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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In accordance with the guidance pursuant to accounting for income taxes, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized. The components of the provision for income taxes are presented in the following table:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
Federal | $ | 4,000 |  |  | $ | — |  |  | $ | — |
State | 2,000 |  |  | — |  |  | — |
Foreign | — |  |  | 2,170,000 |  |  | — |
| 6,000 |  |  | 2,170,000 |  |  | — |
Deferred: |  |  |  |  |
Federal | (263,000 | ) |  | — |  |  |  |
State | — |  |  | — |  |  | — |
Foreign | — |  |  | — |  |  | — |
| (263,000 | ) |  | — |  |  | — |
| $ | (257,000 | ) |  | $ | 2,170,000 |  |  | $ | — |
The reconciliation of income taxes attributable to continuing operations computed at the statutory tax rates to income tax expense (benefit), using a 21% statutory tax rate for December 31, 2019 and 2018, and 35% statutory tax rate for December 31, 2017, is as follows:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Income (benefit) taxes at statutory rates | $ | (25,370,000 | ) |  | $ | (19,908,000 | ) |  | $ | (30,872,000 | )
State income tax, net of federal benefit | — |  |  | (4,000 | ) |  | (4,000 | )
Foreign income taxes | — |  |  | 2,170,000 |  |  | — |
Change in valuation allowance | 25,457,000 |  |  | 20,898,000 |  |  | (20,965,000 | )
Research and development tax credits | (3,838,000 | ) |  | (3,170,000 | ) |  | (3,456,000 | )
Change in fair value of warrants | — |  |  | (76,000 | ) |  | (282,000 | )
Stock-based compensation | 1,114,000 |  |  | 1,094,000 |  |  | 2,332,000 |
Uncertain tax positions | 1,537,000 |  |  | 1,268,000 |  |  | 846,000 |
Expired NOLs and credits | 616,000 |  |  | 2,176,000 |  |  | 454,000 |
Limited NOLs and credits | (616,000 | ) |  | (2,176,000 | ) |  | (165,000 | )
Change in tax rates | 12,000 |  |  | — |  |  | 50,019,000 |
Other | 831,000 |  |  | (102,000 | ) |  | 2,093,000 |
| $ | (257,000 | ) |  | $ | 2,170,000 |  |  | $ | — |
The income tax benefit recorded during the year ended December 31, 2019 of $0.3 million is principally due to a requirement under Accounting Standards Codification ("ASC") 740, Accounting for Income Taxes, that a company must consider all sources of income in order to determine the tax benefit resulting from a loss from continuing operations. As a result of the requirement under ASC 740-20-45-7, the pretax income which the Company generated from other comprehensive income was a source of income which resulted in the partial realization of the current year loss from continuing operations. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 are shown below:
| As of December 31,
| 2019 |  | 2018
Deferred tax assets: |  |  |
Capitalized research expense | $ | 6,300,000 |  |  | $ | 7,408,000 |
NOL carryforwards | 110,788,000 |  |  | 89,399,000 |
Research and development and other tax credits | 11,737,000 |  |  | 9,432,000 |
Deferred revenue | 1,506,000 |  |  | 985,000 |
Deferred rent | — |  |  | 2,013,000 |
Stock-based compensation | 3,255,000 |  |  | 3,408,000 |
Acquired intangibles | 889,000 |  |  | 912,000 |
Derivative liability | 1,852,000 |  |  | — |
Interest expense | 1,122,000 |  |  | — |
Investment in affiliated entity | 645,000 |  |  | — |
Lease liability | 4,722,000 |  |  | — |
Other | 2,413,000 |  |  | 2,693,000 |
| 145,229,000 |  |  | 116,250,000 |
Valuation allowance | (137,159,000 | ) |  | (115,007,000 | )
Total deferred tax assets | 8,070,000 |  |  | 1,243,000 |
Deferred tax liabilities: |  |  |
Acquired intangibles | (160,000 | ) |  | (142,000 | )
Investment in affiliated entity | — |  |  | (4,000 | )
Right of use asset | (2,894,000 | ) |  | — |
Note discount | (2,862,000 | ) |  | — |
Convertible note | (1,381,000 | ) |  | — |
Fixed assets | (805,000 | ) |  | (1,121,000 | )
Net deferred tax liabilities | $ | (32,000 | ) |  | $ | (24,000 | )
As of December 31, 2019, the Company had federal, California and Pennsylvania tax net operating loss (NOL) carryforwards of $483.3 million, $68.6 million and $80.5 million, respectively, net of the net operating losses that will expire due to IRC Section 382 limitations. The federal net operating loss generated in 2018 and 2019 of $186.6 million will carryforward indefinitely and be available to offset up to 80% of future taxable income each year. The federal NOL carryforward began to expire in 2020, and the California and Pennsylvania NOL carryforwards will begin to expire in 2028 and 2021, respectively, unless previously utilized. In addition, as of December 31, 2019, the Company had federal and state research and development (R&D) tax credit carryforwards of $17.3 million and $3.2 million, respectively. The federal tax credit carryforwards will begin to expire in 2029. The California research tax credits do not expire. Based upon statute, federal and state losses and credits are expected to expire as follows (in millions):
Expiration Date: | Federal NOLs |  | State NOLs |  | Federal R&D |  | State R&D
2020 | $ | 1.6 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
2021 | 2.3 |  |  | 0.3 |  |  | — |  |  | — |
2022 | 6.0 |  |  | 0.3 |  |  | — |  |  | — |
2023 | 4.5 |  |  | 0.4 |  |  | — |  |  | — |
2024 and thereafter | 282.3 |  |  | 148.1 |  |  | 17.3 |  |  | — |
Indefinite | 186.6 |  |  | — |  |  | — |  |  | 3.2 |
| $ | 483.3 |  |  | $ | 149.1 |  |  | $ | 17.3 |  |  | $ | 3.2 |
Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the Company’s NOL and R&D credit carryforwards may be limited in the event that a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has completed an IRC Section 382/383 analysis, regarding the limitation of NOL and R&D credit carryforwards as of December 31, 2019. As a result of the analysis, the Company estimates that approximately $10.6 million of tax benefits related to NOL and R&D carryforwards will expire unused. Accordingly, the related NOL and R&D credit carryforwards have been removed from deferred tax assets, accompanied by a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, limitations created by current and future ownership changes, if any, related to the Company's operations in the United States will not impact its effective tax rate. Any additional ownership changes may further limit the ability to use the NOL and R&D carryforwards. The following table summarizes the activity related to the Company's unrecognized tax benefits:
| Year ended December 31,
| 2019 |  | 2018 |  | 2017
Balance at beginning of the year | $ | 9,632,000 |  |  | $ | 8,313,000 |  |  | $ | 6,855,000 |
Increases related to current year tax positions | 1,575,000 |  |  | 1,319,000 |  |  | 1,532,000 |
Increases (decreases) related to prior year tax positions | (3,000 | ) |  | — |  |  | (74,000 | )
Balance at end of the year | $ | 11,204,000 |  |  | $ | 9,632,000 |  |  | $ | 8,313,000 |
The amount of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate was $9.9 million, $8.3 million and $7.1 million as of December 31, 2019, 2018 and 2017, respectively, subject to valuation allowances. The Company has not recorded any interest and penalties on the unrecognized tax positions as the Company has continued to generate net operating losses after accounting for the unrecognized tax benefits. The Company does not anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. With few exceptions, the Company is no longer subject to United States federal income tax examinations for years before 2016 and state and local income tax examinations before 2015. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the NOL carryforward amount. The Company is not currently under Internal Revenue Service (“IRS”), state or local tax examination.

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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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