14. Income taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the United States. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. We evaluated the provisions of the CARES Act and do not anticipate the associated impacts, if any, will have a material effect on our financial position.

During the years ended March 31, 2020, 2019 and 2018, the Company recorded no income tax benefits for the net operating losses incurred generated during the years then ended, due to its uncertainty of realizing a benefit from those items. The Company’s net loss before income taxes were generated in the United States and the United Kingdom.

Net loss before income taxes for the years ended March 31, 2020, 2019 and 2018 were as follows:


	Year Ended March 31,
	2020		2019		2018
United States	$	(12,963)	$	(9,483)	$	(8,992)
Foreign (United Kingdom)		(39,662)		(21,351)		(10,710)
	$	(52,625)	$	(30,834)	$	(19,702)

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years ended March 31, 2020, 2019 and 2018 is as follows:


	March 31,
	2020		2019		2018
U.S. Federal statutory income tax rate	(21.00)	%	(21.00)	%	(21.00)	%
State taxes, net of federal benefit	(1.6)		(1.5)		(2.6)
Research and development expenses	2.2		3.1		3.8
Remeasurement of deferred taxes as a result of tax reform	—		—		2.6
Foreign tax rate differential	2.8		2.4		2.2
Change in valuation allowance	16.0		15.5		14.0
Return to provision	1.9		0.4		—
Other	(0.3)		1.1		1.0
Effective income tax rate	0.00	%	0.00	%	0.00	%

Components of the Company’s deferred tax assets as of March 31, 2020 and 2019 were as follows:


	March 31,
	2020		2019
Deferred tax assets:
Foreign net operating loss carryforwards	$	9,092	$	4,079
Federal net operating loss carryforwards		2,450		2,223
State net operating loss carryforwards		1,054		684
Property, plant and equipment		5,499		—
Capitalized start-up costs		1,748		1,886
Stock compensation		2,526		573
Accrued expenses		341		1,793
Lease liability		8,705		—
Total deferred tax assets		31,415		11,238
Deferred tax liabilities:
Right-to-use asset		(13,998)		—
Property, plant and equipment		—		(1,842)
Other		(88)		—
Total deferred tax liabilities		(14,086)		(1,842)
Valuation allowance		(17,329)		(9,396)
Net deferred tax assets	$	—	$	—

As of March 31, 2020, the Company had federal and foreign net operating loss carryforwards of approximately $11,667 and $53,483, respectively, which can be carried forward indefinitely. As of March 31, 2020, the Company had state net operating loss carryforwards of $16,670, which will expire between 2039 and 2040.

Utilization of the U.S. federal and state net operating loss carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

Changes in the valuation allowance for deferred tax assets during the years ended March 31, 2020 and 2019 related primarily to the increase in net operating loss carryforwards were as follows:


	March 31,
	2020		2019
Valuation allowance as of beginning of year	$	9,396	$	4,724
Increases recorded to income tax provision		8,047		4,672
Decreases recorded to income tax provision for equity		(114)		—
Valuation allowance as of end of year	$	17,329	$	9,396

As of March 31, 2020 and 2019, the Company had not recorded any amounts for unrecognized tax benefits. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of March 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s consolidated statements of operations and comprehensive loss.

The Company files income tax returns in the United States, Massachusetts and the United Kingdom as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state and foreign jurisdictions, where applicable. There are currently no pending tax examinations. The Company is open to future tax examination in the U.S. under statute from 2017 to the present and in the United Kingdom from 2016 to the present.