Income Taxes

At December 31, 2019, we had U.S. federal net operating loss and research and development tax credit carryforwards of approximately $193.2 million and $12.8 million, respectively. Such operating losses and tax credits may be used to reduce future taxable income and tax liabilities and will expire at various dates between 2032 and 2039. Additionally, as of December 31, 2019, we had federal net operating loss carryforwards generated after 2017 of $56.6 million that have an indefinite life, but with usage limited to 80% of taxable income in any given year. We also had foreign net operating loss carryforwards of approximately $24.2 million. Such foreign net operating loss carryforwards do not expire. We also had state and city net operating loss carryforwards aggregating approximately $63.5 million. Such state and city net operating loss carryforwards may be used to reduce future taxable income and tax liabilities and will expire at various dates between 2020 and 2037. Certain state net operating losses do not expire.

The utilization of net operating loss and tax credit carryforwards generated prior to October 2012 (the “Section 382 Limited Attributes”) is substantially limited under Section 382 of the Internal Revenue Code of 1986, as amended, (the “IRC”). We generated U.S. federal net operating loss carryforwards of $156.5 million, research and development tax credits of $12.8 million, and state and local net operating loss carryforwards of $63.3 million since 2012. We will update our analysis under Section 382 prior to using these attributes.

A reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:



	Percent of Income before Income Taxes
	2019		2018
Statutory federal income tax rate	21.0	%	21.0	%
State income taxes - net of federal tax benefit	0.9	%	0.9	%
Other permanent differences	(2.3	)%	(3.7	)%
Valuation allowances	(25.9	)%	(29.2	)%
Research and development - U.S.	6.3	%	11.0	%
Effective tax rate for the year	—	%	—	%

Significant components of our deferred tax assets are as follows (in thousands):



	December 31,
	2019			2018
Net operating loss carryforwards	$	48,182		$	38,813
Research and development credit carryforwards	12,797			9,979
Compensation expense	1,156			1,552
Other	903			1,166
Total deferred tax assets	63,038			51,510
Valuation allowance for deferred tax assets	(63,038		)	(51,510		)
Net deferred tax assets	$	—		$	—

Because of our cumulative losses, substantially all the deferred tax assets have been fully offset by a valuation allowance. We have not paid income taxes for the three-year period ended December 31, 2019.

In December 2017, the U.S. federal government enacted legislation commonly referred to as the “Tax Cuts and Jobs Act” (the “TCJA”). The TCJA made widespread changes to the IRC, including, among other items, a reduction in the federal corporate tax rate from 35% to 21%, effective January 1, 2018. The TCJA also eliminated alternative minimum tax and the 20-year carryforward limitation for net operating losses incurred after December 31, 2017 and imposes a limit on the usage of net operating losses incurred after such date equal to 80% of taxable income in any given year. The 80% usage limit will not have an economic impact on us until our current net operating losses are either utilized or expire. The carrying value of our deferred tax assets and liabilities is determined by the enacted U.S. corporate income tax rate. Consequently, any changes in the U.S. corporate income tax rate impacts the carrying value of our deferred tax assets and liabilities. The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profit (“E&P”) of certain of our foreign subsidiaries. To determine the amount of Transition Tax, a company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant foreign subsidiaries as well as the amount of non-U.S. income tax paid on such earnings. We have an overall foreign E&P deficit and accordingly have not recorded any Transition Tax obligation.

As of December 31, 2018, we have completed the accounting for all the impacts of the TCJA. We continue to evaluate the impacts of the TCJA and will consider additional guidance from the U.S. Treasury Department, Internal Revenue Service or other standard-setting bodies. However, no additional adjustments were recorded by us during the measurement period in 2018 as permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.