	December 31,
	2018		2017
Current Tax Expense:
Federal	$	—	$	—
State		33		—
	$	33	$	—

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets consist of the following (in thousands):

	December 31,
	2018			2017
Deferred tax assets:
Net operating loss carryforwards	$	33,275		$	21,248
Tax credit carryforwards		4,365			3,038
Accrued expenses		103			32
Property and equipment		—			390
Deferred rent		2,209			53
Equity compensation		784			503
Amortizable intangibles		1,339			1,492
Other		78			—
Gross deferred tax assets		42,153			26,756
Deferred tax liability:
Other		—			(241	)
Property and equipment		(1,863	)		—
Valuation allowance		(40,290	)		(26,515	)
Net deferred tax assets	$	—		$	—

Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of the Company’s deferred tax assets, which are comprised principally of net operating loss carryforwards, and determined that it is more likely than not that the Company will not recognize the benefits of the deferred tax assets. As a result, a full valuation allowance of approximately $40.3 million and $26.5 million was established at December 31, 2018 and 2017, respectively.

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows (dollars in thousands):

	Years ended December 31,
	2018			2017
	Tax Rate			Tax Rate
U.S. federal statutory rate		21	%		34	%
State income taxes, net of federal benefit		6	%		5	%
Other permanent differences		(1	)%		(1	)%
Tax credits		3	%		5	%
Other items		(1	)%		—
Change in rate due to Tax Reform		—			(27	)%
Mirna acquisition		—			17	%
Net change in valuation allowance		(28	)%		(33	)%
Effective income tax rate		—			—

A roll-forward of the valuation allowance for the years ended December 31, 2018 and 2017 is as follows (in thousands):

	Years ended December 31,
	2018			2017
Balance at beginning of year	$	(26,515	)	$	(13,060	)
Increase in valuation allowance		(13,775	)		(13,455	)
Balance at end of year	$	(40,290	)	$	(26,515	)

As of December 31, 2018 and 2017, the Company had federal and state net operating loss carryforwards that may be available to reduce future taxable income of approximately $125.5 million and $82.0 million, respectively, which begin to expire in 2034. In addition, at December 31, 2018, the Company had federal and state research and development tax credit carryforwards available to reduce future tax liabilities of approximately $2.8 million and $1.6 million, respectively. These credits begin to expire in 2034 and 2029, respectively.

Pursuant to Section 382 of the Internal Revenue Code of 1986 (“IRC”), certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss (“NOL”) carryforwards and research and development credit (“R&D credit”) carryforwards that may be used in future years. Utilization of the NOL and R&D credit carryforwards may be subject to a substantial annual limitation under Section 382 of the IRC due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since its formation, due to a significant complexity and related costs associated with such a study. There could be additional ownership changes in the future that may result in additional limitations on the utilization of NOL carryforwards and credits.

The Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon the ultimate settlement with the relevant taxing authority. The Company has not recognized any liability for unrecognized tax benefits as of December 31, 2018.

The Company files tax returns, on an entity-level basis, as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. Tax years from 2015 to the present are open to examination under the statute. The Company’s policy is to record interest and penalties related to income taxes as part of the tax provision. There are no interest or penalties accrued at December 31, 2018 and 2017.

On December 22, 2017, President Trump signed into U.S. law the Tax Cuts and Jobs Act of 2017 (“Tax Reform”). ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018. Given the significance of the legislation, the U.S. Securities and Exchange Commission (the "SEC") staff issued Staff Accounting Bulletin ("SAB") No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Tax Cuts and Jobs Act.

However, several provisions of the Tax Reform have significant impact on the Company’s U.S. tax attributes, generally consisting of credits, loss carry-forwards, and amortizable intangibles. The provisional reporting period ended on December 22, 2018. The Company has reevaluated its assets and liabilities associated with such future tax benefits in the current year and determined that no further adjustment is necessary to its deferred tax asset and liabilities. This reduction in the deferred tax asset has been offset by a coinciding reduction in the associated valuation allowance, creating a zero net impact to the Company’s statement of operations. The Company’s tax attributes are generally subject to a full valuation allowance in the United States and thus, any adjustments to the attributes will not impact the tax provision. Although the Company has made a reasonable estimate of the gross amounts of the attributes disclosed, a final determination of the Tax Reform’s impact on the attributes and related valuation allowance requirements remain incomplete pending a full analysis of the provisions and their interpretations.

Other significant provisions that are not yet effective but may impact income taxes in future years include: a limitation on the current deductibility of net interest expense in excess of 30 percent of adjusted taxable income and a limitation of net operating losses generated after fiscal 2018 to 80 percent of taxable income.