Note 13 – Income Taxes

The Company’s loss from operations before income tax expense by jurisdiction for the years ended December 31 are as follows (in thousands):

	2017		2016		2015
Domestic	$	(173,749)	$	(273,134)	$	(150,227)
Foreign		(10,020)		(6,832)		(6,710)
Total net loss	$	(183,769)	$	(279,966)	$	(156,937)

As a result of current and historical losses, there is no income tax provision for the years ended December 31, 2017, 2016 and 2015.

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

	2017		2016
Deferred tax assets:
Federal and State net operating loss carryforward	$	240,550	$	286,619
Foreign net operating loss carryforward		11,577		9,011
Research tax credits		27,571		23,260
Deferred revenue		668		10,121
Original discount interest		7,167		12,445
Other		16,496		17,981
Total deferred tax assets		304,029		359,437
Valuation allowance		(299,862)		(354,530)
Net deferred tax assets	$	4,167	$	4,907

Deferred tax liabilities:
Intangibles		(1,789)		(2,090)
Other		(2,378)		(2,817)
Total deferred tax liabilities		(4,167)		(4,907)
Net deferred tax assets	$	—	$	—

At December 31, 2017, the Company has provided provisional accounting for the tax effects of enactment of the Act. The Company re-measured certain of its U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. As a result, the Company’s U.S. deferred tax balances at December 31, 2017 were revalued at the newly enacted tax rate, decreasing the net deferred tax asset (before valuation allowance) by approximately $132 million, offset by a decrease in the valuation allowance by the same amount.

The valuation allowance decreased $54.7 million during the year ended December 31, 2017 primarily due to the impact of the Act and was partially offset by the generation of net operating losses in 2017. The valuation allowance increased by $117.7 million for the year ended December 31, 2016.

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

	2017			2016			2015
Statutory federal tax rate		(34)	%		(34)	%		(34)	%
State income taxes, net of federal benefit		(3)	%		(3)	%		(3)	%
Research and development and other tax credits		(2)	%		(2)	%		(3)	%
Release of FIN 48 liability		0	%		0	%		(2)	%
Other		(1)	%		2	%		1	%
Change in tax rate		70	%		0	%		0	%
Change in valuation allowance		(30)	%		37	%		41	%
Income tax provision		0	%		0	%		0	%

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, 2017 and 2016 as management believes it is more likely than not that the assets will not be realizable.

As of December 31, 2017, the Company had net operating losses and research tax credits available as follows (in thousands):

	Amount
Federal and State net operating losses expiring through the year 2037	$	974,463
Foreign net operating losses (no expiration)		52,621
Research tax credits expiring through the year 2037		27,477

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 does not expect such limitation, if any, to impact the use of the net operating losses and business tax credits.

At December 31, 2017 and 2016, the Company did not have any unrecognized tax benefits. To the extent 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 does not expect that the amounts of unrecognized tax benefits will change significantly within the next twelve months.

The Company files income tax returns in the U.S. federal jurisdiction and in various states, as well as in Sweden. The Company had U.S. tax net operating losses and credit carryforwards that are subject to examination from 1998 through 2017. The statute extends for a number of years beyond the year in which the losses were 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 returns in Sweden are subject to examination from 2010 through 2017.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2017 and 2016, the Company had no accruals for interest or penalties related to income tax matters.