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 2012 to present. However, if and when the Company claims net operating loss (“NOL”) carryforwards from years prior to 2012 against future taxable income, those losses may be examined by the taxing authorities. The Company's foreign subsidiaries file income tax returns in their respective jurisdictions.

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



	Year ended December 31,		Year ended December 31,		Year ended December 31,
($ in thousands)	2015		2014		2013
U.S. Federal:
Current	$	—	$	—	$	—
Deferred	—		—		—
U.S. State:
Current	—		—		—
Deferred	—		—		—
Income tax expense (benefit)	$	—	$	—	$	—

The reconciliation between income tax expense (benefit) at the U.S. federal statutory rate and the amount recorded in the accompanying Consolidated Financial Statements were as follows:



	Year ended December 31,			Year ended December 31,			Year ended December 31,
($ in thousands)	2015			2014			2013
Tax benefit at U.S. federal statutory rate	$	(12,183	)	$	(8,977	)	$	(11,044	)
Increase in domestic valuation allowance	14,236			11,109			11,626
State income taxes/(benefit) before valuation allowance, net of federal benefit	(1,122		)	(846		)	(1,026		)
Warrant revaluation and other finance (income)/expense	(1,026		)	(1,375		)	369
Other	95			89			75
Income tax expense (benefit)	$	—		$	—		$	—

The components of the Company’s net deferred tax assets and liabilities at December 31, 2015, 2014 and 2013 were as follows:



($ in thousands)	December 31, 2015			December 31, 2014			December 31, 2013
Deferred tax liabilities:
Intangible assets	$	1,764		$	2,001		$	2,247
Total deferred tax liabilities	$	1,764		$	2,001		$	2,247
Deferred tax assets:
Loss carryforwards	$	77,194		$	63,560		$	54,253
Capital loss carryforward	840			841			844
Property and equipment	1,096			1,135			1,149
License fees	8,351			7,055			5,393
Accrued expenses and other	886			602			412
Stock compensation	3,445			2,953			2,698
Total deferred tax assets before valuation allowance	91,812			76,146			64,749
Less: valuation allowance	(90,048		)	(74,145		)	(62,502		)
Total deferred tax assets	$	1,764		$	2,001		$	2,247
Net deferred tax assets	$	—		$	—		$	—

As of December 31, 2015, the Company had generated U.S. net operating loss carryforwards of approximately $197.8 million which expire from 2018 to 2035. The NOL carryforwards are available to reduce future taxable income. However, the NOL carryforwards may be, or 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 NOL's that the Company 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 the Company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. If and when the Company utilizes the NOL carryforwards in a future period, it will perform an analysis to determine the effect, if any, of these loss limitation rules on the NOL carryforward balances. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes, therefore, the Company 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-U.S. jurisdictions of approximately $0.2 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. 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 deferred tax assets at December 31, 2015, 2014, and 2013. The valuation allowance increased by $15.9 million, $11.6 million, and $10.2 million during 2015, 2014, and 2013, respectively, primarily due to the impact from the current year net losses incurred.