Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

5.              Income Taxes

We calculate our interim tax provision in accordance with the guidance for accounting for income taxes in interim periods. At the end of each interim period, we estimate the annual effective tax rate and apply that tax rate to our ordinary quarterly pre-tax income. The tax expense or benefit related to significant, unusual or extraordinary discrete events during the interim period is recognized in the interim period in which those events occurred. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.

For income tax reporting purposes, we anticipate a loss for the year ending December 31, 2011. The primary difference for 2011 between our net income for financial reporting purposes and the loss for income tax reporting purposes relates to the recognition of deferred revenue from our collaborative agreement with Genzyme, which was previously reported for income tax purposes. During the nine months ended September 30, 2010, we recorded $692,000 of income tax expense which represented the Federal Alternative Minimum tax. During the nine months ended September 30, 2011, we recorded income tax expense of $43,000 related to the true up of our tax asset accounts upon filing our 2010 income tax returns.

At September 30, 2011, the balance of our net operating loss and tax credit carryforwards was approximately $78.0 million.  During fiscal 2010, we released a portion of valuation allowance in the amount of $3.2 million to reflect our expectation of being able to utilize net operating loss and tax credit carryforwards in 2011. During the second quarter of 2011, upon filing our 2010 income tax returns, we reduced our deferred tax asset to $2.2 million and increased our income tax receivable to $1.4 million ($1.1 million of which is included in Accounts and Other Receivables in the Condensed Balance Sheet at September 30, 2011). Our remaining deferred tax assets have been fully reserved in both 2011 and 2010 since their ultimate future realization cannot be assured.