We are subject to income taxes in the United States and certain states in which we operate, and we use estimates in determining our provisions for income taxes. Significant management judgement is required in determining our provision for income taxes, deferred tax assets and liabilities and valuation allowances recorded against net deferred tax assets in accordance with U.S. GAAP. These estimates and judgements occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in the current or subsequent period.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and the amount of the recognized tax benefit is still appropriate.

During the years ended December 31, 2020, 2019 and 2018 income (loss) before taxes from U.S. operations were $28.9 million, ($84.8) million and ($103.1) million, respectively, and income before taxes from foreign operations was $0.6 million, $0.9 million and $0.8 million, respectively.

Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax income or loss as follows:



	Years ended December 31,
	2020		2019		2018
Statutory tax rate	21.0	%	21.0	%	21.0	%
State tax rate, net of federal benefit	(8.3)		4.9		3.5
Stock-based compensation	(15.2)		(0.8)		(1.6)
Tax credits	(3.6)		2.2		2.0
Other	(0.2)		0.2		(0.1)
Change in valuation allowance	6.3		(27.5)		(24.8)
Total	-	%	-	%	-	%

Deferred income taxes reflect the net tax effects of loss and credit carry forwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets for federal and state income taxes are as follows (in thousands):



	December 31,
Deferred tax assets:	2020		2019
Net operating loss carryforwards	$	233,225	$	226,911
Research and development credits		49,179		45,853
Accruals and reserves		6,337		8,024
Stock-based compensation		9,717		16,219
ASC842 Operating lease liability		9,870		10,837
Total deferred tax assets		308,328		307,844
Less: Valuation allowance		(300,505)		(298,658)
Total deferred tax assets:		7,823		9,186
Fixed assets		(786)		(1,425)
ASC842 Operating lease right-of-use assets		(7,037)		(7,761)
Total deferred tax liabilities		(7,823)		(9,186)
Net deferred tax assets	$	—	$	—

At December 31, 2020, we maintained a full valuation allowance against all of our deferred tax assets which totaled $300.5 million, including net operating loss carryforwards and research and development credits of $233.2 million and $49.2 million, respectively.

Due to uncertainties surrounding the realization of deferred tax assets through future taxable income, we have provided a full valuation allowance and, therefore, have not recognized any benefits from net operating losses and other deferred tax assets.

A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. We regularly assess the need for a valuation allowance against our deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that our deferred income tax assets will be realized. In evaluating our ability to recover our deferred income tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. Accordingly, we have provided a full valuation allowance against our net deferred tax assets as of December 31, 2020 and 2019, respectively.

For the year ended December 31, 2020, our valuation allowance increased to $300.5 million, primarily because of an increase in our net operating losses and tax credits offset by a decrease to our stock-based compensation deferred tax asset. For the year ended December 31, 2019, our valuation allowance increased to $298.7 million, primarily because of an increase to our net operating losses, tax credits and changes in book to tax timing differences.

As of December 31, 2020, we had a net operating loss carryforward for federal income tax purposes of approximately $913.9 million, $755.9 million of which will begin to expire after 2024 and through 2037, and $158.0 million of which do not expire. We had a total state net operating loss carryforward of approximately $634.3 million, which have expiration dates of 2025 and beyond. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change of ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization.

We have federal credits of approximately $30.7 million, which will begin to expire in 2024 if not utilized and state research credits of approximately $30.1 million which have no expiration date. These tax credits are subject to the same limitations discussed above.

A reconciliation of the beginning and ending unrecognized tax benefit balance is as follows (in thousands):



Balance as of December 31, 2017	$	18,786
Decrease in balance related to tax positions taken in prior year		—
Increase in balance related to tax positions taken during current year		1,661
Balance as of December 31, 2018	$	20,447
Decrease in balance related to tax positions taken in prior year		—
Increase in balance related to tax positions taken during current year		1,532
Balance as of December 31, 2019	$	21,979
Decrease in balance related to tax positions taken in prior year		(17,255)
Increase in balance related to tax positions taken during current year		1,230
Balance as of December 31, 2020	$	5,954

Decrease in balance related to tax positions taken in prior years of $17.3 million in 2020 relates to the fact that we completed a research and development credit study in 2020 and adjusted our associated uncertain tax position accordingly for the 2004-2019 tax years.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of both December 31, 2020 and 2019, we had no accrued interest or penalties due to our net operating losses available to offset any tax adjustment. If total unrecognized tax benefits were realized in the future, it would not result in any tax benefit as we currently have a full valuation allowance. We file U.S. federal and various state income tax returns. For U.S. federal and state income tax purposes, the statute of limitations currently remains open for the years ending December 31, 2017 to present and December 31, 2016 to present, respectively. In addition, all of the net operating losses and research and development credit carryforwards that may be utilized in future years may be subject to examination. We are not currently under examination by income tax authorities in any jurisdiction.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Securities Act (CARES Act) was signed into law in the US in March 2020. The CARES Act adjusted a number of provisions in the tax code, including the calculation and eligibility of certain deductions and the treatment of net operating losses and tax credits. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the year ended December 31, 2020, or to our net deferred tax assets as of December 31, 2020.