INCOME TAXES

The Company has incurred net operating losses for the years ended December 31, 2015, 2014 and 2013, and therefore has no provision for income taxes recorded for such years. The Company had federal, state and foreign net operating loss carryforwards of $497.2 million, $245.4 million and $10.7 million, respectively, as of December 31, 2015. Federal net operating loss carryforwards expire beginning in 2024 and state net operating loss carryforwards expire beginning in 2016, if not utilized. The Company had federal and state research and development tax credit carryforwards of $4.5 million and $2.7 million, respectively, as of December 31, 2015. The federal research and development tax credit carryforwards will expire starting in 2028 if not utilized. The state research and development tax credit carryforwards can be carried forward indefinitely.

Utilization of the net operating loss and research and development credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating losses and research and development credit carryforwards before utilization.

The components of loss before income taxes are as follows for the years ended December 31, 2015, 2014 and 2013 (in thousands):



	Years Ending December 31,
	2015			2014			2013
United States	$	(138,424	)	$	(159,370	)	$	(111,791	)
Foreign	(3,023		)	(2,771		)	(4,598		)
Loss before income taxes	$	(141,447	)	$	(162,141	)	$	(116,389	)

Reconciling items from income tax computed at the statutory federal rate for the years ended December 31, 2015, 2014 and 2013, were as follows:



	Years Ending December 31,
	2015		2014		2013
Federal income tax statutory rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal benefits	2.2		1.6		4.1
Revalued derivative liability	—		0.6		(1.8	)
Incentive stock option compensation	(0.4	)	(1.3	)	(1.6	)
Research tax credits	0.4		0.8		1.6
Other	(0.1	)	0.3		1.9
Valuation allowance	(36.1	)%	(36.0	)%	(38.2	)%
Effective income tax rate	—	%	—	%	—	%

The tax effects of temporary differences and carry forwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):



	December 31,
	2015			2014
Net operating loss carry forwards	$	187,169		$	140,185
Capitalized start-up costs	7,475			8,051
Research and development credits	6,320			5,603
Stock compensation	12,683			10,630
Other	6,875			6,634
Total deferred tax assets	220,522			171,103
Valuation allowance	(216,220		)	(166,180		)
Deferred tax liability—fixed assets	(3,056		)	(3,346		)
Deferred tax liability—derivative liability	(1,246		)	(1,577		)
Net deferred tax assets, after valuation allowance	$	—		$	—

The Company is tracking the portion of its deferred tax assets attributable to excess stock option benefits in accordance with FASB ASC 718-740-45, Other Presentation Matters, and therefore, these amounts are not included in the Company’s deferred tax assets. The deferred tax assets attributable to excess stock option benefits total $6.7 million at December 31, 2015, and the benefit related thereto will only be recognized when it reduces cash taxes payable.

The Company’s deferred tax assets represent an unrecognized future tax benefit. The Company has provided a full valuation allowance on its deferred tax assets as of December 31, 2015 and 2014, as management believes it is more likely than not that the related deferred tax asset will not be realized. The net valuation allowance increased by $50.0 million during the year ended December 31, 2015.

Uncertain Tax Positions

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



Balance as of December 31, 2012	$	619
Addition based on tax positions related to current year	441
Additions based on tax positions related to prior year	428
Balance as of December 31, 2013	1,488
Addition based on tax positions related to current year	6,411
Additions based on tax positions related to prior year	4,042
Balance as of December 31, 2014	11,941
Addition based on tax positions related to current year	184
Reduction based on tax positions related to prior year	(9,799		)
Additions based on tax positions related to prior year	86
Balance as of December 31, 2015	$	2,412

During the year ended December 31, 2015, unrecognized tax benefits of $9.8 million were resolved in connection with the outcome of a California Supreme Court case of Gillette and Company et al. v. Franchise Tax Board that concluded on a methodology which follows that certain of the Company’s net operating losses cannot be sustained. The decision had no impact on the Company’s gross deferred tax assets as presented, as the Company’s deferred tax asset for net operating losses was previously reported, net of a reserve for this same item.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes. Management has determined that no accrual for interest and penalties was required as of December 31, 2015. The Company does not anticipate the total amounts of unrecognized tax benefits will significantly increase or decrease in the next twelve months.

The Company is subject to taxation in the U.S., various states and a foreign jurisdiction. As of December 31, 2015, the Company’s tax years 2004 and thereafter remain subject to examination by the tax authorities.