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Income Tax | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Tax | 9. INCOME TAX [a] We are a Delaware incorporated company subject to blended US Federal and state statutory rates for December 31, 2020, 2019 and 2018 of 21%. For the purposes of estimating the tax rate in effect at the time that deferred tax assets and liabilities are expected to reverse, management uses the furthest out available future tax rate in the applicable jurisdictions. Income tax expense/(recovery) consisted of the following (in thousands):
(In thousands) |  | 2020 |  |  | 2019 |  |  | 2018 |
Income tax recovery at statutory rates (at a rate of 21% for all years presented) |  | $ | (3,094 | ) |  | $ | (3,490 | ) |  | $ | (2,664 | ) |
Expenses not deducted for tax purposes |  |  | 118 |  |  |  | 116 |  |  |  | 70 |
Effect of tax rate changes on deferred tax assets and liabilities |  |  | 34 |  |  |  | (13 | ) |  |  | (1,416 | )
Rate differential on foreign earnings |  |  | (103 | ) |  |  | (296 | ) |  |  | (165 | )
Reduction in benefit of operating losses |  |  | — |  |  |  | — |  |  |  | — |
Reduction in the benefit of other tax attributes |  |  | — |  |  |  | — |  |  |  | — |
Investment tax credits |  |  | (23 | ) |  |  | (84 | ) |  |  | — |
Change in valuation allowance |  |  | 3,662 |  |  |  | (3,246 | ) |  |  | 4,182 |
Book to tax return adjustments |  |  | (518 | ) |  |  | (75 | ) |  |  | 20 |
Unrecognized tax benefits |  |  | — |  |  |  | 7,192 |  |  |  | — |
Reversal of previously accrued taxes due to IRS reassessment |  |  | — |  |  |  | (221 | ) |  |  | — |
Other |  |  | (76 | ) |  |  | (104 | ) |  |  | (27 | )
Income tax expense/(recovery) |  | $ | — |  |  | $ | (221 | ) |  | $ | — |
[b] At December 31, 2020, we have investment tax credits of $2.8 million (2019—$2.9 million) available to reduce future Canadian income taxes otherwise payable. We also have non-capital loss carryforwards of $105.6 million (2019—$104.2 million) available to offset future taxable income in Canada, UK net operating loss carryforwards of $3.2 million (2019—$2.7 million) to offset future taxable income in the UK and federal net operating loss carryforwards of $34.8 million (2019—$25.3 million) to offset future taxable income in the United States. The investment tax credits and non-capital losses and net operating losses for income tax purposes expire as follows (in thousands):
|  |  |  |  |  | US |  |  | Canadian |  |  | UK |
|  | Investment |  |  | Net Operating |  |  | Non-capital |  |  | Net Operating |
|  | Tax Credits |  |  | Losses |  |  | Losses |  |  | Losses |
2020 |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |
2021 |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |
2022 |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |
2023 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
2024 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
2025 |  |  | 244 |  |  |  | — |  |  |  | — |  |  |  | — |
2026 |  |  | 71 |  |  |  | — |  |  |  | 7,660 |  |  |  | — |
2027 |  |  | — |  |  |  | — |  |  |  | 6,082 |  |  |  | — |
2028 |  |  | 111 |  |  |  | — |  |  |  | 7,256 |  |  |  | — |
2029 |  |  | 237 |  |  |  | 9 |  |  |  | 1,712 |  |  |  | — |
2030 |  |  | 346 |  |  |  | 5 |  |  |  | 6,770 |  |  |  | — |
2031 |  |  | 486 |  |  |  | 17 |  |  |  | 12,354 |  |  |  | — |
2032 |  |  | 363 |  |  |  | 43 |  |  |  | 17,278 |  |  |  | 42 |
2033 |  |  | 193 |  |  |  | 2 |  |  |  | 23,240 |  |  |  | 54 |
2034 |  |  | 215 |  |  |  | 3 |  |  |  | 17,077 |  |  |  | 46 |
2035 |  |  | 122 |  |  |  | 654 |  |  |  | 3,112 |  |  |  | 27 |
2036 |  |  | 80 |  |  |  | 611 |  |  |  | 5,361 |  |  |  | 58 |
2037 |  |  | 22 |  |  |  | 8,763 |  |  |  | (5,295 | ) |  |  | 654 |
2038 |  |  | 202 |  |  |  | 7,207 |  |  |  | (3,179 | ) |  |  | 955 |
2039 |  |  | 220 |  |  |  | 7,982 |  |  |  | 4,443 |  |  |  | 869 |
2040 |  |  | 112 |  |  |  | 9,501 |  |  |  | 1,725 |  |  |  | 531 |
|  | $ | 3,029 |  |  | $ | 34,797 |  |  | $ | 105,596 |  |  | $ | 3,236 |
In addition, we have unclaimed tax deductions of approximately $16.0 million related to scientific research and experimental development expenditures available to carry forward indefinitely to reduce Canadian taxable income of future years. We also have research and development tax credits of $0.3 million available to reduce future taxes payable in the United States. The research and development tax credits expire in 2040. [c] Significant components of our deferred tax assets as of December 31 are shown below (in thousands):
|  | 2020 |  |  | 2019 |
Deferred tax assets |  |  |  |  |  |  |  |
Tax basis in excess of book value of assets |  | $ | 892 |  |  | $ | 891 |
Non-capital loss carryforwards |  |  | 35,596 |  |  |  | 33,166 |
Research and development deductions and credits |  |  | 7,010 |  |  |  | 6,256 |
Stock options |  |  | 466 |  |  |  | 315 |
§59(e) Capitalized R&D expenses |  |  | 3,757 |  |  |  | 3,501 |
Accrued expenses |  |  | 164 |  |  |  | 79 |
Other |  |  | 183 |  |  |  | 181 |
Total deferred tax assets |  |  | 48,068 |  |  |  | 44,389 |
Valuation allowance |  |  | (47,539 | ) |  |  | (43,875 | )
Net deferred assets |  |  | 529 |  |  |  | 514 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Right of use assets |  |  | (135 | ) |  |  | (79 | )
Other |  |  | (394 | ) |  |  | (435 | )
Total deferred tax liabilities |  |  | (529 | ) |  |  | (514 | )
Net deferred tax assets |  |  | — |  |  |  | — |
The potential income tax benefits relating to these deferred tax assets have not been recognized in the accounts as their realization did not meet the requirements of “more likely than not” under the liability method of tax allocation. Accordingly, a valuation allowance has been recorded and no net deferred tax assets have been recognized in all jurisdictions as at December 31, 2020. [d] Under ASC 740, the benefit of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of the benefit of an uncertain tax position may be recognized if the position has less than a 50% likelihood of being sustained. A reconciliation of the unrecognized tax benefits of uncertain tax positions for the year ended December 31, 2020 is as follows (in thousands):
|  | Year ended |
|  | December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Balance at January 1 |  | $ | 724 |  |  | $ | 717 |  |  | $ | 715 |
Additions based on tax positions related to the current year |  |  | — |  |  |  | 7 |  |  |  | 6 |
Deductions based on tax positions related to prior years |  |  | — |  |  |  | — |  |  |  | (4 | )
Additions based on tax positions related to the prior years |  |  | 5 |  |  |  | — |  |  |  | — |
Additions based on tax positions related to prior period adjustments |  |  | 38 |  |  |  | — |  |  |  | — |
Balance at December 31 |  | $ | 767 |  |  | $ | 724 |  |  | $ | 717 |
As of December 31, 2020, unrecognized benefits of approximately $0.8 million, if recognized, would affect our effective tax rate, and would reduce our deferred tax assets. Our accounting policy is to treat interest and penalties relating to unrecognized tax benefits as a component of income taxes. As of December 31, 2020 and December 31, 2019 we had no accrued interest and penalties related to income taxes. We are subject to taxes in Canada, the U.K. and the U.S. until the applicable statute of limitations expires. Tax audits by their very nature are often complex and can require several years to complete.
Tax |  | Years open to
Jurisdiction |  | examination
Canada |  | 2012 to 2020
United Kingdom |  | 2013 to 2020
US |  | 2017 to 2020

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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