There is no provision for income taxes because the Company has incurred operating losses since inception. The reported amount of income tax expense for the years differs from the amount that would result from applying

domestic federal statutory tax rates to pretax losses primarily because of the changes in the valuation allowance. Significant components of the Company’s deferred tax assets at December 31,

2020

and

2019

are as follows:


	December 31,
(in thousands)	2020			2019
Deferred tax assets:
Net operating loss carryforwards	$	147,004		$	124,115
Start-up and organizational costs		25,909			30,480
Research and development credit carryforwards		37,183			35,130
Stock compensation		1,478			1,087
Capitalized acquisition costs		3,691			4,501
Lease liability		1,225			626
Depreciation		71			176
Other		135			1,186

		216,696			197,301
Less valuation allowance		(215,513	)		(196,696	)

Total deferred tax assets		1,183			605

Deferred tax liabilities:
Right of use asset		(1,183	)		(605	)

Total deferred tax liabilities	$	(1,183	)	$	(605	)

Net deferred taxes	$	—		$	—

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31,

2020

, the Company has aggregate net operating loss carryforwards for federal tax purposes of approximately $562 million, of which $342 million is available to offset future federal taxable income to the extent permitted under the Internal Revenue Code, or IRC, expiring in varying amounts through 2037 and approximately $220 million can be carried forward indefinitely. The Company also has approximately $458 million of state net operating loss carryforwards available to offset future state taxable income, expiring at various dates through

2040

. Additionally, the Company has approximately $37.0 million of research and development credits at December 31,

2020

, expiring in varying amounts through 2040, which may be available to reduce future taxes.

Under the IRC Section 382, certain substantial changes in the Company’s ownership may limit the amount of net operating loss carryforwards that can be utilized in any one year to offset future taxable income.

Section 382 of the IRC provides limits to which a corporation that has undergone a change in ownership (as defined) can utilize any net operating loss, or NOL, and general business tax credit carryforwards it may have. The Company commissioned an analysis to determine whether Section 382 could limit the use of its carryforwards in this manner. After completing the analysis, it was determined an ownership change had occurred in February 2007. As a result of this change, the Company’s NOL’s and general business tax credits from February 23, 2007 and prior would be completely limited under IRC Section 382. The deferred tax assets related to NOL’s and general business credits have been reduced by $11.2 million and $636 thousand, respectively, as a result of the change. The Company updated the IRC Section 382 analysis through December 31, 2018. There was no change in ownership at this time.

The Company has provided a valuation allowance for the full amount of these net deferred tax assets, since it is more likely than not that these future benefits will not be realized. However, these deferred tax assets may be available to offset future income tax liabilities and expenses. The valuation allowance increased by $18.8 million in

2020

primarily due to net operating loss carryforwards and the increase in research and development credits.

Income taxes using the federal statutory income tax rate differ from the Company’s effective tax rate primarily due to

non-deductible

expenses related to the Company’s issuance of preferred stock along with the change in the valuation allowance on deferred tax assets.

A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:


	Year Ended December 31,
(in thousands)	2020			2019			2018
Federal income tax at statutory rates		21	%		21	%		21	%
State income tax, net of federal tax benefit		3	%		3	%		4	%
Non-cash inducement warrant expense		0	%		-11	%		0	%
Research and development credits		3	%		1	%		2	%
Stock compensation		-1	%		0	%		-1	%
Research and development true-up		0	%		0	%		0	%
Officers compensation		0	%		0	%		-1	%
Other		0	%		-1	%		-2	%
Federal rate change		-2	%		0	%		3	%
Change in valuation allowance		-24	%		-13	%		-26	%

Effective tax rate		0	%		0	%		0	%

The Company adopted ASC740, “Accounting for Uncertain Tax Positions” on January 1, 2007. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” ASC 740 prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. The Company did not establish any additional reserves for uncertain tax liabilities upon adoption of ASC 740. There were no

adjustments to its uncertain tax positions in the

years ended December 31, 2020, 2019, and 2018.

The Company has not recognized any interest and penalties in the statement of operations because of the Company’s net operating losses and tax credits that are available to be carried forward. When necessary, the Company will account for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. The Company does not expect the amounts of unrecognized benefits will change significantly within the next twelve months.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state jurisdictions for the years ended December 31, 1999 through 2020.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law which was an emergency economic stimulus package in response to the COVID-19 pandemic and its impact on the economy, public health, state and local governments, individuals and businesses. The Company has considered the legislation surrounding the impact of the CARES Act and the potential effects it may have on

the Company. Some of the more significant provisions under the CARES Act include five-year carryback of net operating losses (Section 2303), Refundable AMT credit (Section 2305), relaxation of the limitation of adjusted taxable income (ATI) as determined under IRC Section 163(j) from 30% to 50% (Section 2306), and changes to qualified bonus improvement property (QIP) tax life and bonus depreciation eligibility allowing for a

-year tax useful life an eligibility for 100%b bonus depreciation (Section 2307). Due to the Company’s history of US taxable losses, and use of MACRS and/or straight-line depreciation for tax purposes, there is no impact to the tax provision as a result of the enactment of the CARES Act. As of December 31, 2020, the Company has analyzed the provisions of the CARES Act and has recorded no income tax benefit or expense related to it.