Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Note 14. Income Taxes
We did not have an income tax benefit or income tax expense from continuing operations in the years ended December 31, 2023 and 2022.
The components of income (loss) before income taxes were as follows (in thousands):
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
The Company evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, including a three-year cumulative loss position as of December 31, 2023, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company provided a full valuation allowance for its net deferred tax assets as of December 31, 2023 and 2022. The valuation allowance increased by $4.2 million during the year ended December 31, 2023. The increase in the valuation allowance during the year ended December 31, 2023 was due primarily to a an increase in deferred tax assets resulting from the orphan drug credit generated during the period, Section 174 capitalized research expenditures, and the generation of federal and state NOLs during the period. As of December 31, 2023 and 2022, we have recorded gross federal net operating losses (NOL) carryforwards of approximately $168.2 and $156.2 million, respectively, gross state NOL carryforwards of approximately $70.5 and $71.1 million, respectively, and tax credit carryforwards of $6.1 million and $4.9 million, respectively. Approximately $15.2 million of federal losses and credits would begin to expire in 2037, while $153 million of federal losses may be carried forward indefinitely. The state net operating losses will begin to expire in varying periods. The Company completed an IRC Section 382/383 study on its federal and state tax attributes based on an ownership change that occurred during 2021. Based on the study, there are not any permanent limitations on our ability to use federal and state net operating loss carryforwards and tax credits. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs in the future, our ability to use our net operating loss carryforwards and credits could be limited. The Company files income tax returns in the U.S. and several state jurisdictions and are open to review by taxing authorities for the 2016 tax filings and thereafter. We are subject to the accounting guidance for uncertain income tax positions. We believe that our income tax positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material adverse effect on our financial condition, results of operations, or cash flow. Our policy for recording interest and penalties associated with audits and uncertain tax positions is to record such items as a component of income tax expense, and amounts recognized to date are insignificant. No uncertain income tax positions are recorded, and we do not expect our uncertain tax position to change during the next twelve months. The reconciliation of the federal statutory income tax rate to the Company’s effective income tax from continuing operations is as follows:
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