Income taxes

9 Months Ended

Sep. 30, 2022

Income Taxes

Income Taxes

11. Income taxes

We account for income taxes under the liability method in accordance with ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law.

The Tax Cuts and Jobs Act passed in 2017 included a provision which would require taxpayers to capitalize and amortize U.S.-based research & experimentation (R&E) expenses over a period of five years and non-U.S. R&E expenses over 15 years effective for tax years beginning after December 31, 2021 pursuant to Internal Revenue Code Section 174. As a result of the capitalization of R&E expenses, income generated from the sale of the PRV, and limitations related to the utilization of state net operating losses, we have a current income tax expense of $1.8 million for the period ended September 30, 2022 attributable to state income taxes. Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified. As of September 30, 2022, we do not estimate a federal income tax liability due to the utilization of Net Operating Losses (NOLs) after taking into consideration Internal Revenue Code Section 382 limitations related to changes in ownership.

We have significant deferred tax assets, a substantial amount of which result from operating loss carryforwards. We routinely evaluate our ability to realize the benefits of these assets to determine whether it is more likely than not that such benefit will be realized. Based on the history of losses generated, we believe as of September 30, 2022, it is more likely than not that our remaining deferred tax assets will not be realized. Accordingly, we maintain a full valuation allowance on our net deferred tax assets.