9. Income Taxes

The components of the gross deferred tax asset and related valuation allowance at December 31 were as follows:


	2016		2015
Deferred tax assets:
Net operating loss carryforward	$	34,451,814	$	24,745,536
Capitalized start-up costs		2,708,479		2,986,272
Patent amortization		216,203		238,378
Research and orphan drug credits		14,988,522		10,110,590
Deferred rent		123,744		96,107
Deferred compensation		2,107,964		1,206,920
Other		70,511		52,985
Total gross deferred tax assets		54,667,237		39,436,788
Valuation allowance		(54,667,237)		(39,436,788)
Deferred tax assets		—		—
Deferred tax liabilities:
Depreciation		—		—
Total deferred tax liabilities		—		—

Net deferred tax assets	$	—	$	—

Based on the Company’s operating history and management’s expectation regarding future profitability, management believes the realization of the Company’s deferred tax assets does not meet the more-likely-than-not criteria under ASC 740, Income Taxes. Accordingly, a full valuation allowance has been established as of December 31, 2016 and 2015.

As of December 31, 2016, the Company had $87,591,753 of U.S. Federal and state net operating losses, of which $250,359 will be recognized as a benefit through additional-paid-in-capital when realized, $7,394,601 of research and development tax credits and $7,593,921 of orphan drug tax credits available to carry forward. A portion of the net operating loss carryforwards will begin to expire in 2026, the research and development tax credits in 2023 and the orphan drug tax credit in 2033.

The Company’s tax attributes, including net operating losses and credits, are subject to any ownership changes as defined under Internal Revenue Code Sections 382 and 383. A change in ownership could affect the Company’s ability to utilize its net operating losses and credits. As of December 31, 2016, the Company does not believe that an ownership change has occurred. Any future ownership changes may cause a limitation on the Company’s ability to utilize existing tax attributes.

The Company files income tax returns in the U.S. federal jurisdiction and in the State of Maryland. The Company’s federal income tax returns for tax years 2003 and after remain subject to examination by the U.S. Internal Revenue Service. The Company’s Maryland income tax returns for the tax years 2006 and thereafter remain subject to examination by the Comptroller of Maryland. In addition, all of the net operating losses, research and development tax credit and orphan drug credit carryforwards that may be used in future years are still subject to adjustment.

The Company did not have unrecognized tax benefits as of December 31, 2016 and 2015, and does not anticipate this to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Reconciliations between the statutory federal income tax rate and the effective income tax rate of income tax expense is as follows as of December 31:


	2016		2015		2014
U.S. Federal statutory tax rate	34.0	%	34.0	%	34.0	%
State taxes	4.6		3.7		4.6
Research credit	1.0		5.6		7.4
Orphan drug credit	9.0		11.5		8.7
Stock-based compensation	(0.7)		(1.8)		(1.3)
Other	—		—		2.4
Change in valuation allowance	(47.9)		(53.0)		(55.8)
Provision for income taxes	—	%	—	%	—	%