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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 9. INCOME TAXES On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The Tax Reform Act significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a quasi-territorial tax system, providing a one -time transition toll charge on foreign earnings, creating a new limitation on the deductibility of interest expenses and modifying the limitation on officer compensation. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The income tax provision (benefit) for the years ended December 31, 2019 and 2018 consists of the following:
|  | 2019 |  |  | 2018 |
Federal |  |  |  |  |  |  |  |
Current |  | $ | - |  |  | $ | - |
Deferred |  |  | - |  |  |  | - |
State and Local |  |  | - |  |  |  | - |
Current |  |  | - |  |  |  | (10,419,115 | )
Deferred |  |  | (1,819,324 | ) |  |  | - |
Effective tax rate |  | $ | (1,819,324 | ) |  |  | (10,419,115 | )
A reconciliation of the Company’s statutory tax rate to the effective rate for the years ended December 31, 2019 and 2018 is as follows:
|  | 2019 |  |  | 2018 |
Federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
State taxes, net of federal tax benefit |  |  | 12.2 |  |  |  | 36.9 |
Permanent differences |  |  | (4.5 | ) |  |  | (3.8 | )
Other |  |  | (7.0 | ) |  |  | (9.4 | )
Change in valuation allowance and deferred rate change, net |  |  | (12.0 | ) |  |  | 2.0 |
Effective tax rate |  |  | 9.7 | % |  |  | 46.7 | %
The components of the Company’s deferred tax asset as of December 31, 2019 and 2018 are as follows:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Net operating loss carryforwards |  | $ | 58,243,000 |  |  | $ | 51,498,000 |
Other Deferred tax assets, net |  |  | 254,283 |  |  |  | 1,092,000 |
Subtotal |  |  | 58,497,283 |  |  |  | 52,590,000 |
Valuation allowance |  |  | (56,497,283 | ) |  |  | (52,590,000 | )
Total deferred tax asset |  | $ | 1,819,324 |  |  | $ | - |
The evaluation of the realizability of such deferred tax assets in future periods is made based upon a variety of factors that affect the Company’s ability to generate future taxable income, such as intent and ability to sell assets and historical and projected operating performance. As of December 31, 2019, the Company has established a valuation reserve for its deferred income tax assets other than those related to its New Jersey NOLs. At December 31, 2019, after its evaluation of its New Jersey NOL’s as discussed more fully below, reduced the valuation reserve and recognized $1.8 million as a deferred tax asset. Such tax assets are available to be recognized and benefit future periods. As of December 31, 2019, the Company had net operating losses of approximately $289 million of which $247 million, if unused, will expire starting in 2023 through 2037. The Federal net operating loss generated for the year ended December 31, 2018 of approximately $25.8 million can be carried forward indefinitely. However, the deduction for net operating losses incurred in tax years beginning after January 1, 2018 is limited to 80% of annual taxable income During 2019, 2018 and in prior years, the Company performed analyses to determine if there were changes in ownership, as defined by Section 382 of the Internal Revenue Code that would limit its ability to utilize certain net operating loss and tax credit carry forwards. The Company determined that it experienced ownership changes, as defined by Section 382, in connection with certain common stock offerings in July 2011, February 2013, June 2013, June 2015, February 2017, June 2017, October 2017 and August 2018. As a result, the utilization of the Company’s federal tax net operating loss carry forwards generated prior to the ownership changes are limited. As of December 31, 2018, the Company has net operating loss carry forwards for U.S. federal and state tax purposes of approximately $233 million, before excluding net operating losses that have been limited as a result of Section 382 limitations. The annual limitation due to Section 382 for net operating loss carry forward utilization is approximately $4.2 million per year for approximately $90 million in net operating loss carry forwards existing at the ownership change occurring in July 2011, approximately $1.4 million per year for approximately $34 million of additional net operating losses occurring from July 2011 to the ownership change that occurred in February 2013, approximately $1.5 million per year for approximately $4 million of additional net operating losses occurring from February 2013 to the ownership change that occurred in June 2013, approximately $1.6 million per year for approximately $40 million of additional net operating losses occurring from June 2013 to the ownership change that occurred in June 2015, approximately $0.3 million per year for approximately $35 million of additional net operating losses occurring from June 2015 to the ownership change that occurred in February 2017, approximately $0.3 million per year for approximately $7 million of additional net operating losses occurring from February 2017 to the ownership change that occurred in June 2017, approximately $0.8 million per year for approximately $5 million of additional net operating losses occurring from June 2017 to the ownership change that occurred in October 2017, and approximately $1.5 million per year for approximately $30 million of additional net operating losses occurring from October 2017 to the ownership change that occurred in August 2018. The utilization of these net operating loss carry forwards may be further limited if the Company experiences future ownership changes as defined in Section 382 of the Internal Revenue Code. Sale of New Jersey Net Operating Losses During 2019 and 2018, the Company received approval to sell a portion of the Company’s New Jersey NOLs as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other companies. During the first quarter of 2020, the Company entered into an agreement to sell these approved portion of these New Jersey NOL’s for $1.8 million. At December 31, 2019, the Company evaluated the valuation reserve for its tax net operating losses associated with its New Jersey NOLs and reduced the valuation reserve and recognized $1.8 million as a deferred income tax asset and an income tax benefit. The Company expects to complete the sale of these net operating losses in the second quarter of 2020. In 2018, the Company completed the sale of a portion of its New Jersey net operating losses totaling approximately $11.1 million for net proceeds of $10.4 million in December 2018. The Company has approximately $2.1 million in future tax benefits remaining under the NOL Program for future years.

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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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