5. Income Taxes

Total income tax expense for the years ended December 31 is allocated as follows:


	December 31,
	2015			2014			2013
Current	$	1,600		$	1,600		$	18,000
Deferred		(51,165,859	)		(14,655,320	)		(13,229,355	)
Valuation allowance		51,165,859			14,655,320			13,229,355

Provision for income taxes	$	1,600		$	1,600		$	18,000

A reconciliation of the difference between the statutory federal income tax rate and the effective income tax rate for the years ended December 31 is as follows:


	December 31,
	2015			2014			2013
Income tax benefit at statutory federal rate		35.00	%		35.00	%		35.00	%
Permanent differences		(0.56	)		0.12			(1.20	)
Return-to-provision—R&D Credit		0.00			(0.05	)		2.61
R&D Credit—current year		4.19			2.32			3.72
Reserve for uncertain tax positions		0.00			(0.01	)		(6.53	)
Change in effective state tax rates		(0.05	)		(0.14	)		6.58
State income tax expense		10.24			10.50			10.12
Change in valuation allowance		(48.82	)		(47.75	)		(50.37	)

Provision for income taxes		(0.00	)%		(0.01	)%		(0.07	)%

Deferred income taxes reflect the net tax effect of temporary differences that exist between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse. As of December 31, 2015, the Company had $174.8 million of federal net operating loss carryforwards, which expire at various dates through 2035. The gross amount of the state net operating loss carryforwards is equal to or less than the federal net operating loss carryforwards and expires over various periods based on individual state tax law. In general, businesses with U.S. net operating losses (“NOLs”) are considered loss corporations for U.S. federal income tax purposes. Pursuant to Section 382 of the Code, loss corporations that undergo an ownership change, as defined under the Code, may be subject to an annual limitation on the amount of NOLs (and certain other tax attributes) available to offset taxable income earned after such ownership change. For the year ended December 31, 2015, the Company performed a Section 382 ownership analysis and determined that an ownership change occurred (within the meaning of Section 382 of the Code) in 2015. Based on the analysis performed, however, the Company does not believe that the Section 382 annual limitation will impact the Company’s ability to utilize the tax attributes that existed as of the date of the ownership change in a material manner. If the Company experiences an ownership change in the future, the tax benefits related to the NOLs and tax credit carryforwards may be further limited or lost.

At December 31, 2015, the Company had $5.7 million in excess tax benefits related to stock-based compensation deductions, the benefit of which will be recorded to additional paid-in-capital once the benefit is realized through a reduction of income taxes payable. The following summarizes the significant components of the Company’s deferred tax assets and liabilities as of December 31, 2015 and 2014, respectively:


	December 31,
	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	76,741,198		$	34,870,169
Accrued employee benefits		543,466			443,371
Research and development credit		6,962,731			2,570,540
Stock compensation		5,641,993			1,563,785
Deferred rent		725,195			—

Deferred tax liabilities:
Depreciation		(6,062	)		(5,204	)

Net deferred tax asset		90,608,521			39,442,661
Valuation allowance		(90,608,521	)		(39,442,661	)

Net deferred tax asset	$	—		$	—

Based upon the Company’s historical operating performance and the reported cumulative net losses to date, the Company presently does not have sufficient objective evidence to support the recovery of its net deferred tax assets. Accordingly, the Company has established a valuation allowance against its net deferred tax assets for financial reporting purposes because it is not more likely than not that these deferred tax assets will be realized.

The total amount of unrecognized tax benefits as of December 31, 2015 and December 31, 2014 were $1.72 million and $1.72 million respectively. If recognized none of these tax benefits would affect the effective tax rate due to valuation allowances.

The following summarizes the significant components of gross unrecognized tax benefits as of December 31, 2015 and 2014, respectively:


	December 31,
	2015		2014
Balance at January1,	$	1,717,635	$	1,715,904
Current Year Uncertain Tax Positions:
Gross Increases		3,277		1,731
Prior Year Uncertain Tax Positions:

Balance at December 31,	$	1,720,912	$	1,717,635