Income Taxes

12 Months Ended

Dec. 31, 2020

Income taxes:

The provision for income taxes consisted of the following components for the years ended December 31:


	2020		2019
Current:
Federal	$	(326)	$	—
State	578		5
Total current	252		5
Deferred:
Federal	—		—
State	—		—
Total deferred	—		—
Total provision for income taxes	$	252	$	5

Reconciliation of the Federal statutory income tax rate of 21% to the effective rate is as follows:


	2020		2019		2018
Federal statutory income (benefit) tax rate	21.00	%	21.00	%	21.00	%
State taxes, net of federal benefit	1.75		(0.18)		(0.11)
Stock compensation	4.47		(5.39)		(4.74)
Permanent differences-other	3.77		(7.67)		(1.33)
CARES Act 163(j) Modifications	2.95		—		—
Other	3.94		1.71		(2.07)
Decrease (increase) in valuation allowance	(36.91)		(9.44)		(12.65)
	0.97	%	0.03	%	0.10	%

The tax effects of temporary differences and net operating losses that give rise to significant components of deferred tax assets and liabilities consist of the following:


	December 31,
Deferred tax assets	2020		2019
Net operating loss carry-forward	$58,520		$62,535
R&D credit	10,930		10,980
Accrued liabilities and other	1,004		3,942
Stock options	850		4,416
Less: valuation allowance	(66,495)		(76,079)
Net deferred tax assets	4,809		5,794
Deferred tax liabilities
Basis difference in intangibles	(4,696)		(5,356)
Basis difference in equipment	(113)		(438)
Total net deferred tax asset	$	—	$	—

The Company is required to reduce any deferred tax asset by a valuation allowance if, based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. As a result, the Company recorded a valuation allowance with respect to all of the Company’s deferred tax assets for the years ended December 31, 2020 and 2019. The net decrease in the valuation allowance during 2020 was approximately $9.6 million.

The Company has a federal net operating loss carry forward (“NOLs”) of approximately $254 million as of December 31, 2020. Under Section 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a “loss corporation”, as defined, there are annual limitations on the amount of the NOLs and other deductions, which are available to the Company. The Company has determined that the portion of the NOLs incurred prior to May 16, 2006 is subject to this limitation. As such, the use of these NOLs to offset taxable income is limited to approximately $1.5 million per year. The Company has state NOLs of approximately $228 million as of December 31, 2020. These state NOLs expire in various years through 2038 and certain state NOLs generated in 2018 have an indefinite carryforward period. The federal NOLs incurred through December 31, 2017 expire between 2024 and 2037. The federal NOL generated in 2018 has an indefinite carryforward life due to tax reform.

Management has evaluated all other tax positions that could have a significant effect on the financial statements and determined that the Company has no uncertain income tax positions at December 31, 2020.

One or more of the Company’s legal entities file income tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions. The Company’s income tax returns are subject to audit by the tax authorities in those jurisdictions. Significant disputes may arise with authorities involving issues of the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and the interpretation of the relevant facts. The Company is no longer subject to U.S. federal or state tax examinations for years ended on or before December 31, 2016.