Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 8 – 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 the Company’s deferred tax assets are as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	73,129		$	67,395
Research and development tax credit carryforwards		6,770			6,844
Capitalized research		5			117
Stock-based compensation		7,375			7,355
Other		937			1,125
		88,216			82,836
Valuation allowance		(88,216	)		(82,836	)
Net deferred tax assets	$	—		$	—

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $5.4 million, $19.7 million and $7.4 million for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012, Sangamo had net operating loss carryforwards for federal and state income tax purposes of approximately $187.1 million and $163.1 million, respectively. If not utilized, the net federal and state operating loss carryforwards will begin to expire in 2013. The Company also has federal and state research tax credit carryforwards of $5.1 million and $5.9 million, respectively. The federal research credits will begin to expire in 2018 while the state research credits have no expiration date. Utilization of the Company’s net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before use.

The Company files U.S and state income tax returns with varying statutes of limitations. The tax years from 1998 forward remain open to examination due to the carryover of net operating losses or tax credits. The Company also files various foreign income tax returns with varying statutes of limitations, and the tax years from 2006 and thereafter remain open to examination.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31 2012, the Company had no accrued interest and/or penalties. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business. In the event that any unrecognized tax benefits are recognized, the effective tax rate will not be affected.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):

	December 31,
	2012			2011		2010
Beginning balance	$	2,750		$	1,896	$	1,643
Additions based on tax positions related to the current year		153			589		253
Additions for tax positions of prior years		58			265		—
Reductions for tax positions of prior years		(227	)		—		—
Ending balance	$	2,734		$	2,750	$	1,896