Income Taxes

There was no income tax benefit recognized for the years ended December 31, 2018 and 2017 due to the Company’s history of net losses combined with an inability to confirm recovery of the tax benefits from the Company’s losses and other net deferred tax assets. The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

The reasons for the difference between actual income tax benefit for the years ended December 31, 2018 and 2017, and the amount computed by applying the statutory federal income tax rate to losses before income tax benefit are as follows:



	Year Ended December 31,
	2018			2017

Income tax benefit at federal statutory rate	$	(2,661	)	$	(12,451	)
State income taxes, net of federal benefit	(570		)	(751		)
Non-deductible expenses	154			235
Federal rate impact	—			18,894
Change in fair value of warrants	(3,479		)	—
Research and development tax credits	(1,254		)	(1,732		)
Other	380			431
Change in valuation allowance	7,430			(4,626		)
Total income tax provision	$	—		$	—

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows:



	As of December 31,
	2018			2017
Deferred tax assets:
Accrued compensation	$	184		$	329
Accrued liabilities	149			121
Tax loss carryforwards	37,986			32,395
Intangible assets	286			307
Share-based compensation	814			728
Tax credits	6,917			5,662
Facility financing lease obligation	1,847			1,861
Deferred revenue	588			—
Other	10			13
Total deferred tax assets	48,781			41,416
Less valuation allowance	(46,604		)	(39,174		)
Net deferred tax asset	2,177			2,242
Deferred tax liabilities:
Fixed assets	(2,032		)	(2,067		)
Other	(145		)	(175		)
Net noncurrent deferred tax asset (liability)	$	—		$	—

In December 2017, the Tax Cuts and Jobs Act, or TCJA, was signed into law. Among other things, the TCJA permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018. Based on provisions of the TCJA, the Company remeasured its deferred tax assets and liabilities to reflect the lower statutory tax rate, which resulted in a provision of $18,894 to income tax expense. However, there is no impact to the Company’s effective tax rate because a corresponding and offsetting reduction was made in the valuation allowance. The other provisions of the TCJA did not have a material impact on the consolidated financial statements. The Company’s deferred tax remeasurement is complete and all tax effects of the TCJA have been reflected in the Company’s income tax provision for the year ended December 31, 2018.

As described in “Note 1-Organization and Significant Accounting Policies,” the 2017 consolidated financial statements have been revised to reflect the adoption of FASB ASC Topic 606, using the full retrospective transition method. As a result of adopting ASC 606, the Company recorded an adjustment of $506 to previously reported license and collaboration revenue for the year ended December 31, 2017 and a corresponding adjustment to deferred revenue balances as of December 31, 2017. Corresponding retrospective adjustments were made to the 2017 columns of the rate reconciliation and deferred income tax tables above in which a deferred tax liability was recognized to reflect this change in accounting principle with an offsetting reduction in the total valuation allowance. The adoption of ASC 606 and the associated retrospective adjustments had no impact on the Company’s reported net operating loss carryforwards as of December 31, 2017.

As of December 31, 2018, the Company had federal and state net operating loss carryforwards of $165,381 and $164,873, respectively. The net operating loss carryforwards begin to expire in 2028 and 2023 for federal and state tax purposes, respectively. As of December 31, 2018, the Company had government research and development tax credits of approximately $6,917 to offset future federal taxes which begin to expire in 2028.

The Company had no unrecognized tax benefits as of December 31, 2018 and 2017. The Company does not anticipate a significant change in total unrecognized tax benefits within the next 12 months. Tax years 2015-2017 remain open to examination by the major taxing jurisdictions to which the Company is subject. Additionally, years prior to 2015 are also open to examination to the extent of loss and credit carryforwards from those years.

The Tax Reform Act of 1986 contains provisions which limit the ability to utilize the net operating loss carryforwards in the case of certain events including significant changes in ownership interests. If the Company’s net operating loss carryforwards are limited, and the Company has taxable income which exceeds the permissible yearly net operating loss carryforwards, the Company would incur a federal income tax liability even though net operating loss carryforwards would be available in future years.