15. Income Taxes

At December 31, 2012, the Company had federal and state net operating loss carryforwards of $166.7 million and $97.6 million, respectively, available to offset against future taxable income, which expire in 2013 through 2032.

The Company's utilization of net operating loss ("NOL") carryforwards may be subject to a substantial annual limitation due to ownership change provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as similar state and foreign provisions. These provisions limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and income tax following an "ownership change," defined by Section 382 of the Code to mean a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the market value of a company by certain stockholders or public groups.

As a result of an ownership change that occurred in the CytRx shareholder base in July 2002, approximately $10.1 million in federal net operating loss carryforwards became limited in their availability to $4.0 million in total or $363,000 annually. Management currently believes that the remaining $135.9 million in federal net operating loss carryforwards, and the $97.6 million in state net operating loss carryforwards, are unrestricted.

As of December 31, 2012, CytRx also had research and development and alternative minimum tax credits for federal and state purposes of approximately $7.5 million and $12.2 million, respectively, available for offset against future income taxes, which expire in 2022 through 2031. Based on an assessment of all available evidence including, but not limited to, the Company's limited operating history in its core business and lack of profitability, uncertainties of the commercial viability of its technology, the impact of government regulation and healthcare reform initiatives, and other risks normally associated with biotechnology companies, the Company has concluded that it is more likely than not that these net operating loss carryforwards and credits will not be realized and, as a result, a 100% deferred tax valuation allowance has been recorded against these assets.

Deferred income taxes reflect the net effect of temporary differences between the financial reporting carrying amounts of assets and liabilities and income tax carrying amounts of assets and liabilities. The components of the Company's deferred tax assets and liabilities, all of which are long-term, are as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	60,184		$	56,025
Tax credit carryforwards		15,514			10,040
Equipment, furnishings and other		9,822			9,154

Total deferred tax assets		85,520			75,219
Deferred tax liabilities		(100	)		(3,868	)
Net deferred tax assets		85,420			71,351
Valuation allowance		(85,420	)		(71,351	)
	$	—		$	—

For all years presented, the Company did not recognize any deferred tax assets or liabilities. The net change in valuation allowance for the years ended December 31, 2012 and 2011 was $14.1 million and $16.2 million, respectively.

The provision for income taxes differs from the provision computed by applying the Federal statutory rate to net loss before income taxes as follows (in thousands):

	Years ended December 31,
	2012			2011			2010
Federal benefit at statutory rate	$	(6,107	)	$	(4,996	)	$	139
State income taxes, net of Federal taxes		(745	)		(857	)		24
State credits		(1,555	)
Warrant liabilities		941
Other permanent differences		(23	)		6			22
Book gain in excess of tax gain		—			—			(3,630	)
Provision related to change in valuation allowance		14,069			16,235			3,278
Other, net		(6,578	)		(10,290	)		167
	$	2		$	98		$	0

There have been no changes to the Company's liability for unrecognized tax benefits during the year ended December 31, 2012.

The Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. The Company follows ASC 740 and the year ended December 31, 2012, the tax returns for 2008 through 2012 remain open to examination by the Internal Revenue Service and various state tax authorities.

The Company's policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2012, 2011 and 2010, the Company had accrued no interest or penalties related to uncertain tax positions.