13. Income Taxes

The components of the income tax benefit were as follow, in thousands:

	Year Ended December 31,

	2013		2012		2011
Current
Federal	$	—	$	—	$	14,090
State		—		—		2,155
Deferred
Federal		—		—		—
State		—		—		—


Total	$	—	$	—	$	16,245

For the years ended December 31, 2013, 2012 and 2011, there was a $0 million, $0 million and $16.2 million benefit for federal or state income taxes based on continuing operations, respectively. A reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows, in thousands:

	Year Ended December 31,

	2013			2012			2011
Income tax (benefit) computed at federal statutory tax rate	$	(32,286	)	$	(16,270	)	$	(13,419	)
Permanent items		340			396			57
State taxes		(4,772	)		(2,487	)		(2,155	)
Change in valuation allowance		31,526			18,754			—
Uncertain tax position		5,411			(64	)		129
Research and development credits		(156	)		—			(857	)
Other		(63	)		(329	)		—


Income tax benefit	$	—		$	—		$	(16,245	)

In 2011, the Company recorded pre-tax income from discontinued operations of approximately $93.3 million, which resulted in income tax expense from discontinued operations of approximately $36.8 million. This income tax expense from discontinued operations was completely offset by a $16.2 million income tax benefit generated from the 2011 loss from continuing operations and the utilization of net operating loss carryforwards.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (NOL) carryforwards are available. Management considers projected future taxable income, the scheduled reversal of deferred tax liabilities, and available tax planning strategies that can be implemented by the Company in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the NOL carryforwards are available to reduce income taxes payable, management has established a full valuation allowance.

As of December 31, 2013, the NOL carryforwards amounted to approximately $144.3 million ($58.0 million tax effected) and will expire in various years beginning in 2030. As of December 31, 2013, the Company has available research and development credit carryforwards of approximately $4.2 million, which expire, if unused, starting 2025. The use of the Company's NOL carryforwards and research and development credits may be restricted due to changes in Company ownership. Additionally, despite the NOL carryforwards, the Company may have a future tax liability due to an alternative minimum tax or state tax requirements. The Company paid no income taxes in the years ended December 31, 2013, 2012 or 2011.

The deferred tax benefit has been entirely offset by valuation allowances. The significant components of the Company's deferred tax assets (liabilities) were as follow, in thousands:

	As of December 31,

	2013			2012
Deferred tax assets:
Net operating loss carryforward	$	58,047		$	32,714
Deferred rent credit		615			477
Accrued compensation and non-qualified stock options		1,986			59
Deferred financing costs		319			—
Depreciation and amortization		337			282
Research and development credits		4,167			3,901
Capitalized overhead into inventory (UNICAP §263A)		282			—
Other		151			789
Valuation allowance		(59,823	)		(38,222	)


Net deferred tax asset		6,081			—
Deferred tax liability:
Debt discount on convertible notes		(6,081	)		—


Net deferred taxes	$	0		$	0

The Company accounts for uncertain tax positions pursuant to the guidance in FASB ASC Topic 740, Income Taxes. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense. As of December 31, 2013 and 2012, the Company did not accrue any interest related to uncertain tax positions. The Company's income taxes have not been subject to examination by any tax jurisdictions since its inception. Due to NOL and research and development credit carryforwards, all income tax returns filed by the Company are subject to examination by the taxing jurisdictions. The net change during the year ended December 31, 2013 in total valuation allowance of approximately $21.6 million is primarily due to an increase in the NOL carryforward related to the 2013 net loss from continuing operations.

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

	Year Ended December 31,

	2013		2012			2011
Balance as of January 1	$	688	$	752		$	642
Gross increases related to prior-year tax positions		23		—			—
Gross increases (decrease) related to current-year tax positions		9,117		(64	)		110


Balance as of December 31	$	9,828	$	688		$	752

The Company believes that its uncertain tax positions would not result in adjustments to its effective income tax rate because likely corresponding adjustments to deferred tax assets would be offset by adjustments to recorded valuation allowances.