11. Income Taxes

The Company had federal, state and foreign net operating loss carryforwards of approximately $106,878, $87,868 and $69,941, respectively, as of December 31, 2018. The U.S. tax losses begin to expire in 2030. The foreign losses are primarily from Israel and have an indefinite carryforward. The Company’s federal net operating losses include $25,569 which can also be carried forward indefinitely.

The Company may be able to utilize its net operating loss carryforwards to reduce future federal and State income tax liabilities. However, these net operating losses are subject to various limitations under Internal Revenue Code section 382, which limit the use of net operating loss carryforwards to the extent there has been in ownership change of more than 50 percentage points. In addition, the net operating loss carryforwards are subject to examination by the taxing authorities and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC section 382 analysis, it is possible that the utilization of the Company’s net operating loss carryforwards may be limited.

In addition, the Company has federal and state research and development tax credits of approximately $2,811 and $382, respectively, that begin expiring in 2030 for federal and state tax purposes.

There is no provision for income taxes in the United States or Israel, because the Company has historically incurred operating losses and maintains a full valuation allowance against its deferred tax assets in these jurisdictions. The deferred tax asset recorded in the consolidated balance sheets relates to the Company’s Australian operations.

Income (loss) before income taxes consisted of the following:


	Year Ended
	December 31,
	2018		2017
U.S.	$	(21,378)	$	(30,168)
Foreign		(1,740)		284
Loss before income taxes	$	(23,118)	$	(29,884)

A summary of the Company’s current and deferred expense for income tax is as follows:


	Year Ended
	December 31,
	2018		2017
Current expense (benefit):
Federal	$	—	$	—
State		—		—
Foreign		—		—
Total current expense (benefit):	$	—	$	—
Deferred expense (benefit):
Federal	$	—	$	—
State		—		—
Foreign		20		(157)
Total deferred expense (benefit):	$	20	$	(157)
Total income tax expense (benefit):	$	20	$	(157)

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


	Year Ended
	December 31,
	2018		2017
Federal statutory income tax rate	21.00	%	34.00	%
State taxes, net of federal benefit	7.76	%	4.42	%
Permanent differences	2.38	%	(2.27)	%
Tax credits	6.94	%	3.45	%
Tax law change	0.00	%	(37.65)	%
Foreign rate differential	0.68	%	(0.02)	%
Valuation allowance	(38.26)	%	(3.11)	%
Other	(0.59)	%	1.68	%
	(0.09)	%	0.50	%

The significant components of the Company’s deferred tax assets as of December 31, 2018 and 2017 were as follows:


	Year Ended
	December 30,
	2018		2017
Federal net operating loss carryforwards	$	38,531	$	33,232
State net operating loss carryforwards		5,553		4,014
Stock Options		1,632		1,348
Federal research tax credits		2,811		1,799
State research tax credits		382		231
License fees		1,495		1,659
Accrued expenses		88		29
Other		149		182
Total deferred tax assets	$	50,641	$	42,494
Valuation allowance		(50,517)		(42,336)
Net deferred tax asset (liability)	$	124	$	158

As of December 31, 2018 and 2017, the Company had provided a full valuation allowance against its net deferred tax assets, except for its Australian deferred tax assets, because realization of any future tax benefit cannot be reasonably assured. The valuation allowance increased during the years ended December 31, 2018 and 2017, by $8,181 and $17,504, respectively.

During 2017, the Company recorded tax charges for the impact of the Tax Act effects using the current available information and technical guidance on the interpretations of the Tax Act. As permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, the Company recorded provisional estimates and have subsequently finalized the accounting analysis based on the guidance, interpretations, and data available as of December 31, 2018. Adjustments made in the fourth quarter of 2018 upon finalization of the accounting analysis were not material to the consolidated financial statements.

The Company follows the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority.

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 tax examinations. The earliest tax years that may be subject to examination by jurisdiction are 2015 for both federal and state purposes. In addition, the NOL carryforwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. The Company’s policy is to record interest and penalties related to income taxes as part of the tax provision. There were no interest and penalties pertaining to uncertain tax positions for the years ended December 31, 2018 or 2017.