11. Income Taxes

Due to ongoing operating losses and the inability to recognize any income tax benefit, there is no provision for income taxes for any periods presented.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows:

	December 31,

(In thousands)	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	479,000		$	411,000
Deferred revenues		6,000			4,000
Capitalized research and development expenditures		30,000			35,000
Research and development tax credit carryforwards		44,000			38,000
Other		32,000			33,000


Total deferred tax assets		591,000			521,000
Valuation allowance		(591,000	)		(521,000	)


Net deferred tax assets	$	—		$	—

The differences between the U.S. federal statutory income tax rate to our effective tax rate are as follows:

	Year Ended December 31,

	2013			2012			2011
U.S. federal statutory income tax rate		34.00	%		34.00	%		34.00	%
Federal and state research credits		3.63			(4.21	)		1.67
Non-deductible executive compensation		(0.07	)		(13.24	)		—
Stock-based compensation		0.28			(1.36	)		(0.32	)
Expiration of net operating loss		—			(1.81	)		(0.42	)
Other		(2.51	)		(2.09	)		0.75
Change in valuation allowance		(35.33	)		(11.29	)		(35.68	)


Effective tax rate		(0.00	)%		(0.00	)%		(0.00	)%

Realization of deferred tax assets is dependent on future taxable income, if any, the timing and the amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $70.1 million in 2013, $3.0 million in 2012 and $50.0 million in 2011.

As of December 31, 2013, we had federal net operating loss carryforwards of approximately $1,412.0 million, which will expire from 2018 through 2033, and federal research and development tax credit carryforwards of approximately $52.7 million, which will expire from 2018 through 2033. We also had state net operating loss carryforwards of approximately $890.9 million expiring in the years 2014 through 2033 and state research tax credits of approximately $57.9 million, which do not expire.

The net operating loss deferred tax asset balances as of December 31, 2013 and 2012 do not include excess tax benefits from stock option exercises. Stockholders' equity will be credited if and when such excess tax benefits are ultimately realized.

Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized.

Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2013 and 2012, we had no accrued interest or penalties due to our net operating losses available to offset any tax adjustment.

We conducted an analysis through 2013 to determine whether an ownership change had occurred since inception. The analysis indicated that two ownership changes occurred in prior years. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards are expected to expire before becoming available to reduce federal and state income tax liabilities.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows (in thousands):


Unrecognized tax benefits as of December 31, 2010	$	42,600
Gross decrease for tax positions for prior years		—
Gross increase in tax positions for current year		4,300


Unrecognized tax benefits as of December 31, 2011		46,900
Gross decrease for tax positions for prior years		—
Gross increase in tax positions for current year		5,600


Unrecognized tax benefits as of December 31, 2012		52,500
Gross decrease for tax positions for prior years		(565	)
Gross increase in tax positions for current year		5,485


Unrecognized tax benefits as of December 31, 2013	$	57,420

If we eventually are able to recognize these uncertain positions, most of the $57.4 million of the unrecognized benefit would reduce our effective tax rate, except for excess tax benefits related to stock-based payments. We currently have a full valuation allowance against our deferred tax assets, which would impact the timing of the effective tax rate benefit should any of these uncertain positions be favorably settled in the future. We do not believe it is reasonably possible that our unrecognized tax benefits will significantly change within the next twelve months.

We are subject to taxation in the U.S. and various state jurisdictions. The tax years 1996 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.