Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

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):

	2018			2017			2016
Domestic	$	(176,290	)	$	(173,749	)	$	(273,134	)
Foreign		(8,458	)		(10,020	)		(6,832	)
Total net loss	$	(184,748	)	$	(183,769	)	$	(279,966	)

As a result of current and historical losses, there is no income tax provision for the years ended December 31, 2018, 2017 and 2016.

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

	2018			2017
Deferred tax assets:
Federal and State net operating loss carryforward	$	270,177		$	240,550
Foreign net operating loss carryforward		12,321			11,577
Research tax credits		33,633			27,571
Non-cash stock-based compensation		10,888			8,048
Original discount interest		5,687			7,167
Other		7,987			9,116
Total deferred tax assets		340,693			304,029
Valuation allowance		(337,515	)		(299,862	)
Net deferred tax assets	$	3,178		$	4,167
Deferred tax liabilities:
Intangibles		(1,492	)		(1,789	)
Other		(1,686	)		(2,378	)
Total deferred tax liabilities		(3,178	)		(4,167	)
Net deferred tax assets	$	—		$	—

The valuation allowance increased by $37.7 million for the year ended December 31, 2018 due to increases in deferred tax assets. The valuation allowance decreased $54.7 million during the year ended December 31, 2017 primarily due to the impact of the enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”) and was partially offset by the generation of net operating losses in 2017.

At December 31, 2017, the Company had 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 of 21%, 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 Company completed its analysis of the Act in 2018, which resulted in no adjustment to income tax expenses on the Company’s consolidated statements of operations.

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

	2018			2017			2016
Statutory federal tax rate		(21	)%		(34	)%		(34	)%
State income taxes, net of federal benefit		(3	)%		(3	)%		(3	)%
Research and development and other tax credits		(3	)%		(2	)%		(2	)%
Other		1	%		(1	)%		2	%
Change in tax rate		5	%		70	%		0	%
Change in valuation allowance		21	%		(30	)%		37	%
Income tax provision		0	%		0	%		0	%

The change in the tax rate in 2018 is primarily related to changes in applicable state apportionment factors; whereas the change in the tax rate in 2017 resulted from the Act as discussed above.

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, 2018 and 2017 as management believes it is more likely than not that the assets will not be realizable.

As of December 31, 2018, 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	$	969,452
Federal and State net operating losses (no expiration)		164,443
Foreign net operating losses (no expiration)		56,003
Research tax credits expiring through the year 2038		33,539

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, 2018 and 2017, 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 1999 through 2018. 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 2013 through 2018.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2018 and 2017, the Company had no accruals for interest or penalties related to income tax matters.