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Income Taxes
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
For the three months ended June 30, 2018 and 2017, the Company recorded an expense for income taxes of $0.1 million on a pre-tax loss of $50.1 million for an effective tax rate of (0.3)% and an expense for income taxes of $0.2 million on a pre-tax loss of $67.4 million for an effective tax rate of (0.3)%, respectively. For the six months ended June 30, 2018 and 2017, the Company recorded an expense for income taxes of $0.5 million on a pre-tax loss of $72.1 million for an effective tax rate of (0.6)% and an expense for income taxes of $0.4 million on a pre-tax loss of $132.5 million for an effective tax rate of (0.3)%, respectively. The effective tax rate for the periods presented is lower than the statutory federal tax rate primarily due to a full valuation allowance against U.S. deferred tax assets.
A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, is not more-likely-than-not to be realized. Management believes that, based on available evidence both positive and negative, it is more likely than not that the U.S. deferred tax assets will not be utilized and as such, a full valuation allowance has been recorded. The valuation allowance for deferred tax assets was $542.4 million as of December 31, 2017. There were no releases from the valuation allowance in either period.
At December 31, 2017, the Company had federal and state net operating loss carryforwards of $1.7 billion and $1.5 billion, respectively, which will expire, if unused, beginning in 2022 and 2018, respectively. In addition, at December 31, 2017 the Company had approximately $16.1 million of federal research credit, $6.6 million of federal investment tax credit, and $12.2 million of state research credit carryforwards. The federal tax credit carryforwards begin to expire in 2022. The state credit carryforwards may be carried forward indefinitely. The Company has not recorded deferred tax assets for the federal and state research credit carryforwards as the entire amount of the carryforwards represent unrecognized tax benefits.
U.S. law H.R.1, commonly referred as to the Tax Cuts and Jobs Act of 2017 (The Act) was enacted on December 22, 2017. Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period”. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. For the Global Intangible Low-Taxed Income (GILTI) provisions of the Tax Act, the Company has not yet completed its assessment or elected an accounting policy to either recognize deferred taxes for basis differences expected to reverse as GILTI or to record GILTI as period costs if and when incurred. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. The Company is in the measurement period, however the Company believes it has made reasonable estimate for all effects for periods presented.
As a result of The Act, the U.S. statutory tax rate was lowered from 34 percent to 21 percent effective on January 1, 2018. The Company is required to remeasure the U.S. deferred tax assets and liabilities to the new tax rate. The U.S. operation is in a net deferred tax asset position, offset by a full valuation allowance.