12. Income Taxes

For the years ended December 31, 2016, 2015, and 2014, the Company recognized no provision or benefit from income taxes. The difference between the Company’s provision for income taxes and the amounts computed by applying the statutory federal income tax rate to income before income taxes is as follows (in thousands):

	Year Ended December 31,
	2016			2015			2014
Tax provision derived by applying the federal statutory rate to income before income taxes	$	(7,377	)	$	(3,841	)	$	(3,518	)
Permanent differences and other		333			307			54
Federal tax credits		(1,921	)		(321	)		(289	)
State tax credits		(404	)		—			—
Losses of LLC entity attributable to the members		—			—			730
Conversion of LLC from partnership to corporation		—			(21	)		—
Change in the valuation allowance		9,369			3,876			3,023
Income tax expense /(benefit)	$	—		$	—		$	—

The components of the deferred tax assets and liabilities consist of the following (in thousands):

	December 31,
	2016			2015
Deferred tax assets
Net operating loss carryforward	$	12,286		$	6,336
Intangible assets		38			41
Accrued expense		335			184
Stock-based compensation		283			112
Federal tax credits		3,291			624
State tax credits		404
Other		76			36
Total deferred tax assets		16,713			7,333
Deferred tax liabilities
Depreciable assets	$	(60	)	$	(49	)
Total deferred tax liabilities		(60	)		(49	)
Less: Valuation allowance		(16,653	)		(7,284	)
Deferred tax assets, net	$	—		$	—

The Company has established a valuation allowance equal to the net deferred tax asset due to uncertainties regarding the realization of the deferred tax asset based on the Company’s lack of earnings history. The valuation allowance increased by approximately $9.4 million, $3.9 million, and $3.0 million during the years ended December 31, 2016, 2015, and 2014, respectively, primarily due to continuing loss from operations.

As of December 31, 2016 and 2015, the Company had U.S. net operating loss carryforwards (“NOL”) of approximately $36.1 million and $18.6 million, respectively. As of December 31, 2016 and 2015, the Company had U.S. tax credit carryforwards of approximately $3.3 million and $624,000, respectively, and state tax credit carryforwards of approximately $612,000 and $0, respectively. The net operating loss and tax credit carryforwards will begin to expire in 2033, if not utilized. The net operating loss carryforwards are subject to Internal Revenue Service adjustments until the statute closes on the year the net operating loss is utilized.

The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. If the Company has experienced an ownership change at any time since its formation, utilization of the NOL or R&D credit carryforwards would be subject to an annual limitation under Section 382 or 383 of the Internal Revenue Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Additionally, the separate return limitation year (“SRLY”) rules may apply to losses of the Company’s seven wholly-owned subsidiary corporations. The SRLY rules limit the consolidated group’s use of a subsidiary corporation’s net operating losses to the amount of income generated by the subsidiary corporation after it becomes a member of the group. Any limitation may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization. Further, until a study is completed and any limitation known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Additionally, the Company does not expect any unrecognized tax benefits to change significantly over the next twelve months. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance.

The Company files income tax returns in the U.S. and state jurisdictions. The Company is subject to examination by taxing authorities in its significant jurisdictions for the 2013 and subsequent years.