Note 17. Income Taxes

U.S and foreign components of consolidated loss before income taxes for the years ended December 2013, 2012 and 2011 was as follows (in thousands):


	Year Ended December 31,
	2013			2012			2011
Income (loss) before income taxes:
U.S.	$	(44,035	)	$	(16,360	)	$	(17,461	)
Foreign		916			685			622

Loss before income taxes	$	(43,119	)	$	(15,675	)	$	(16,839	)

The provision for income taxes for the years ended December 2013, 2012 and 2011 was as follows (in thousands):


	Year Ended December 31,
	2013		2012		2011
Provision for income taxes:
Current:
Foreign	$	191	$	180	$	143
Federal		—		—		—
State		—		—		—

Total Current		191		180		143
Deferred:
Foreign		—		—		—
Federal		21		48		—
State		6		14		—

Total Deferred		27		62		—

Provision for income taxes	$	218	$	242	$	143

The difference between the provision for income taxes and the amount computed by applying the federal statutory income tax rate to loss before taxes for the years ended December 31, 2013, 2012 and 2011 was as follows (in thousands):


	Year Ended December 31,
	2013			2012			2011
Federal statutory tax	$	(14,661	)	$	(5,329	)	$	(5,725	)
Stock-based compensation		(10	)		99			83
Lobbying expenses		107			51			112
Warrants		4,926			(706	)		(165	)
Foreign rate differential		(121	)		(53	)		(68	)
Expiration of federal net operating losses and credits—tax effected		—			4,352			1,744
Change in valuation allowance		9,934			1,761			4,158
Goodwill amortization		21			48			—
Other		22			19			4

Provision for income taxes	$	218		$	242		$	143

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at the enacted rates. The significant components of the Company’s deferred tax assets at December 31, 2013 and 2012 were as follows (in thousands):


	December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	142,500		$	137,700
Research and development credit carryforwards		32,100			30,800
Capitalized inventory costs		800			900
Inventory reserve		100			700
Capitalized research and development		12,300			9,100
Capitalized trademark		400			400
Capitalized revenue sharing rights		100			300
Asia license intangible		100			100
Deferred compensation		4,900			4,800
Accrued liabilities		200			100
Depreciation		1,300			1,300
Acquisition costs		200			200
Deferred tenant allowance		100			200
Capital loss carryforwards		3,900			3,900

Total deferred tax assets		199,000			190,500
Valuation allowance		(199,000	)		(190,500	)

Net deferred tax assets	$	—		$	—

Deferred tax liabilities:
Amortization of goodwill	$	89		$	62

Total deferred tax liabilities	$	89		$	62

The valuation allowance increased by $8.5 million for the year ended December 31, 2013, compared to a decrease of $0.8 million and an increase of $2.0 million for the years ended December 31, 2012 and 2011, respectively. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that a full valuation allowance has been recorded. These factors include the Company’s history of net losses since its inception, the need for regulatory approval of the Company’s products prior to commercialization, expected near-term future losses and the absence of taxable income in prior carryback years. The Company expects to maintain a full valuation allowance until circumstances change.

Undistributed earnings of the Company’s foreign subsidiary, Cerus Europe B.V., amounted to approximately $2.8 million at December 31, 2013. The earnings are considered to be permanently reinvested and accordingly, no deferred United States income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to United States income taxes. At the Federal statutory income tax rate of 34%, this would result in taxes of approximately $0.9 million. In the event all foreign undistributed earnings were remitted to the U.S., any incremental tax liability would be fully offset by the Company’s domestic net operating loss.

For the year ended December 31, 2013, the Company reported net losses of $43.3 million on its consolidated statement of operations and calculated taxable losses for both federal and state taxes. The difference between reported net loss and taxable loss are due to temporary differences between book accounting and the respective tax laws.

At December 31, 2013, the Company had federal and state net operating loss carryforwards of approximately $381.7 million and $218.1 million, respectively. The net operating loss carryforwards for federal and state expire at various dates beginning in 2018 and 2014, respectively, and ending in 2033.

At December 31, 2013, the Company had federal research and development credit carryforwards of approximately $21.6 million that expire in various years between 2018 and 2033. The state research and development credits are approximately $15.9 million as of December 31, 2013 have an indefinite carryforward period.

The utilization of net operating loss carryforwards, as well as research and development credit carryforwards, is limited by current tax regulations. These net operating loss carryforwards, as well as research and development credit carryforwards, will be utilized in future periods if sufficient income is generated. The Company believes it more likely than not that its tax positions would be recognized upon review by a taxing authority having full knowledge of all relevant information. The Company’s ability to utilize certain loss carryforwards and certain research credit carryforwards are subject to limitations pursuant to the ownership change rules of Internal Revenue Code Section 382.

The Company will recognize accrued interest and penalties related to unrecognized tax benefits in its income tax expense. To date, the Company has not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties. The Company had no unrecognized tax benefits as of December 31, 2013 and 2012. The Company’s tax years 1998 through 2013 remain subject to examination by the taxing jurisdictions due to unutilized net operating losses and research credits.