The provision for income taxes differs from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

	Year Ended December 31,
	2020			2019			2018
Federal statutory income tax rate		21.00	%		21.00	%		21.00	%
Equity investment		4.15	%		0.00	%		0.00	%
Research and development credits		3.10	%		0.00	%		0.00	%
Change in valuation allowance		(27.35	)%		(19.65	)%		(19.46	)%
Non-deductible expenses and other		(0.90	)%		(1.35	)%		(1.54	)%
Total		0.00	%		0.00	%		0.00	%

As of December 31, 2020 and 2019, the components of the Company’s deferred tax assets are as follows (in thousands):

	Year Ended December 31,
	2020			2019
Deferred tax assets:
Federal and state net operating loss carryforwards	$	54,526		$	30,049
Research and development credits carryforwards		11,209			8,077
Depreciation		9,068			6,052
Deferred Revenue		2,407			3,277
Lease liability		3,831			-
Other		5,890			2,965
Total deferred tax assets		86,931			50,420
Deferred tax liabilities:
Right-of-use assets		(2,704	)		-
Total deferred tax liabilities		(2,704	)		-
Less valuation allowance		(84,227	)		(50,420	)
Net deferred tax assets	$	-		$	-

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company considered factors such as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible, including amounts that may arise under the collaboration agreement with Gilead entered into in 2020. As a result of the Company's evaluation of these factors, including the uncertainty that exists with respect to the option fees and milestone payments, the Company does not believe that it is more likely than not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying consolidated balance sheets. The valuation allowance increased by approximately $33.8 million, $19.7 million and $12.2 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

At December 31, 2020, the Company has total net operating loss carryforwards (NOLs) of $253.3 million for federal income tax purposes, of which approximately $47.4 million begin to expire in 2035 and approximately $205.9 million that have no expiration date and federal research tax credits of approximately $9.9 million that begin to expire in 2035. The Company also has state NOLs of approximately $15.9 million that begin to expire in 2035, and state research tax credits of approximately $5.1 million that have no expiration date. Use of the NOLs and credit carryforwards may be subject to a substantial annual limitation due to the ownership change provisions of U.S. tax law, as defined in Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOLs and credits before use. The Company

determined that an ownership change, as defined under IRC Section 382, occurred in the current and previous years. While the Company does not expect these ownership changes to result in the expiration of net operating loss and credit carryforwards prior to utilization, the Company is subject to an annual limitation on the use of its tax attributes. The limitation on the Company's use of net operating loss and credit carryforwards could reduce the Company's ability to use a portion of the tax attributes to offset future taxable income.

The Company has not been audited by the Internal Revenue Service, any state or foreign tax authority. The Company is subject to taxation in the United States and also beginning in 2017, in Australia. Because of the net operating loss and research credit carryforwards, all of the Company’s tax years, from 2015 to 2019, remain open to U.S. federal and California state tax examinations. In addition, the Company’s tax years from 2017 to 2019 are open to examination in Australia. There were no interest or penalties accrued at December 31, 2020, 2019 or 2018.

The Company follows the provisions of FASB Accounting Standards Codification (ASC 740-10), Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of uncertain tax positions that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the consolidated financial statements. The Company’s reserve for unrecognized tax benefits is approximately $3.2 million, $2.2 million and $1.1 million at December 31, 2020, 2019 and 2018, respectively.

Due to the full valuation allowance at December 31, 2020 and 2019, current adjustments to the unrecognized tax benefit will have no impact on the Company’s effective income tax rate; any adjustments made after the valuation allowance is released will have an impact on the tax rate.

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2020			2019			2018
Beginning balance	$	2,165		$	1,084		$	622
Additions (decreases) for tax positions taken in a prior year		(258	)		(7	)		8
Additions for tax positions taken in current year		1,246			1,088			454
Ending balance	$	3,153		$	2,165		$	1,084

The Company does not anticipate material changes to its uncertain tax positions through the next 12 months.