Note 16 - Income Taxes

The Company recorded a current income tax expense for foreign taxes of $0.4 million in 2011. The components of the income tax provision are as follows (in thousands):


	2013		2012		2011
Current U.S.	$	-	$	-	$	-
Current foreign		25		-		412
Deferred		-		-		-
Net provision	$	25	$	-	$	412

Deferred tax assets (liabilities) consist of the following at December 31 (in thousands):


	2013			2012
Net operating losses U.S.	$	123,907		$	122,731
Net operating losses foreign		6,405			-
Research tax credits		9,175			5,693
Other		6,844			7,326
Total deferred tax assets		146,331			135,750
Intangibles		(3,573	)		-
Other		(227	)		(335	)
Total deferred tax liabilities		(3,800	)		(335	)
Net deferred tax assets		142,531			135,415
Less valuation allowance		(142,531	)		(135,415	)
Deferred tax assets, net	$	-		$	-

The differences between the U.S. federal statutory tax rate and the Company's effective tax rate are as follows:


	2013			2012			2011
Statutory federal tax rate		(34	)%		(34	)%		(34	)%
State income taxes, net of federal benefit		(3	)%		(8	)%		(9	)%
Research and development and other tax credits		(7	)%		0	%		(5	)%
Expiration of net operating losses		0	%		6	%		10	%
Other		3	%		3	%		(3	)%
Change in valuation allowance		41	%		33	%		43	%
		0	%		0	%		2	%

Realization of net deferred tax assets is dependent on the Company's ability to generate future taxable income, which is uncertain. Accordingly, a full valuation allowance was recorded against these assets as of December 31, 2013 and 2012 as management believes it is more likely than not that the assets will not be realizable.

During 2011, the Company incurred a $0.4 million foreign withholding tax related to a payment received in accordance with a license agreement. This withholding tax gives rise to an increase to the U.S. net operating loss for which a full valuation allowance has been recorded.

As of December 31, 2013, the Company had tax return reported federal net operating losses and tax credits available as follows (in thousands):


	Amount
Federal net operating losses expiring through the year 2033	$	335,892
Research tax credits expiring through the year 2033		9,081
Alternative-minimum tax credit (no expiration)		94
Foreign net operating losses (no expiration)		29,115

Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to prior ownership change of the Company. The Company has analyzed the impact of these changes and determined that such annual limitation will not ultimately impact its ability to utilize the net operating losses and business tax credits before they expire.

Beginning in 2006, the windfall equity-based compensation deductions are tracked, but will not be recorded to the balance sheet until management determines more likely than not that such amounts will be utilized. As of December 31, 2013 and 2012, the Company had $2.4 million of windfall stock compensation deductions. If and when realized, the tax benefit associated with these deductions will be credited to additional paid-in capital. These excess benefit deductions are included in the total federal net operating losses disclosed above.

Tabular Reconciliation of Unrecognized Tax Benefits (in thousands):


	Amount
Unrecognized tax benefits as of January 1, 2012	$	4,875
Gross increases - tax positions in prior period		-
Gross decreases - tax positions in prior period		(74	)
Gross increases - current-period tax positions		-
Increases (decreases) from settlements		-
Unrecognized tax benefits as of December 31, 2012	$	4,801
Gross increases - tax positions in prior period		-
Gross decreases - tax positions in prior period		-
Gross increases - current-period tax positions		-
Increases (decreases) from settlements		-
Unrecognized tax benefits as of December 31, 2013	$	4,801

To the extent these unrecognized tax benefits are ultimately recognized, it would affect the annual effective income tax rate unless otherwise offset by a corresponding change in the valuation allowance.

The Company files income tax returns in the U.S. federal jurisdiction and in various states. The Company had tax net operating losses and credit carryforwards that are subject to examination for a number of years beyond the year in which they are generated for tax purposes. Since a portion of these carryforwards may be utilized in the future, many of these attribute carryforwards remain subject to examination.

The Company's policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2013 and 2012, the Company had no accruals for interest or penalties related to income tax matters.