Income Taxes

The Company had no federal income tax expense and immaterial state tax expense for the years ended December 31, 2016, 2015 and 2014.

The differences between the effective income tax rate and the statutory tax rates during the years ended 2016, 2015 and 2014 are as follows (in thousands):



	Year Ended December 31,
	2016			2015			2014
Net loss before tax	$	(83,118	)	$	(64,544	)	$	(43,698	)
Statutory combined US federal and state tax rate	34.00		%	34.00		%	39.83		%
Statutory federal and state taxes	(28,260		)	(21,945		)	(17,405		)
Increase (decrease) in taxes recoverable resulting from:
Effect of change in valuation allowance	28,446			22,350			12,273
Non-deductible share-based compensation	1,247			923			930
Non-deductible warrant expenses for tax purposes	—			—			1,799
Tax credits	(2,906		)	(2,430		)	(227		)
Share issue costs - temporary difference	(78		)	(184		)	(184		)
Differential in income tax rates of foreign subsidiary	261			31			3,047
Uncertain Tax Positions	3,921			1,961			47
Return to provision and other true-ups	(2,619		)	(899		)	—
Other differences	(12		)	193			(280		)
Income tax benefit	$	—		$	—		$	—

Deferred Tax

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



	December 31,
	2016			2015
Deferred tax assets:
Tangible and intangible depreciable assets	$	990		$	199
Stock compensation	6,635			4,429
Provisions	853			725
Financing fees	—			78
Net operating loss carry forwards	66,489			42,864
Capital loss carryforward	51			102
Scientific research and experimental development expenditures	5,531			5,552
Research and development tax credits	4,266			2,411
Total gross deferred tax assets	84,815			56,360
Less valuation allowance	(84,815		)	(56,360		)
Net deferred tax assets	$	—		$	—

Total valuation allowance increased by $28.5 million for the year ended December 31, 2016. The Company has established a full valuation allowance against its deferred tax assets as of December 31, 2016 due to the uncertainty surrounding the realization of such assets as evidenced by the cumulative losses from operations through December 31, 2016.

For Canadian federal income tax purposes, the Company's Canadian federal scientific research and experimental development expenditures amounted to $19.9 million at December 31, 2016 and 2015 and $20.1 million at December 31, 2014 and for provincial income tax purposes amounted to $21.6 million at December 31, 2016 and 2015 and $22.7 million at December 31, 2014. As operations in Canada ceased during 2014, the expenditures incurred for the year ended December 31, 2016 and 2015 were much lower than previous years. These expenditures are available to reduce future taxable income and have an unlimited carry forward period. Scientific research and development expenditures are subject to verification by the taxation authorities, and accordingly, these amounts may vary by a material amount. In addition, the Company has research and development tax credit carryforwards for U.S. federal and state income tax purposes as of December 31, 2016 of $4.4 million and $2.0 million, respectively. The federal credits will begin to expire in 2034 unless utilized and the state credits have an indefinite life.

At December 31, 2016, the Company's net operating loss carry forwards ("NOLs") for U.S. federal and state income taxes were $133.4 million and $77.3 million, respectively and the Company's NOLs for Canadian federal and provincial income tax purposes were $79.2 million and $78.5 million, respectively. The NOLs are available to offset future taxable income from both U.S. federal and state tax sources, as well as Canadian federal and provincial tax sources and the tax benefits of which have not been recognized in the consolidated financial statements. The NOLs expire as follows (in thousands):



	US				Canada
	Federal		State		Federal		Provincial
Expires in:
2030	$	—	$	—	$	5,907	$	5,985
2031	—		—		7,059		7,066
2032	—		—		13,308		12,433
2033	3,261		2,286		18,623		19,385
2034	7,260		22,162		32,401		31,809
2035	53,345		52,878		1,084		1,084
2036	69,508		—		777		777
	$	133,374	$	77,326	$	79,159	$	78,539

The future utilization of the US federal and state NOL carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may 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 ownership in excess of 50% as defined in the Act. The Canadian Federal and Provincial Tax Acts maintain similar rules in the case of acquisition of control.

The Company files income tax returns in the U.S. (federal and state) and Canada (federal and provincial). The Company’s U.S. operations have not been audited for any open taxation years. The Company has experienced losses for U.S. tax purposes and therefore, the taxation authorities may review any loss year, if and when the losses are utilized.

For Canadian tax purposes, the Company remains subject to federal and provincial audit for the December 31, 2012 and subsequent taxable years. Where taxation years remain open, the Company considers it reasonably possible that issues may be raised or tax positions agreed to with the taxation authorities, which may result in increases or decreases of the balance of non-refundable ITCs and NOLs. However, an estimate of such increases and decreases cannot be currently made.

A reconciliation of the beginning and ending amounts of unrecognized tax positions are as follows (in thousands):



	Federal									Provincial/State
	December 31,									December 31,
	2016			2015			2014			2016			2015			2014
Unrecognized tax positions, beginning of year	$	509		$	42		$	35		$	2,274		$	18		$	6
Gross increase — current period tax positions	598			445			35			195			259			12
Gross decrease — prior period tax positions	(9		)	(4		)	(28		)	—			(3		)	—
Gross increase — prior period tax positions	—			26			—			4,866			2,000			—
Expiration of statute of limitations	(3		)	—			—			(2		)	—			—
Unrecognized tax positions, end of year	$	1,095		$	509		$	42		$	7,333		$	2,274		$	18

If recognized, none of the unrecognized tax positions would impact the Company's income tax benefit or effective tax rate as long as the Company's deferred tax assets remain subject to a full valuation allowance. The Company does not expect any significant increases or decreases to the Company's unrecognized tax positions within the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had no accrual for interest or penalties on tax matters as of December 31, 2016 and 2015 and the Company had no ongoing tax audits as of December 31, 2016.