. Income Taxes

The Company recorded a provision for income taxes of

$3.0

thousand and

$2.0

thousand during the years ended

December 31, 2019

and

2018,

respectively, and a benefit for income taxes of

$0.7

million during the year ended

December 31, 2017.

Net deferred tax assets as of

December

31,

2019

and

2018

consist of the following (in thousands):

	December 31, 201 9			December 31, 201 8
Deferred tax assets:
Accruals and other	$	3,672		$	3,263
Research credits		7,275			7,275
Net operating loss carryforward		52,361			39,082
Section 59(e) R&D expenditures		8,933			10,387
Deferred revenue		21,324			20,689
Total deferred tax assets		93,565			80,696
Valuation allowance		(93,565	)		(80,696	)
Net deferred tax assets	$	—		$	—

Reconciliations of the statutory federal income tax to the Company’s effective tax during the years ended

December

31,

2019,

2018

and

2017

are as follows (in thousands):

	Year Ended December 31,
	201 9			2018			2017
Tax at statutory federal rate	$	(11,180	)	$	(9,901	)	$	(17,751	)
State tax—net of federal benefit		(2,538	)		(792	)		350
General business credits		—			(500	)		(316	)
Stock options		800			1,048			42
Other		7			295			(19	)
Change in valuation allowance		12,914			9,852			(17,110	)
Tax reform – tax rate change		—			—			34,103
Provision (benefit) for income taxes	$	3		$	2		$	(701	)

ASC

740

requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than

not.”

Realization of deferred tax assets is dependent on future taxable income, if any, the timing and the amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by

$12.9

million and

$9.9

million, and decreased by

$17.1

million during the years ended

December 31, 2019,

2018

and

2017,

respectively.

As of

December

31,

2019,

the Company had federal net operating loss carryforwards of

$212.4

million, of which

$114.9

million federal net operating losses generated before

January 1, 2018

will begin to expire in

2029.

Federal net operating losses of

$97.5

million generated in

2019

and

2018

will carryforward indefinitely but are subject to the

80%

taxable income limitation. As of

December

31,

2019,

the Company had state net operating loss carryforwards of

$113.5

million, which begin to expire in

2028.

As of

December 31, 2017,

the Company had a federal alternative minimum tax credit carryover of

$0.7

million which was refundable under the tax reform enacted on

December 22, 2017,

$0.3

million of which was received during the year ended

December 31, 2019,

$0.1

million of which is now classified as Tax receivable on the Company’s balance sheet and

$0.3

million of which is classified as a Long-term tax receivable.

As of

December

31,

2019,

the Company had federal research credit carryovers of

$6.5

million, which begin to expire in

2026.

As of

December

31,

2019,

the Company had state research credit carryovers of

$4.0

million, which will carryforward indefinitely.

Under Section

382

of the Internal Revenue Code of

1986,

as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than

50%

change (by value) in its equity ownership over a

three

year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research credits, to offset its post-change income

may

be limited. Based on an analysis performed by the Company as of

December

31,

2013,

it was determined that

two

ownership changes have occurred since inception of the Company. The

first

ownership change occurred in

2006

at the time of the Series A financing and, as a result of the change,

$1.4

million in federal and state net operating loss carryforwards will expire unutilized. In addition,

$26

thousand in federal and state research and development credits will expire unutilized. The

second

ownership change occurred in

July 2013

at the time of the underwritten public offering; however, the Company believes the resulting annual imposed limitation on use of pre-change tax attributes is sufficiently high that the limit itself will

not

result in unutilized pre-change tax attributes.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the years ended

December

31,

2019,

2018

and

2017

is as follows (in thousands):

	Year Ended December 31,
	2019		2018		2017
Unrecognized benefit—beginning of period	$	2,635	$	2,365	$	2,162
Gross increases—prior period tax positions		—		57		—
Gross increases—current period tax positions		—		213		203
Unrecognized benefit—end of period	$	2,635	$	2,635	$	2,365

The entire amount of the unrecognized tax benefits would

not

impact the Company’s effective tax rate if recognized.

There were

accrued interest or penalties related to unrecognized tax benefits in the years ended

December 31, 2019,

2018

and

2017.

The Company files income tax returns in the United States, California, and other states. The tax years

2005

through

2014,

and

2016

through

2019,

remain open in all jurisdictions. The Company is

not

currently under examination by income tax authorities in federal, state or other foreign jurisdictions. The Company does

not

anticipate any significant changes within

months of this reporting date of its uncertain tax positions.