9. Income Taxes

As of December 31, 2015 and 2014, we had approximately $93.2 million and $68.0 million, respectively, of net operating loss (NOL), carry forwards available to offset future federal and state taxable income that will expire beginning in 2023. We also have federal research and development credit carryovers of approximately $3.7 million and state credit carryovers of approximately $0.4 million which expire beginning in 2019.

The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL, and tax credit carry forwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three ‑ year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, as well as similar state tax provisions. This could limit the amount of NOLs that we can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of our company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. Additionally, U.S. tax laws limit the time during which these carry forwards may be applied against future taxes, therefore, we may not be able to take full advantage of these carry forwards for federal income tax purposes. We are currently evaluating the ownership history of our company to determine if there were any ownership changes as defined under Section 382(g) of the Code and the effects any ownership change may have had.

The components of the net deferred tax asset are as follows (in thousands):


	December 31,
	2015		2014
Gross deferred tax assets:
Net operating loss carryforwards	$	37,051	$	26,505
Accrued expenses		29		—
Contributions		6		5
Deferred expenses		23		—
Stock‑based compensation		826		211
Research and development and other credits		4,123		3,075
Total gross deferred tax assets		42,058		29,796
Gross deferred tax liabilities:
Depreciation		(2)		(1)
Total gross deferred tax liabilities		(2)		(1)
Net deferred tax assets		42,056		29,795
Less: valuation allowance		(42,056)		(29,795)
Net deferred tax assets after valuation allowance	$	—	$	—

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2015. The valuation allowance increased by $12.3 million and $3.9 million during the years ended December 31, 2015 and 2014, respectively, due primarily to the generation of NOLs during those periods.

We did not have unrecognized tax benefits as of December 31, 2015 and 2014, and do not expect this to change significantly over the next twelve months. We recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements. Accrued interest and penalties, where appropriate, are recorded in income tax expense. We did not have uncertain tax positions as of December 31, 2015 and 2014. As of December 31, 2015 and 2014, we have not accrued interest or penalties related to any uncertain tax positions. Our tax returns filed since inception are still subject to examination by major tax jurisdictions.

A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:


	Year Ended
	December 31,
	2015		2014
Federal income tax expense at statutory rate	34.0	%	34.0	%
Permanent items	(1.0)		(5.4)
State income tax, net of federal benefit	7.1		3.8
R&D tax credits	4.2		4.2
Other	5.0		—
Change in valuation allowance	(49.3)		(36.6)
Effective income tax rate	0.0	%	0.0	%

For all years through December 31, 2015, we generated research credits but have not conducted a study to document the qualified activities. This study may result in an adjustment to our research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position for these years. A full valuation allowance has been provided against our research and development credits and, if an adjustment is required, this adjustment to the deferred tax asset established for the research and development credit carryforwards would be offset by an adjustment to the valuation allowance.

We file income tax returns in the United States, the State of Connecticut, and the Commonwealth of Pennsylvania. The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2012 through December 31, 2014. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.