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

	Years Ended December 31,
	2019			2018
Federal income taxes	$	(7,179	)	$	(1,379	)
State income taxes, net of federal benefit		(968	)		(500	)
Permanent items		873			(147	)
In-process research and development		3,354
Research and development credit carryforwards		(217	)		(468	)
Other, net		18			51
Change in valuation allowance		4,119			2,443
Provision for income taxes	$	—		$	—

Significant components of the Company’s net deferred tax assets are as follows (in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	18,108		$	8,321
Research and development credit carryforwards		1,446			1,231
Accrued expenses		214			24
Capitalized research and development costs		7,688			—
Other, net		143			288
Total deferred tax assets		27,599			9,864
Valuation allowance		(27,546	)		(9,864	)
		53			—
Deferred tax liabilities:
Right of use asset		(53	)		—
Total deferred tax liabilities		(53	)		—
Net deferred tax assets	$	—		$	—

Based on the Company’s history of operating losses, the Company is unable to conclude that it is more likely than not that the benefit of its deferred tax assets will be realized. Accordingly, the Company has provided a full valuation allowance for its deferred tax assets as of December 31, 2019 and 2018. As a result of the Merger in 2019, the Company recorded deferred tax assets of $13.1 million which are fully offset by a valuation allowance. The $13.1 million net deferred tax assets do not include federal and state net operating loss carryforwards and federal research and development credit carryforwards that are estimated to expire under Internal Revenue Code Sections 382 and 383 as a result of the Merger.

At December 31, 2019, the Company had federal and state net operating loss (NOL) carryforwards of approximately $70.0 million and $48.7 million, respectively. Of the federal net operating losses at December 31, 2019, $44.2 million do not expire, and the remaining federal and state net operating loss carryforwards will begin expiring in 2034 and 2030, respectively, unless previously utilized. At December 31, 2019, the Company also had federal and state research and development credit carryforwards of approximately $0.9 million and $0.7 million, respectively. The federal research and development credit carryforwards will begin expiring in 2034 unless previously utilized. The state research and development credits do not expire.

Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the Company’s net operating loss and research and development tax credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed a Section 382 study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study and the fact that there may be additional such ownership changes in the future. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition at the effective date to be recognized. At December 31, 2019 and 2018, there were no unrecognized tax benefits recorded in the consolidated financial statements. The Company does not expect any material changes to unrecognized tax benefits within the next twelve months.

The Company is subject to taxation in the United States federal and state jurisdictions. The Company’s 2013 through 2019 federal income tax and state income tax returns are subject to examination by federal and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits. The Company is not currently under examination by any tax authority.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company has not recognized interest or penalties in its consolidated statements of operations since inception.

The Company adopted Accounting Standards Codification Topic 842 – Leases, on January 1, 2019. Under Topic 842, the Company is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for operating leases on the balance sheet. Upon adoption, no change in retained earnings was recorded related to income taxes as the Company maintains a full valuation allowance. As of the implementation date, an adjustment of $0.1 million was recorded as a deferred tax liability and an adjustment of $0.1 million was recorded as a deferred tax asset.