Income Taxes

9 Months Ended

Sep. 30, 2021

Income Taxes

Income Taxes

(8) Income Taxes

Excluding the impact of the sale of state net operating losses (“NOL”) and research and development tax credits during the nine months ended September 30, 2021 and 2020, the effective tax rate for each of the nine months ended September 30, 2021 and 2020 was 0.0% which was lower than the federal statutory rate primarily due to the losses incurred and the full valuation allowance on deferred tax assets.

The Company’s estimated tax rate for 2021 excluding any benefits from any sales of net operating losses or R&D tax credits is expected to be zero because the Company expects to generate additional losses and currently has a full valuation allowance. The valuation allowance is required until the Company has sufficient positive evidence of taxable income necessary to support realization of its deferred tax assets. In addition, the Company may be subject to certain limitations in its annual utilization of NOL carry forwards to offset future taxable income (and of tax credit carry forwards to offset future tax expense) pursuant to Section 382 of the Internal Revenue Code, which could result in tax attributes expiring unused.

In June 2021, the Company sold $16.4 million of state NOLs and $0.3 million of R&D tax credits under the State of New Jersey’s Technology Business Tax Certificate Transfer Program for net proceeds of $1.7 million, which resulted in the reversal of the valuation allowance and a tax benefit of $1.8 million for the nine months ended September 30, 2021. In May 2020, the Company sold $21.2 million of state NOLs and $0.2 million of R&D tax credits under the State of New Jersey’s Technology Business Tax Certificate Transfer Program for net proceeds of $2.0 million, which resulted in the reversal of the valuation allowance and a tax benefit of $2.1 million for the nine months ended September 30, 2020. The proceeds from such sales are recorded as income tax benefit when sales occur or proceeds are received.

In May 2021 the Company received a Final Determination letter from the New Jersey Division of Taxation (the “Final Determination Letter”) related to the deduction of expenses, disallowed for federal income tax purposes, used in calculating the Orphan Drug Credit for tax years 2015 and 2016. The aggregate claim of tax liabilities owed by the Company was approximately $1.6 million, inclusive of interest. The Company opted to formally amend the 2015 and 2016 federal income tax returns to forgo the federal Orphan Drug Credit and fully claimed the deduction for the previously disallowed operating expenses. On August 25, 2021 the Company received an additional letter from the New Jersey Division of Taxation notifying the Company of the acceptance of the amended returns and the cancellation of its assessment as communicated in the Final Determination Letter with no liability due for either year.

As of September 30, 2021, there were no material uncertain tax positions. There are no tax positions for which a material change in any unrecognized tax benefit liability is reasonably possible in the next 12 months.