13. Income Taxes

The Company's loss before provision for income taxes during the years ended December 31, 2020 and 2019, was a domestic loss of $33.8 million and $38.5 million, respectively.

The effective tax rate for 2020 and 2019 was 0%. As a result of the Company's history of net operating losses (“NOL”) and a full valuation allowance against its deferred tax assets, there was minimal current income tax and no deferred income tax provision for the years ended December 31, 2020 and 2019.

The components of the provision for income taxes during the years ended December 31, 2020 and 2019 is as follows:


	December 31,
(In thousands)	2020		2019
Current:
Federal	$	—	$	10
State		—		—
Foreign		—		—
Total current		—		10
Deferred:
Federal		—		—
State		—		—
Foreign		—		—
Total deferred		—		—
Total provision for income taxes	$	—	$	10

The Company’s effective tax during the years ended December 31, 2020 and 2019, differed from the federal statutory rate as follows:


	December 31,
	2020		2019
Statutory rate	(21.0)	%	(21.0)	%
State taxes	—	%	(0.1)	%
Book loss on debt extinguishment	4.2	%	5.4	%
Other	3.4	%	0.5	%
Valuation allowance	13.4	%	15.2	%
Effective tax rate	—	%	—	%

Net deferred tax assets as of December 31, 2020 and 2019 consist of the following:


	December 31,
(In thousands)	2020		2019
Non-current deferred tax assets:
Net operating losses	$	19,863	$	15,966
Tax credits		241		241
Stock compensation		1,711		1,364
Other		156		—
		21,971		17,571
Valuation allowance		(18,437)		(13,884)
Net non-current deferred tax assets		3,534		3,687
Non-current deferred tax liabilities:
Other		—		(21)
Property and equipment		(3,534)		(3,666)
Net non-current deferred tax liability		(3,534)		(3,687)
Net non-current deferred tax asset (liability)	$	—	$	—

A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The Company has established a valuation allowance to offset net deferred tax assets as of
December 31, 2020 and 2019, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.

The valuation allowance increased by $4.6 million during the year ended December 31, 2020.

As of December 31, 2020, the Company had federal and California NOL carryovers of approximately $86.7 million and $23.6 million, respectively. Of the federal NOL, $20.7 million will begin to expire in 2034 and $65.9 million will carryforward indefinitely. The California NOL will begin to expire in 2033.

As of December 31, 2020, the Company had California research credit carryovers of approximately $382,000. The California research credits carry forward indefinitely. The Company had no Federal research credit carryovers.

Utilization of the domestic NOL and tax credit forwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code Section 382, as well as similar state provisions. In general, an "ownership change," as defined by the code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization. The Company also reduced its federal and California R&D credit carryforwards by $1.4 million and $697,000, respectively.

Enacted on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) authorizes more than $2 trillion to battle COVID-19 and its economic effects, including immediate cash relief for individual citizens, loan programs for small business, support for hospitals and other medical providers, and various types of economic relief for impacted businesses and industries. The CARES Act does not have a material impact on the Company’s financial results for the year ended December 31, 2020.

The Consolidated Appropriations Act, 2021 (the "Act") was enacted in the United States on December 27, 2020. The Act enhances and expands certain provisions of the CARES Act. The Act does not have a material impact on the Company’s financial results for the year ended December 31, 2020.

Uncertain Tax Positions

The Company has adopted the provisions of ASC 740, “Income Taxes Related to Uncertain Tax Positions.” Under these principals, tax positions are evaluated in a two-step process. The Company first determines whether it is more-likely-than-not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to be recognized in the financial statements. The tax position is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.

As of December 31, 2020, all unrecognized tax benefits are offset against deferred tax assets which are subject to a full valuation allowance, and if recognized, will not affect the Company's tax rate.

The Company does not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

The Company's policy is to include interest and penalties related to unrecognized tax benefits within its provision for income taxes. Due to the Company's net operating loss position, the Company has not recorded an accrual for interest or penalties related to uncertain tax positions for the years ended December 31, 2020 or 2019.

The following is a reconciliation of the beginning and ending amount of the Company’s total gross unrecognized tax benefit liabilities:


	December 31,
(In thousands)	2020		2019
Gross Unrecognized Tax Benefit--Beginning Balance	$	77	$	101
Increases Related to Tax Positions from Prior Years		—		(24)
Increases Related to Tax Positions Taken During the Current Year		—		—
Gross Unrecognized Tax Benefit--Ending Balance	$	77	$	77