13. Income Taxes

We account for income taxes using the liability method in accordance with ASC 740 Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

There is no provision or benefit for federal or state income taxes for 2013, 2012 and 2011, other than $0.4 million income tax benefit in 2013, resulting from the change in the temporary difference between carrying amounts of in-process research and development assets for financial reporting purposes and the amounts used for income tax purposes. We have completed a calculation through March 31, 2011, under Internal Revenue Code Section 382, the results of which indicate that past ownership changes will limit utilization of NOLs in the future. Ownership changes subsequent to March 31, 2011, may further limit the future utilization of net operating loss and tax credit carry-forwards as defined by the federal and state tax codes.

Deferred tax assets and liabilities as of December 31, 2013 and 2012, consisted of the following:

	2013			2012
Deferred tax assets:
Depreciation and amortization	$	6,165		$	6,497
R&E tax credit carry-forwards		5,129			11,843
NYS investment tax credit carry-forwards		1,095			1,084
AMT credit carry-forwards		211			211
Net operating loss carry-forwards		190,263			112,966
Capitalized research and development expenditures		25,231			30,884
Stock compensation		13,826			14,436
Other items		1,097			2,193
Total gross deferred tax assets		243,017			180,114
Less: Valuation allowance		(243,017	)		(178,045	)
Deferred tax assets		-			2,069
Deferred tax liability - current		-			(2,069	)
Deferred tax liability – long term		(12,321	)		-
Net deferred tax liability	$	(12,321	)	$	-

We do not recognize deferred tax assets considering our history of taxable losses and the uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets. For 2013 and 2012, we incurred net losses for tax purposes. For 2011, we had income for tax purposes and such amount was offset completely by our available net operating loss carry-forwards. We recognized a full tax valuation against deferred taxes at December 31, 2013. In 2012, we recognized deferred income tax assets, net of a valuation allowance, of $2,069 ($17 in current assets and $2,052 in non-current assets) and in 2013 and 2012 we recognized deferred income tax liabilities of $12,321 and $2,069, respectively to reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The recognition of these deferred income tax assets and liabilities had no effect on our net loss for 2012, however, it resulted in $362 income tax benefit for 2013.

The following is a reconciliation of income taxes computed at the Federal statutory income tax rate to the actual effective income tax provision during 2013, 2012 and 2011:

	2013			2012			2011

U.S. Federal statutory rate		(34.0	)%		(35.0	)%		35.0	%
State income taxes, net of Federal benefit		(4.9	)		(5.4	)		8.0
Research and experimental tax credit		(3.6	)		-			(4.1	)
Change in valuation allowance		11.4			34.7			(22.6	)
Effect of federal tax rate bracket change on valuation allowance		8.7			-			(34.8	)
Equity compensation		3.1			4.2			17.0
Investment tax credit		(0.1	)		-			(0.1	)
NOL expiration – Section 382		18.6			-			-
Other		-			1.5			1.6
Income tax provision (benefit)		(0.8	)%		0.0	%		0.0	%

As of December 31, 2013, we had available, for tax return purposes, unused federal NOLs of approximately $513.8 million, which will expire in various years from 2018 to 2033, $18.2 million of which were generated from deductions post January 1, 2006 that, when realized, will reduce taxes payable and will increase paid-in-capital and are not reflected in our deferred tax assets above. Additionally, $11.2 million of the valuation allowance relates to NOLs attributable to excess tax deductions for equity compensation pre January 1, 2006. When realized this will also be reflected as an increase to paid-in-capital. Also, we had available, for tax return purposes, unused state NOLs of approximately $453.1 million, which will expire in various years from 2019 to 2033.

We have reviewed our nexus in various tax jurisdictions and our tax positions related to all open tax years for events that could change the status of our ASC 740 Income Taxes liability, if any, or require an additional liability to be recorded. During 2013, 2012 and 2011, we had no unrecognized tax benefits resulting from tax positions during a prior or current period, settlements with taxing authorities or the expiration of the applicable statute of limitations, except for the $0.4 million income tax benefit recognized in 2013, resulting from the change in the difference between carrying amounts of in-process research and development assets for financial reporting purposes and the amounts used for income tax purposes. We have not, as of yet, conducted a study of our research and development credit carry-forwards. Such a study might result in an adjustment to our research and development credit carry-forwards, but until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position under ASC 740-10. A full valuation allowance has been provided against the Company's research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the statements of operations and comprehensive loss if an adjustment was required.

As of December 31, 2013, we are subject to federal and state income tax in the U.S. Open tax years relate to years in which unused net operating losses were generated or, if used, for which the statute of limitation for examination by taxing authorities has not expired. Our open tax years extend back to 1996. No amounts of interest or penalties were recognized in our Consolidated Statements of Operations or Consolidated Balance Sheets as of and for 2013, 2012 and 2011.

Our research and experimental (R&E) tax credit carry-forwards of approximately $5.1 million at December 31, 2013 expire in various years from 2018 to 2033. During 2013, research and experimental tax credit carry-forwards of approximately $20 expired. The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, retroactively reinstated the federal research and development credit for 2012 and extended these credits through 2013.

As of December 31, 2013, we have not recognized any liability for uncertain tax positions, because of our full valuation allowance. We will recognize interest and penalties related to these positions, should such costs be assessed. As of December 31, 2013, we have not recognized interest and penalties. The recognition of unrecognized tax benefits would not affect our effective tax rate because the tax benefit would be offset by an increase in our valuation allowance.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year ended December 31, 2013.

	2013

Beginning uncertain tax benefits	$	2,661
Current year - increases		-
Current year - decreases		-
Settlements		-
Expired statuses		-
Ending uncertain tax benefits	$	2,661