INCOME TAXES

No provision for federal and state income tax expense has been recorded for the years ended December 31, 2019 and 2018 due to the valuation allowance recorded against the net deferred tax asset and recurring losses.

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:



	December 31,
	2019			2018
Tax loss and contribution carryforwards	$	9,857,000		$	4,336,800
Tax credits	723,800			224,900
Share-based compensation	2,805,700			2,377,400
Intangible assets	1,716,300			1,677,600
Accrued expenses	122,500			151,800
Legal fees	111,800			—
Other	60,100			4,500
Valuation allowance	(15,397,200		)	(8,773,000		)
Total deferred tax assets, noncurrent	$	—		$	—

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. During the years ended December 31, 2019 and 2018, the valuation allowance increased by $6,624,200 and $4,921,000, respectively.

The reasons for the difference between actual income tax expense (benefit) for the years ended December 31, 2019 and 2018, and the amount computed by applying the statutory federal income tax rate to losses before income tax (benefit) are as follows:



	2019					2018
	Amount			% of Pretax Earnings		Amount			% of Pretax Earnings
Income tax benefit at statutory rate	$	(5,680,200	)	21.0	%	$	(5,074,100	)	21.0	%
State income taxes, net of federal tax benefit	(534,200		)	2.0	%	(477,200		)	2.0	%
Non-deductible expenses	89,100			(0.3	)%	333,600			(1.4	)%
Credits	(540,200		)	2.0	%	(224,900		)	0.9	%
Change in state tax rate	—			—	%	(82,300		)	0.3	%
Other	41,300			(0.2	)%	603,900			(2.5	)%
Change in valuation allowance	6,624,200			(24.5	)%	4,921,000			(20.3	)%
Income tax benefit	$	—		—	%	$	—		—	%

As of December 31, 2019, the Company had net operating loss carryforwards for federal and state income tax purposes of $42,944,800 and $42,349,200, respectively. Federal loss carryforwards of $3,551,900 begin to expire in 2034 and $39,392,900 of the federal losses carryforward indefinitely. The state loss carryforwards begin to expire in 2029. As of December 31, 2018, the Company had contribution carryforwards of $10,300, which begin to expire in 2021. In addition, the Company has federal research and development credits of $723,800 which begin to expire in 2038.

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

As of December 31, 2019 and 2018, the Company had no unrecognized tax benefits and does not anticipate a significant change in total unrecognized tax benefits within the next 12 months.

The Company is subject to United States federal income tax and income tax in multiple state jurisdictions. The Company has analyzed its filing positions in all federal and state jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. The Company is subject to United States federal, state and local tax examinations by tax authorities for all years of operation. No income tax returns are under examination by taxing authorities at this time.

The Company’s policy for recording interest and penalties is to record them as a component of interest expense and general and administrative expenses, respectively. During December 31, 2019 and 2018, the Company did not record any interest and penalties related to uncertain tax positions.