14. Income Taxes

The Company’s benefit from income taxes is as follows:


	December 31,
	2019		2018		2017
Current:
Federal	$	—	$	—	$	—
State		(816)		(389)		(204)
		(816)		(389)		(204)
Deferred:
Federal		—		—		—
State		—		—		—
		—		—		—
Benefit from income taxes	$	(816)	$	(389)	$	(204)

The Company’s tax benefits relate to state R&D tax credits exchanged for cash. The State of Connecticut provides companies with the opportunity to exchange certain R&D credit carryforwards for cash in exchange for foregoing the carryforward of the R&D credit. The program provides for such exchange of the R&D credits at a rate of 65% of the annual R&D credit, as defined.

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:


	December 31,
	2019		2018		2017
Income taxes using U.S. federal statutory rate	21.00	%	21.00	%	34.00	%
State income taxes, net of federal benefit	(1.99)	%	6.82	%	5.33	%
Tax Cuts and Jobs Act	0.00	%	0.00	%	(44.43)	%
Impact of R&D tax credit on effective tax rate	4.34	%	3.48	%	3.25	%
Stock option shortfalls and cancellations	(0.17)	%	(0.43)	%	0.21	%
Permanent items and other	0.36	%	(0.15)	%	(0.56)	%
Change in valuation allowance	(22.76)	%	(31.76)	%	2.55	%
Provision to return	(0.02)	%	0.03	%	0.00	%
Non-taxable revenue	0.00	%	1.54	%	0.00	%
	0.76	%	0.53	%	0.35	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,
	2019		2018
Valuation allowance	$	(114,136)	$	(89,815)

Net operating loss carryforwards		84,608		73,578
Federal and state tax credits		16,624		11,108
Deferred revenue		5,994		1,111
Stock-based compensation expense		4,481		3,605
Other		3,409		420
Deferred tax assets		115,116		89,822

Other		(980)		(7)
Deferred tax liabilities:		(980)		(7)

Net deferred tax asset:	$	—	$	—

A 100% valuation allowance has been recorded on the deferred tax asset as of December 31, 2019 and 2018 because management believes it is more likely than not that the asset will not be realized. The change in the valuation allowance during 2019 and 2018 was an increase of $24,321 and $23,642, respectively.

The Company applies the provisions of ASC 740, Income Taxes, which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. The financial statements reflect expected future tax consequences of such positions presuming the taxing authorities possess full knowledge of the position and all relevant facts. As of December 31, 2019 and 2018, the Company had no unrecognized tax benefits or related interest and penalties accrued. In the event the Company determines that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of income tax expense.

At December 31, 2019, the Company had federal and state net operating loss carryforwards of $349,525 and $189,157, respectively. The federal and state tax loss carryforwards will begin to expire in 2026 and 2027, respectively, unless previously utilized. The federal net operating losses arising in 2018 and forward have an unlimited carryforward period, however will only offset 80% of taxable income in a carryforward year. The federal losses may also be subject to limitation pursuant to Internal Revenue Code section 382. The Company also had federal and state R&D tax credit carryforwards of $15,274 and $1,448, respectively. The federal credits will begin expiring in 2025 unless previously utilized. The Connecticut credit carryforwards have no expiration period. Because of the net operating loss and research credit carryforwards, tax years 2006 through 2019 remain open to U.S. federal and state tax examinations.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act, or the TCJA. The TCJA, which is also commonly referred to as “U.S. tax reform”, significantly changes U.S. corporate income tax laws by, among other provisions, reducing the maximum U.S. corporate income tax rate from 35% to 21% starting in 2018. As of December 31, 2019 and 2018, the Company did not have any foreign subsidiaries and the international aspects of the TCJA were not applicable.

On December, 22, 2017, SAB 118 was issued by the SEC due to the complexities involved in accounting for the TCJA. SAB 118 requires the Company to include in its financial statements a reasonable estimate of the impact of the TCJA on earnings to the extent such estimate has been determined. The Company finalized its accounting for the TCJA as of December 31, 2018, which resulted in insignificant adjustments.