INCOME TAXES - Note 13

12 Months Ended

Dec. 31, 2019

Notes To Financial Statements Abstract

Income taxes - Note 13

13. INCOME TAXES

A provision for income taxes has not been recorded for 2019 and 2018 due to the valuation allowances placed against the net operating losses and deferred tax assets arising during such periods. A valuation allowance has been recorded for all deferred tax assets. Based on our history of losses since inception, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets.

The effective tax rate of our provision (benefit) for income taxes differs from the Federal statutory rate as follows:

	Year Ended December 31,
	2019	2018
Statutory rate	21.0%	21.0%
Net operating loss expiration	(14.7)%	(5.8)%
Tax credits	2.8%	3.7%
Change in valuation allowance	(9.1)%	(18.9)%
Total	0.0%	0.0%

Deferred tax assets are summarized as follows (in thousands):

		December 31,
		2019		2018
Deferred tax assets
Reserves	$	610	$	1,152
Net operating loss carryforwards		85,282		83,608
R&D credit carryforwards		9,047		8,593
Depreciation/amortization deferred		16,978		15,884
Other		5,808		6,076
Net deferred taxes before valuation allowance		117,725		115,313
Less: Valuation allowance		(117,725)		(115,313)
Deferred tax assets	$	-	$	-

At December 31, 2019, we have net operating loss carryforwards of approximately $405.8 million for federal income tax reporting purposes. In addition, we have research and development tax credits of $9.0 million. During 2019, $17.1 million federal net operating losses and $301,000 general business credits expired unused. A majority of the net operating loss carryforwards and research and development credits available to offset future taxable income, if any, will expire in varying amounts from 2020 to 2039, if not previously used.

Certain net operating losses arise from the deductibility for tax purposes of compensation under nonqualified stock options equal to the difference between the fair value of the stock on the date of exercise and the exercise price of the options. For financial reporting purposes, the tax effect of this deduction, when recognized, is accounted for as an income tax benefit.

In certain circumstances, as specified in the Internal Revenue Code, a 50% or more ownership change by certain combinations of our shareholders during any three year period would result in limitations on our ability to use a portion of our net operating loss carryforwards.

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or the Tax Act, was signed in to law. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 35% to 21%, requires taxpayers to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings.

We did not have any unrecognized tax benefits at December 31, 2019 or 2018.

We recognize interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2019 and 2018 we did not recognize any interest or penalties.

We file income tax returns in the U.S. federal jurisdiction and Oregon. Due to our operating loss and credit carryforwards, the U.S. federal statute of limitations remains open for 1998 and onward.