Note 12. Income Taxes

Fibrocell Science, Inc. and Fibrocell Technologies, Inc. file a consolidated U.S. Federal income tax return, and file U.S. state income tax returns in several jurisdictions as well. In general, the U.S. federal and state income tax returns remain open to examination by taxing authorities for tax years beginning in 2011 to present. However, if and when the Company claims net operating loss (“NOL”) carryforwards from years prior to 2011 against future taxable income, those losses may be examined by the taxing authorities as well. The Company's foreign subsidiaries file income tax returns in their respective jurisdictions.

The components of the income tax expense/(benefit) related to continuing operations, are as follows:



	Year ended December 31,		Year ended December 31,		Year ended December 31,
($ in thousands)	2014		2013		2012
U.S. Federal:
Current	$	—	$	—	$	—
Deferred	—		—		(2,068		)
U.S. State:
Current	—		—		—
Deferred	—		—		(432		)
	$	—	$	—	$	(2,500	)

The reconciliation between income taxes/(benefit) at the U.S. federal statutory rate and the amount recorded in the accompanying consolidated financial statements is as follows:



	Year ended December 31,			Year ended December 31,			Year ended December 31,
($ in thousands)	2014			2013			2012
Tax benefit at U.S. federal statutory rate	$	(8,977	)	$	(11,044	)	$	(5,475	)
Increase in domestic valuation allowance	11,109			11,626			11,127
State income taxes/(benefit) before valuation allowance, net of federal benefit	(846		)	(1,026		)	(1,971		)
Capital loss limitation	—			—			(817		)
Loss on extinguishment of debt	—			—			1,966
Derivative revaluation expense	—			—			8
Warrant revaluation and other finance (income)/expense	(1,375		)	369			(7,141		)
Other	89			75			(197		)
	$	—		$	—		$	(2,500	)

The components of the Company’s net deferred tax assets and liabilities at December 31, 2014, 2013 and 2012 are as follows:



($ in thousands)	December 31, 2014			December 31, 2013			December 31, 2012
Deferred tax liabilities:
Intangible assets	$	2,001		$	2,247		$	2,282
Total deferred tax liabilities	$	2,001		$	2,247		$	2,282
Deferred tax assets:
Loss carryforwards	$	63,560		$	54,253		$	49,598
Capital loss carryforward	841			844			817
Property and equipment	1,135			1,149			1,327
License fees	7,055			5,393			—
Accrued expenses and other	602			412			360
Stock compensation	2,953			2,698			2,492
Total deferred tax assets	76,146			64,749			54,594
Less: valuation allowance	(74,145		)	(62,502		)	(52,312		)
Total deferred tax assets	$	2,001		$	2,247		$	2,282
Net deferred tax assets	$	—		$	—		$	—

As of December 31, 2014, the Company had generated U.S. net operating loss carryforwards of approximately $167.5 million which expire from 2018 to 2034. The NOL carryforwards are available to reduce future taxable income. However, the NOL carryforwards become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that we can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of our company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes, therefore, we may not be able to take full advantage of these carryforwards for federal income tax purposes. In addition, the Company has NOL carryforwards in certain non-US jurisdictions of approximately $25.5 million. However, it is not expected that these non-U.S. loss carryforwards will ever be utilized, so they are not included in the components of deferred taxes listed above. The Company does not plan to have material operations in the non-U.S. jurisdictions in the foreseeable future, and does not know when or if income will ever be generated in these foreign jurisdictions. Finally, there are no unremitted earnings in foreign jurisdictions, so no provision for taxes thereupon is required.

As the Company has had cumulative losses and there is no assurance of future taxable income, valuation allowances have been recorded to fully offset the deferred tax asset at December 31, 2014, 2013, and 2012. The valuation allowance increased by $11.6 million, $10.2 million, and $11.1 million during 2014, 2013, and 2012, respectively, primarily due to the impact from the current year net losses incurred.