17. Income Taxes

During the years ended December 31, 2019, 2018 and 2017, the Company recorded no income tax benefits for the net operating losses incurred or the research and development tax credits generated in each year, due to its uncertainty of realizing a benefit from those items.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:


	Year Ended December 31,
	2019		2018		2017
Federal statutory income tax rate	21.0	%	21.0	%	34.0	%
Tax reform change	—		—		(43.0)
Research and development tax credits	2.1		3.6		3.3
State taxes, net of federal benefit	2.7		4.5		3.8
Stock-based compensation	(1.3)		(1.3)		(2.2)
Other	(0.5)		(0.1)		0.2
Change in deferred tax asset valuation allowance	(24.0)		(27.7)		3.9
Effective income tax rate	—	%	—	%	—	%

Net deferred tax assets consisted of the following:


	December 31,
	2019		2018
Deferred tax assets:
Net operating loss carryforwards	$	70,317	$	49,699
Tax credit carryforwards		11,966		10,160
Capitalized start-up costs		695		870
Capitalized research and development expenses, net		14,521		18,418
Operating lease liabilities		2,505		—
Derivative liability		3,028		—
Accrued expenses and other temporary differences		6,987		5,196
Total deferred tax assets		110,019		84,343
Valuation allowance		(105,062)		(84,343)
Net deferred tax assets		4,957		—

Deferred tax liabilities:
Operating lease right of use assets		(1,662)		—
2026 Convertible Notes		(3,295)		—
Total deferred tax liabilities		(4,957)		—
Net deferred tax assets	$	—	$	—

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2019, 2018 and 2017 related primarily to the increase in net operating loss carryforwards, capitalized research and development expenses and research and development tax credit carryforwards offset in 2017 by a decrease in a deferred tax asset resulting from the decreased federal corporate tax rate and were as follows:


	Year Ended December 31,
	2019		2018		2017
Valuation allowance as of beginning of year	$	84,343	$	67,726	$	70,236
Increases recorded to income tax provision		20,719		16,617		24,773
Decreases recorded to income tax provision		—		—		(27,283)
Valuation allowance as of end of year	$	105,062	$	84,343	$	67,726

As of December 31, 2019, the Company had net operating loss carryforwards for federal and state income tax purposes of $274,331 and $219,375, respectively. The federal and state net operating losses generated for annual periods prior to January 1, 2018 begin to expire in 2024. The Company’s federal net operating losses generated for the years ended December 31, 2019 and 2018, which amounted to a total of $148,250, can be carried forward indefinitely. As of December 31, 2019, the Company also had available research and development tax credit carryforwards for federal and state income tax purposes of $8,211 and $4,342, respectively, which begin to expire in 2026 and 2025, respectively. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management considered the Company’s cumulative net losses and concluded that it is more likely than not that the Company would not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance was established against the net deferred tax assets as of December 31, 2019 and 2018.

The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2019 or 2018.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from December 31, 2015 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2019 and 2018, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations and comprehensive loss.