	Year Ended December 31,
	2018		2017
Current:
Federal	$	–	$	–
State		–		–
Foreign		–		–
		–		-
Deferred:
Federal	$	–	$	–
State		–		–
Foreign		–		–
		–		–
Total provision for income taxes	$	-	$	-

We did not record an income tax expense for the years ended December 31, 2018, 2017 and 2016. The effective tax rate of our provision for income taxes differs from the federal statutory rate as follows:

	Year Ended December 31,
	2018			2017			2016
Federal statutory income tax rate		21.0	%		34.0	%		34.0	%
Federal and state credits		7.4	%		8.9	%		9.5	%
Excess tax benefit		0.4	%		8.6	%		0.0	%
Stock based compensation		-0.8	%		0.1	%		-0.1	%
Other		-0.6	%		-0.1	%		0.1	%
Tax impact due to tax rate reduction		0.0	%		-47.7	%		0.0	%
Change in valuation allowance		-24.1	%		2.6	%		-38.6	%
Foreign Rate Differential		-3.3	%		-6.4	%		-4.9	%
Total tax benefit		0.0	%		0.0	%		0.0	%

The components of U.S. deferred tax assets and (liabilities) are as follows (in thousands):

	December 31,
	2018			2017
Deferred tax assets:
Federal and state net operating loss carryforwards	$	241,881		$	203,897
Federal and state research tax credit carryforwards		23,917			21,238
Federal Orphan Drug Credit		120,273			96,750
Deferred revenue		29,530			17,538
Stock options		19,992			15,995
Other		9,448			7,529
Net deferred tax assets before valuation allowance		445,041			362,947
Valuation allowance		(445,041	)		(362,947	)
Net deferred tax assets	$	–		$	–

We received orphan designation and were eligible to claim a federal orphan drug credit starting in 2015 and reported the credit in 2018, 2017 and 2016. On December 22, 2017, President Donald Trump signed into U.S. law the Tax Reform Act. The new law limits the orphan drug credit to 25% of qualified clinical testing expenses for the tax year effective for amounts paid or incurred in tax years beginning after 2017.

Realization of the deferred tax assets is dependent upon the generation of future taxable income, if any, the amount and timing of which are uncertain. Based on available objective evidence, including the fact that we have incurred significant losses in almost every year since our inception, we believe it is more likely than not that our deferred tax assets are not recognizable. Accordingly, deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $82.1 million for the year ended December 31, 2018. The valuation allowance decreased by approximately $2.2 million for the year ended December 31, 2017.

As of December 31, 2018, we had net operating loss carryforwards for federal income tax purposes of approximately $1,040.8 million and federal research tax credits of approximately $19.4 million and orphan drug credit of $141.5 million, which expire at various dates in the period from 2024 to 2038. We also have California net operating loss carry forwards of approximately $216 million which expire at various dates in the period from 2018 to 2033 and California research tax credits of approximately $10.6 million, which can be carried forward indefinitely. Our federal and state net operating loss carryforwards as of December 31, 2018 include amounts resulting from exercises and sales of stock option awards to employees and non-employees. When we realize the tax benefit associated with these stock option exercises as a reduction to taxable income in our returns, we will account for the tax benefit as a reduction of our income tax provision in our consolidated financial statements.

Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. In the event that we had a change of ownership, utilization of the net operating loss and tax credit carryforwards may be limited under section 382.

We are subject to taxation in the United States. We have not been audited by the Internal Revenue Service or any state tax authority. We are no longer subject to audit by the Internal Revenue Service for income tax returns filed before 2016, and by the material state and local tax authorities for tax returns filed before 2015. However, carryforward tax attributes that were generated prior to these years may still be adjusted upon examination by tax authorities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,
	2018			2017			2016
Unrecognized tax benefits, beginning of period	$	20,730		$	13,865		$	3,228
Increases due to current period positions		4,879			7,046			6,919
Increase due to prior period positions		26			–			4,266
Decreases due to prior period positions		(214	)		(181	)		(548	)
Unrecognized tax benefits, end of period	$	25,421		$	20,730		$	13,865

The amount of unrecognized income tax benefits that, if recognized, would affect our effective tax rate was $0 as of December 31, 2018 and December 31, 2017. If the $25.4 million and $20.7 million of unrecognized income tax benefits as of December 31, 2018 and 2017, respectively, is recognized, there would be no impact to the effective tax rate as any change will fully offset the valuation allowance. We do not expect that the unrecognized tax benefit will change within the next 12 months.

We recognize interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within the related tax liability line in the accompanying consolidated balance sheets. Due to our net operating losses, we have not accrued any interest or penalty for any of our uncertain tax benefits as of December 31, 2018 and 2017.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax ACT") was enacted into law, which significantly changes existing U.S. tax law and includes many provisions applicable to us, such as reducing the U.S. federal statutory tax rate. The Tax Act reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018.

Given the significance of the legislation, the U.S. Securities and Exchange Commission (the "SEC") staff issued Staff Accounting Bulletin ("SAB") No. 118 ("SAB 118"), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. During 2017, we recorded the impact of the Tax Act effects using the current available information and technical guidance on the interpretations of the Tax Act.

Amounts recorded, where we consider accounting to be provisional for the year ended December 31, 2017, principally related to the impact of corporate income tax rate reduction on the deferred tax assets, on the corresponding change of deferred tax assets' valuation allowance and limitations on deductibility of compensation paid to certain highly paid employees. As permitted by SAB 118, we recorded provisional estimates in 2017 and finalized our accounting for these provisional estimates based on guidance, interpretations and all of the available data during the year ended December 31, 2018. During the year ended December 31, 2018, we finalized the provisional amounts recorded in 2017. No adjustment to the previously recorded provisional amount as such no impact to 2018.