14. Income taxes

The components of loss before income taxes were as follows (in thousands):

	Year ended December 31,
	2016			2015			2014
U.S.	$	(210,188	)	$	(162,287	)	$	(61,118	)
Foreign		(53,931	)		(4,436	)		612
Total	$	(264,119	)	$	(166,723	)	$	(60,506	)

The (benefit from) provision for income taxes were as follows (in thousands):

	Year ended December 31,
	2016			2015		2014
Current
Federal	$	—		$	—	$	—
State		—			—		1
Foreign		—			60		—
Deferred
Federal		(588	)		—		(9,390	)
State		(24	)		—		(2,408	)
Foreign		—			—		—
Total income tax expense (benefit)	$	(612	)	$	60	$	(11,797	)

A reconciliation of income tax (benefit) provision computed at the statutory federal income tax rate to the Company’s effective income tax rate (benefit) provision as reflected in the financial statements is as follows:

	Year ended December 31,
	2016			2015			2014
Federal income tax expense at statutory rate		34.0	%		34.0	%		34.0	%
State income tax, net of federal benefit		3.3	%		4.2	%		4.0	%
Permanent differences		(5.3	%)		(6.4	%)		(3.2	%)
Research and development credit		15.0	%		14.6	%		25.7	%
Foreign differential		(7.0	%)		(1.0	%)		0.0	%
Other		0.0	%		(0.5	%)		0.0	%
Change in valuation allowance		(39.9	%)		(44.9	%)		(41.0	%)
Effective income tax rate benefit		0.1	%		0.0	%		19.5	%

For the years ended December 31, 2016, 2015 and 2014, the Company recognized an income tax benefit (expense) of $0.6 million or 0.1%, $(0.1) million or 0.0% and $11.8 million or 19.5%, respectively. In 2014, the Company recorded a non-recurring tax benefit of $11.8 million due to the release of a portion of the valuation allowance due to taxable temporary differences available as a source of income to realize certain pre-existing deferred tax assets as a result of the acquisition of Pregenen. Excluding the impact of this item, the Company’s overall tax provision and effective tax rate would have been zero. The Company did not recognize any significant tax benefit for the years ended December 31, 2016 and December 31, 2015 as the Company was subject to a full valuation allowance.

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are comprised of the following (in thousands):

	Year ended December 31,
	2016			2015
Deferred tax assets:
U.S. net operating loss carryforwards	$	106,064		$	62,844
Foreign net operating loss carryforwards		—			194
Tax credit carryforwards		87,117			47,386
Capitalized research and development expenses, net		631			979
Capital lease		47,191			24,315
Deferred revenue		18,231			16,438
Capitalized license fees		11,752			5,488
Accruals and other		32,172			19,486
Total deferred tax assets		303,158			177,130
Intangible assets		(8,129	)		(9,606	)
Fixed assets		(48,902	)		(26,681	)
Less valuation allowance		(246,127	)		(140,843	)
Net deferred taxes	$	—		$	—

A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. The valuation allowance increased on a net basis by approximately $105.3 million during the year ended December 31, 2016 due primarily to net operating losses and tax credit carryforwards.

As of December 31, 2016, 2015 and 2014, the Company had U.S. federal net operating loss carryforwards of approximately $466.8 million, $347.5 million, and $130.0 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2036. As of December 31, 2016, 2015 and 2014, the Company also had U.S. state net operating loss carryforwards of approximately $456.8 million, $335.0 million, and $115.5 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2036. At December 31, 2016, $195.4 million and $195.4 million of federal and state net operating losses, respectively, relate to excess equity based compensation tax deductions, the benefits for which will be recorded to additional paid-in capital when recognized through a reduction of cash taxes paid. At December 31, 2016, 2015 and 2014, the Company also had approximately $0.0 million, $0.6 million, and $2.7 million, respectively, of foreign net operating loss carryforwards that may be available to offset future income tax liabilities; these carryforwards do not expire.

As of December 31, 2016, 2015 and 2014, the Company had federal research and development and orphan drug tax credit carryforwards of approximately $83.2 million, $44.9 million, and $22.0 million, respectively, available to reduce future tax liabilities which expire at various dates through 2036. As of December 31, 2016, 2015 and 2014, the Company had state credit carryforwards of approximately $6.0 million, $3.8 million, and $2.0 million, respectively, available to reduce future tax liabilities which expire at various dates through 2031.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inception which it believes has resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code.

The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2016, 2015 and 2014, the Company had no significant accrued interest or penalties related to uncertain tax positions and no significant amounts have been recognized in the Company’s consolidated statements of operations and comprehensive income (loss).

For all years through December 31, 2016, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s 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. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

The Company or one of its subsidiaries files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2013 through December 31, 2016. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period.