7. Income taxes

Components of the net loss consist of the following:


	Year ended December 31,
	2019		2018		2017
Foreign	$	(25,268,373)	$	(15,713,032)	$	(15,185,931)
Domestic		(2,791,434)		184,763		(4,319)
Net loss	$	(28,059,807)	$	(15,528,269)	$	(15,190,250)

A reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate:


	Year ended December 31,
	2019		2018		2017
Statutory federal income tax rate	21.0	%	21.0	%	34.0	%
Earnings in jurisdictions taxed at rates different from the statutory U.S. federal tax rate	0.4	%	1.0	%	(12.0)	%
Permanent differences	3.7	%	0.4	%	(0.1)	%
Changes in valuation allowance	(25.1)	%	(16.7)	%	(21.5)	%
Rate change due to TCJA	—	%	—	%	(0.4)	%
Rate change due to Swedish tax reform	—	%	(5.7)	%	—	%
Effective income tax rate	—	%	—	%	—	%

Significant components of the Company’s deferred taxes as of December 31, 2019 and 2018 are as follows:


	December 31,
	2019		2018
Deferred tax assets:
Net operating loss carryforward	$	20,536,344	$	12,816,395
Capitalized research and development		—		1,951
Intangible assets		26,842		—
Accrued expenses		17,779		—
Lease liability - ASC 842		128,337		—
Gross deferred tax assets		20,709,302		12,818,346
Valuation allowance		(19,676,794)		(12,661,874)
Total deferred tax assets		1,032,508		156,472
Deferred tax liabilities:
Fixed assets		(1,692)		(2,050)
Stock Compensation		(908,322)		(154,422)
Right of Use Asset - ASC 842		(122,494)		—
Total deferred tax liabilities		(1,032,508)		(156,472)
Net deferred tax assets (liabilities)	$	—	$	—

The Company has no income tax expense due to operating losses incurred for the years ended December 31, 2019, 2018 and 2017, respectively. The Company has provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period. At December 31, 2019, the Company has $89.9 million, $7.3 million and $5.8 million of foreign, federal and state net operating loss carryforwards, respectively, that expire at various dates through 2037. Certain of these foreign, federal and state net operating loss carryforwards may be subject to Internal Revenue Code Section 382 or similar provisions, which impose limitations on their utilization.

The valuation allowance increased in 2019 and 2018 by $7.0 million and $2.5 million, respectively due to the increase in the deferred tax assets by the same amounts; primarily due to net operating loss carryforwards. Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of the U.S. Internal Revenue Code and Sweden tax law, certain changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards that could be used annually to offset future taxable income. For U.S. and Swedish income tax purposes, the Company has not completed a study to assess whether a change of control has occurred or whether there have been changes of control since the Company’s formation due to the complexity and cost associated with such study and because there could be additional changes in control in the future. As a result, the Company is not able to estimate the effect of the change in control, if any, on the Company’s ability to utilize U.S. or Swedish net operating losses or other tax attribute carryforwards in the future. For Swedish income tax purposes, the Company’s net operating losses may be subject to limitations in accordance with the country’s group contribution restriction laws.

The Company files tax returns in Sweden, the United States and Massachusetts, and all tax years since inception remain open to examination by the major taxing jurisdictions to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (IRS) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax years.

As of December 31, 2019, the Company had no uncertain tax positions. The Company has elected to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2019, 2018 and 2017.

In June 2018, Sweden promulgated changes to the Swedish regulations on corporate income taxation. The law will apply from January 1, 2019. Among other things, the changes decrease the corporate income tax rate in two steps from 22% to 21.4% as of January 1, 2019 and 20.6% as of January 1, 2020. U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. This revaluation resulted in an overall reduction of deferred taxes of $0.7 million and a corresponding reduction in the valuation allowance. As such, there was no net impact to the Company’s statement of operations as a result of the reduction in tax rates.

In December 2017, what is commonly known as the Tax Cuts and Jobs Act (the Tax Act), was signed into law. Among other things, the Tax Act permanently lowers the corporate federal income tax rate to 21% from the statutory rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate federal income tax rate to 21%, U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. This revaluation resulted in an overall reduction of deferred taxes of $0.1 million and a corresponding reduction in the valuation allowance. As such, there was no net impact to the Company’s statement of operations as a result of the reduction in tax rates.