Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
Note 8 - Income Taxes
The Tax Cuts and Jobs Act, or the "Act, was enacted in December 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%. As of December 31, 2017, the Company remeasured its existing deferred tax balance by recording a provisional charge of $17.9 million, which was fully offset by a change in the valuation allowance. As of December 31, 2018, upon completing its analysis of the Act, the Company believes that the disclosures in its financial statements as of December 31, 2017 are still accurate.
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 the Company's deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows:
The Company has recorded a valuation allowance of $46.4 million and $40.9 million against its deferred tax assets at December 31, 2018 and 2017, respectively, because management determined that it is not more-likely-than not that those assets will be realized.
For federal income tax purposes, the Company has approximately $144.5 million of unused net operating losses ("NOLs") at December 31, 2018 available for carry forward to future years. Prior NOLs have begun to expire as they are unused.
For state income tax purposes, the Company has approximately $66.8 million of unused NOLs available for carry forward to future years. These NOLs will begin to expire in 2035 if unused.
The Company has federal research and development tax credits of approximately $1.4 million at December 31, 2018 which will begin to expire in 2033 if unused and orphan drug credits of $7.5 million which will begin to expire in 2037 if unused.
Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. As a result of any such ownership change, portions of the Company's net operating loss carryforwards and research and development tax credits are subject to annual limitations. Accordingly, the Company's ability to utilize these carryforwards may be limited as a result of an ownership change which may have already happened or may happen in the future. Such an ownership change could result in a limitation in the use of the net operating losses in future years and possibly a reduction of the net operating losses available.
The difference between the income tax provision and the amount that would result if the U.S. Federal statutory rates were applied to pre-tax losses for the year ended December 31, 2018, 2017 and 2016 are as follows:
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