12. 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. Significant components of our deferred tax assets are as follows:

	December 31,

	2012			2011
	(In thousands)
Net operating loss carryforwards	$	248,700		$	230,200
Purchased technology		20,000			22,200
Research credits		20,500			20,100
Capitalized research and development		19,400			19,000
License fees		1,100			1,300
Other—net		14,000			16,700

Total deferred tax assets		323,700			309,500
Valuation allowance for deferred tax assets		(323,700	)		(309,500	)

Net deferred tax assets	$	—		$	—

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. Because of our history of losses, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $14,200,000, $27,300,000 and $42,800,000 during the years ended December 31, 2012, 2011 and 2010, respectively. Approximately $5,500,000 of the valuation allowance for deferred tax assets relates to benefits of stock option deductions which, when recognized, will be allocated directly to contributed capital.

As of December 31, 2012, we had domestic federal net operating loss carryforwards of approximately $672,000,000 expiring at various dates beginning in 2018 through 2032, and state net operating loss carryforwards of approximately $346,100,000 expiring at various dates beginning in 2013 through 2032, if not utilized. We also had federal research and development tax credit carryforwards of approximately $12,400,000 expiring at various dates beginning in 2018 through 2031, if not utilized. Our state research and development tax credit carryforwards of approximately $12,100,000 carry forward indefinitely.

Due to the change of ownership provisions of the Tax Reform Act of 1986, utilization of a portion of our domestic net operating loss and tax credit carryforwards may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

We adopted the provision of the standard for accounting for uncertainties in income taxes on January 1, 2007. Upon adoption, we recognized no material adjustment in the liability for unrecognized tax benefits. At December 31, 2012, we had approximately $10,500,000 of unrecognized tax benefits, none of which would currently affect our effective tax rate if recognized due to our deferred tax assets being fully offset by a valuation allowance.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):


Balance as of December 31, 2011	$	10,200
Decrease related to prior year tax positions		(100	)
Increase related to current year tax positions		400
Settlements		—
Reductions due to lapse of applicable statute of limitations		—

Balance as of December 31, 2012	$	10,500

If applicable, we would classify interest and penalties related to uncertain tax positions in income tax expense. Through December 31, 2012, there has been no interest expense or penalties related to unrecognized tax benefits.

We do not currently expect any significant changes to unrecognized tax benefits during the fiscal year ended December 31, 2013. In certain cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. Tax years for which we have carryforward net operating loss and credit attributes remain subject to examination by federal and most state tax authorities.