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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
10. | Income Taxes
For the years ended December 31, 2019, 2018 and 2017, we did not record a provision for income taxes due to a full valuation allowance against our deferred tax assets. The difference between the provision for income taxes and income taxes computed using the effective U.S. federal statutory rate is as follows (in thousands):
|  | December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Tax at statutory federal rate |  | $ | (42,997 | ) |  | $ | (37,557 | ) |  | $ | (67,145 | )
State tax, net of federal benefit |  |  | (9,823 | ) |  |  | (6,527 | ) |  |  | (6,203 | )
Research and development credits |  |  | (4,855 | ) |  |  | (4,775 | ) |  |  | (5,962 | )
Stock-based compensation expense |  |  | 2,906 |  |  |  | (2,059 | ) |  |  | 3,151 |
Non-deductible compensation |  |  | 4,720 |  |  |  | 901 |  |  |  | — |
Change in valuation allowance |  |  | 49,479 |  |  |  | 50,834 |  |  |  | 3,241 |
Impact of the 2017 Tax Act |  |  | — |  |  |  | — |  |  |  | 74,361 |
Other |  |  | 570 |  |  |  | (817 | ) |  |  | (1,443 | )
Provision for income taxes |  | $ | — |  |  | $ | — |  |  | $ | — |
Deferred income tax assets and liabilities arising from differences between accounting for financial statement purposes and tax purposes, less valuation allowance at year-end are as follows (in thousands):
|  | December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforward |  | $ | 210,301 |  |  | $ | 172,113 |
Research and development credits |  |  | 42,490 |  |  |  | 35,670 |
Stock-based compensation |  |  | 15,628 |  |  |  | 11,905 |
Lease liabilities |  |  | 3,487 |  |  |  | — |
Other |  |  | 3,818 |  |  |  | 3,171 |
Total gross deferred tax assets |  |  | 275,724 |  |  |  | 222,859 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right-of-use lease assets |  |  | (3,385 | ) |  |  | — |
Total gross deferred tax liabilities |  |  | (3,385 | ) |  |  | — |
Valuation allowance |  |  | (272,339 | ) |  |  | (222,859 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
We have established a valuation allowance to offset net deferred tax assets as of December 31, 2019 and 2018 due to the uncertainty of realizing future tax benefits from such assets. As of December 31, 2019, we had federal, California and other state net operating loss (“NOL”) carryforwards of $865.2 million, $125.9 million and $1.1 billion, respectively. The federal NOL carryforwards consist of $549.7 million generated before January 1, 2018, which will begin to expire in 2021, and $315.5 million that can be carried forward indefinitely, but are subject to the 80% taxable income limitation. The state NOL carryforwards will begin to expire in 2028. As of December 31, 2019, we had federal and state research and development credit carryforwards of $33.7 million and $15.8 million, respectively. The federal research and development credit carryforwards will begin to expire in 2022. The state research and development credit carryforwards can be carried forward indefinitely. Internal Revenue Code (“IRC”) Section 382 and 383 places a limitation on the amount of taxable income that can be offset by NOL and credit carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL and credit carryforwards in excess of the IRC Section 382 and 383 limitation. We have performed an IRC Section 382 and 383 analysis and determined there were ownership changes in 2007, 2011 and 2013. We are currently in the process of completing the IRC Section 382 and 383 analysis for 201 9. The limitation in the federal and state NOL and research and development credit carryforwards reduce the deferred tax assets, which are further offset by a full valuation allowance. The limitation can result in the expiration of the NOLs and research and development credit carryforwards available as of December 31, 201 9. We file U.S. and state income tax returns with varying statutes of limitations. The tax years from 2001 to 2019 remain open to examination due to the carryover of unused NOL carryforwards and tax credits. The Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) was enacted in December 2017. The 2017 Tax Act, among other things, reduced the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign earnings. We revalued our deferred tax assets as of December 31, 2017 based on a U.S. federal tax rate of 21%, which resulted in a reduction to our deferred tax assets of $74.3 million fully offset by a reduction to the valuation allowance. We were not required to pay a one-time transition tax on earnings of our foreign subsidiary as the foreign subsidiary has an accumulated deficit. In addition, the Global Intangible Low-taxed Income provision, as defined in the 2017 Tax Act, is not applicable given the Company’s controlled foreign corporations incurred losses for the years ended December 31, 2018 and 2019. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provided guidance for the tax effects of the 2017 Tax Act. SAB 118 provided a measurement period that should not extend beyond one year from the 2017 Tax Act’s enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, we must have reflected the income tax effects of those aspects of the 2017 Tax Act for which the accounting under ASC 740 was complete. To the extent that our accounting for certain income tax effects of the 2017 Tax Act was incomplete, but we were able to determine a reasonable estimate, we were required to record a provisional estimate in our financial statements. If were not able to determine a provisional estimate to be included in our financial statements, we should have continued to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. We completed our analysis of the 2017 Tax Act’s income tax effects. In accordance with SAB 118, the 2017 Tax Act-related income tax effects that we initially reported as provisional estimates were refined as additional analysis was performed. Our analysis was completed in the fourth quarter of 2018 and there was no material impact to our consolidated balance sheets or statements of operations and comprehensive loss. A reconciliation of our unrecognized tax benefits is as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of year |  | $ | 2,385 |  |  | $ | 120 |  |  | $ | 120 |
Additions for tax positions of prior years |  |  | 147 |  |  |  | — |  |  |  | — |
Additions based on tax positions related to current year |  |  | 2,252 |  |  |  | 2,265 |  |  |  | — |
Balance at end of year |  | $ | 4,784 |  |  | $ | 2,385 |  |  | $ | 120 |
Due to our valuation allowance, the $4.8 million of unrecognized tax benefits would not affect the effective tax rate, if recognized. It is the Company’s practice to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2019, we had no accrued interest and penalties related to uncertain tax positions. We do not expect any material changes to the estimated amount of liability associated with our uncertain tax positions within the next 12 months.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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