Income Taxes

The following table summarizes the components of our income tax (benefit) expense (in thousands):



	Year ended December 31,
	2016			2015			2014
Current:
Federal	$	—		$	—		$	—
State	1			1			1
	1			1			1
Deferred:
Federal	(5		)	(17		)	—
State	—			(2		)	—
	(5		)	(19		)	—
Income tax (benefit) expense	$	(4	)	$	(18	)	$	1

The following is a reconciliation of the expected statutory federal income tax provision to our actual income tax provision (in thousands):



	Year ended December 31,
	2016			2015			2014
Expected income tax benefit at federal statutory tax rate	$	(27,826	)	$	(18,960	)	$	(19,271	)
State income taxes, net of federal benefit	(1,152		)	(1,580		)	(2,348		)
Tax credits	(5,447		)	(5,039		)	(3,307		)
Change in fair value of convertible note payable	—			616			4,120
Change in valuation allowance	31,990			23,216			20,047
Prior year true-up	(1,320		)	110			(92		)
Stock compensation	2,458			1,161			902
Reserve for uncertain tax positions	1,314			254			—
Other	(21		)	204			(50		)
Income tax (benefit) expense	$	(4	)	$	(18	)	$	1

The following table summarizes the significant components of our deferred tax assets and liabilities (in thousands):



	December 31,
	2016			2015
Deferred tax assets:
Net operating loss carryovers	$	70,739		$	48,912
Research and development and other tax credits	22,613			15,148
Deferred revenue	735			1,210
Intangibles and property and equipment basis difference	—			2,097
Stock compensation expense	5,664			3,488
Other	4,679			1,129
Total deferred tax assets	104,430			71,984
Total deferred tax liabilities	(799		)	(343		)
Net deferred tax asset	103,631			71,641
Valuation allowance	(103,631		)	(71,641		)
Net deferred tax asset	$	—		$	—

For all periods presented, we have determined that it is more likely than not that our deferred tax asset will not be realized. Accordingly, we have recorded a valuation allowance to fully offset the net deferred tax asset of $103.6 million.

As of December 31, 2016, we had federal and California tax net operating loss carryforwards of $204.8 million and $173.2 million, respectively, which begin to expire in 2030 and 2031. At December 31, 2016, approximately $19.4 million and $19.4 million of the Federal and State net operating loss carryforwards, respectively, relate to stock option exercises, which will result in an increase to additional paid-in capital and a decrease in income taxes payable at the time when the tax loss carryforwards are utilized. Upon adoption of ASU 2016-09 in the first quarter of 2017, the balance of the unrecognized excess tax benefits will be reversed with the impact recorded to accumulated deficit, including any change to the valuation allowance as a result of the adoption. Due to the full valuation allowance on the U.S. deferred tax assets as of December 31, 2016, we do not expect any impact to the financial statements as a result of this adoption. As of December 31, 2016, we also had federal and California research and development tax credit carryforwards of $20.3 million and $6.9 million, respectively. The federal research and development tax credit carryforwards will begin to expire in 2029. The California research and development tax credit carryforwards are available indefinitely. As of December 31, 2016, we also had $0.2 million of Federal Alternative Minimum Tax Credit carryforwards that are available indefinitely.

The future utilization of our research and development credit carryforwards and net operating loss carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. The Tax Reform Act of 1986 (the Act) limits a company’s ability to utilize certain tax credit carryforwards and net operating loss carryforwards in the event of a cumulative change in ownerships in excess of 50% as defined in the Act.

The following table summarizes the changes in the amount of our unrecognized tax benefits (in thousands):



	Year Ended December 31,
	2016		2015			2014
Beginning balance of unrecognized tax benefits	$	2,298	$	1,853		$	1,092
Increase (decrease) for prior year tax positions	1,991		(250		)	(73		)
Increase for current year tax positions	1,343		695			834
Total	$	5,632	$	2,298		$	1,853

Included in unrecognized tax benefits of $5.6 million at December 31, 2016 was $3.7 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to valuation allowance.

We are subject to taxation in the United States and California. Our tax years for 2009 and forward are subject to examination by the U.S. tax authorities and our tax years for 2009 and forward are subject to examination by the California tax authorities due to carryforward of unutilized net operating losses and research and development credits.

It is our practice to recognize interest and/or penalties related to income tax matters in income tax expense. For the years ended December 31, 2016, 2015 and 2014, we have not recognized any interest or penalties related to income taxes.