9. Income Taxes

For the year ended December 31, 2017, the Company has taxable income primarily due to timing differences. The losses are fully offset with available NOLs for regular federal and state tax purposes. The Company does have a tax liability for Alternative Minimum Tax in 2017, however due to tax reform, the amount that will be paid this year is fully refundable through 2021 and thus the net result is that the Company recorded an income tax receivable rather than a tax expense for the year ended December 31, 2017. The Company recorded a receivable of approximately $1.0 million and a payable of approximately $1.0 million for the Alternative Minimum Tax which is included in other assets and accrued expenses, respectively, in the accompanying consolidated balance sheets as of December 31, 2017. The Company has recorded a full valuation allowance on its deferred tax assets and thus, for the year ended December 31, 2017 there is no deferred tax expense recorded. For the years ended December 31, 2016 and 2015, there was no current or deferred tax expense recorded due to the Company's net losses and increases in its deferred tax asset valuation allowance. The U.S. components of loss before income taxes and a reconciliation of the statutory federal income rate to with the provision for income taxes follow:

	Year ended December 31,
	2017			2016			2015
Federal tax at statutory rate		34.0	%		34.0	%		34.0	%
State and local tax at statutory rate		3.8			1.4			3.0
Research and development tax credits		11.9			6.4			0.4
Equity compensation		(0.6	)		(0.2	)		(0.6	)
Alternative minimum tax		(1.3	)		—			—
Change in valuation allowance		6.9			(41.6	)		(36.8	)
Impact of US tax reform		(54.7	)		—			—
Effective tax rate		0.0	%		0.0	%		0.0	%

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. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. Valuation allowances are provided against deferred tax assets when, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. The Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets, and accordingly a full valuation allowance has been provided on its deferred tax assets. The Company continues to maintain the underlying tax benefits to offset future taxable income and to monitor the need for a valuation allowance based on the profitability of its future operations. The valuation allowance decreased by approximately $4.9 million and increased by approximately $56.4 million, during the years ended December 31, 2017 and 2016. Significant components of the Company’s deferred tax assets and liabilities are as follows:

		December 31,
		2017			2016
	(in thousands)
Deferred tax assets:
Accrued expenses		$	4,305		$	2,170
Deferred revenue			32,093			12,157
Intangible assets			509			449
Restricted stock			—			45
Non-qualified stock options			3,129			2,963
Research and development credits			25,322			10,510
Net operating loss carryforward			42,335			84,372
Other			600			326
Total deferred tax assets			108,293			112,992
Less valuation allowance			(108,112	)		(112,986	)
Total deferred tax assets, net of valuation allowance			181			6
Deferred tax liabilities:
Fixed assets			(181	)		(6	)
Total deferred tax liabilities			(181	)		(6	)
Net deferred tax asset		$	—		$	—

At December 31, 2017 and December 31, 2016, the Company has approximately $0.8 million (after amortization of $1.1 million) and $0.9 million (after amortization of $1.0 million), respectively, of start-up expenses capitalized for income tax purposes with amortization available to offset future federal, state and local income tax. At December 31, 2017 and 2016, the Company has approximately $179.7 million and $234.5 million, respectively, of federal net operating loss (NOL) carry-forwards which expire through 2036. Additionally, at December 31, 2017 and 2016, the Company has approximately $74.6 million and $103.9 million, respectively, of state net operating loss (NOL) carry-forwards which expire through 2036. As a result of the adoption of ASU 2016-09 for the year ended December 31, 2017, the benefits of tax deductions related to equity compensation in excess of book compensation expense that were previously suspended are now recognized for financial statement purposes. To record this tax benefit, both the NOL deferred tax asset and valuation allowance increased by $1.3 million, with a net zero tax impact recorded directly to retained earnings. For comparison purposes, the 2016 NOL deferred tax asset above (prior to the adoption of ASU 2016-09) does not include the benefit of these tax deductions. The Company also has approximately $25.7 million of federal and state research and development tax credit carry-forwards. The NOL and research and development tax credit carry-forwards which expire through 2037, will be utilized for tax purposes at such time the Company generates taxable income. The NOL and research and development tax credit carry-forwards may be limited in certain circumstances, including ownership changes.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inception, two of which resulted in a change in control and limitations on the deductibility of existing NOLs at the dates of change of control. As of December 31, 2016, there were $170.0 million unlimited NOLs available to offset taxable income in future years, which allowed for the complete offset of taxable income for the year ended December 31, 2017.

For applicable years, the Company generated research credits but has not conducted a study to document its qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carry-forwards and the valuation allowance.

The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017, 2016 and 2015, the Company had no accrued uncertain tax positions or associated interest or penalties and no amounts have been recognized in the Company’s consolidated statements of operations.

The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. Generally, the Company’s 2014 through 2016 tax years remain open and subject to examination by federal and state taxing authorities. However, federal and state net operating losses from 2009 through 2016 are subject to review by taxing authorities in the year utilized.

The Tax Cuts and Jobs Act (the Act), which was signed on December 22, 2017, makes significant change in U.S. tax law including a reduction in the corporate tax rates to 21% starting in 2018. The legislation reduced the U.S. corporate tax rate from the current rate of 35% to 21%for tax years beginning after December 31, 2017. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities existing as of December 31, 2017 from the 35% federal rate in effect through the end of 2017, to the new 21% rate. As a result of the change in law, the Company recorded a $43.0 million reduction in the deferred tax asset and corresponding valuation allowance.

In accordance with SAB 118, we have determined that our deferred tax asset value and associated valuation allowance reduction is a provisional amount and a reasonable estimate at December 31, 2017. The final impact may differ from this provisional amount due to, among other things, changes in interpretations and assumptions we have made thus far and the issuance of additional regulatory or other guidance. We expect to complete the final impact within the measurement period.