Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

The components of income (loss) before income tax (benefit) provision are as follows (in thousands):

	December 31,
	2016		2015
U.S.	$	10,403	$	(1,090	)

During the years ended December 31, 2016 and 2015, the Company’s (benefit) provision for income taxes was as follows (in thousands):

	December 31,
	2016			2015
Current provision	$	4		$	—
Deferred (benefit) provision		(21,642	)		3,273
Total (benefit) provision for income taxes	$	(21,638	)	$	3,273

The components of the income tax provision (benefit) are as follows (in thousands):

	December 31,
	2016			2015
Federal tax provision (benefit) at statutory rate	$	3,643		$	(382	)
Change in valuation allowance		(24,115	)		3,858
Change in statutory rate		—			—
Other		(194	)		849
Write off of expired deferred tax assets		131			—
Provision related to non-controlling interest		(1,103	)		(1,052	)
Total (benefit from) provision for income taxes	$	(21,638	)	$	3,273

The Company records deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting standards that address income taxes. Significant management judgment is required in determining whether a valuation allowance against the Company’s deferred tax assets is required. The Company has considered all available evidence, both positive and negative, such as historical levels of income and predictability of future forecasts of taxable income from existing investments, in determining whether a valuation allowance is required. The Company is also required to forecast future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment. The Company focuses on forecasting future taxable income for the investment portfolio that exists as of the balance sheet date. Specifically, the Company evaluated the following criteria when considering a valuation allowance:

• the history of tax net operating losses in recent years;

• predictability of operating results;

• profitability for a sustained period of time; and

• level of profitability on a quarterly basis.

As of December 31, 2016, the Company had cumulative net income before tax for the three years then ended. Based on its historical operating performance, the Company has concluded that it was more likely than not that the Company would not be able to realize the full benefit of the U.S. federal and state deferred tax assets in the future. However, the Company has concluded that it is more likely than not that the Company will be able to realize approximately $38.5 million benefit of the U.S. federal and state deferred tax assets in the future.

The Company will continue to assess the need for a valuation allowance on the deferred tax assets by evaluating both positive and negative evidence that may exist on a quarterly basis. Any adjustment to the deferred tax asset valuation allowance would be recorded in the consolidated statement of operations for the period that the adjustment is determined to be required. The valuation allowance against deferred tax assets was $109.6 million and $133.7 million as of December 31, 2016 and 2015, respectively.

Deferred tax assets consist of the following (in thousands):

	December 31,
	2016			2015
Deferred tax assets:
Credit carryforward	$	2,660		$	2,660
Stock based compensation		477			582
Other		634			254
Capital loss (Impairment)		3,454			4,738
Net operating losses		140,799			142,265
Gross deferred tax assets		148,024			150,499
Valuation allowance		(109,553	)		(133,666	)
Net deferred tax assets	$	38,471		$	16,833

The Tax Reform Act of 1986 limits the use of NOLs and tax credit carryforwards in certain situations where stock ownership changes occur. In the event the Company has had a change in ownership, the future utilization of the Company’s net operating loss and tax credit carryforwards could be limited.

The Company is making an election to early adopt ASU 2015-17 to classify all deferred tax assets and liabilities, along with any related valuation allowance, as noncurrent on the balance sheet.

A portion of deferred tax assets relating to NOLs pertains to NOL carryforwards resulting from tax deductions upon the exercise of employee stock options of $1.9 million. When recognized, the tax benefit of these loss carryforwards will be accounted for as a credit to additional paid-in capital rather than a reduction of the income tax expense.

As of December 31, 2016, the Company had NOL carryforwards for federal income tax purposes of $404.0 million. The federal NOL carryforwards, if not offset against future income, will expire by 2032, with the majority of such NOLs expiring by 2021.

The Company also had federal research carryforwards of $2.7 million. The federal credits will expire by 2029.

The Company records liabilities, where appropriate, for all uncertain income tax positions. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. The adoption of these provisions did not have an impact on the Company’s consolidated financial condition, results of operations or cash flows. At December 31, 2016, the Company did not have any unrecognized tax benefits.

The Company is subject to taxation in the US and various state jurisdictions.  The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 1998 through December 31, 2015, due to carryforward of unutilized net operating losses and research and development credits.  The Company does not anticipate significant changes to its uncertain tax positions through December 31, 2016.