INCOME TAXES

The components of loss before provision for income taxes are as follows:



	For the Years Ended December 31,
	2016			2015			2014
United States	$	(68,718	)	$	(56,554	)	$	(37,327	)
Foreign	(2,107		)	6,175			(6,205		)
Total	$	(70,825	)	$	(50,379	)	$	(43,532	)

The (benefit) provision for income taxes consist of the following:



	For the Years Ended December 31,
	2016			2015		2014
Current:
Federal	$	(2,001	)	$	113	$	1,529
State	(216		)	5		126
Foreign	8			148		29
	$	(2,209	)	$	266	$	1,684
Deferred:
Federal	(93		)	114		495
State	(11		)	26		7
Foreign	—			—		—
	(104		)	140		502
Total income tax (benefit) provision	$	(2,313	)	$	406	$	2,186

The 2014 income tax provision includes $1.5 million related to the correction of our prior year estimates of carryback of federal net operating losses, book tax differences on acquisition-related liabilities, and credits ineligible for offset against federal income taxes. Management has evaluated the materiality of these adjustments quantitatively and qualitatively, and has concluded that the corrections are immaterial to the accompanying Consolidated Financial Statements, taken as a whole.

The income tax (benefit) provision differs from that computed using the federal statutory rate applied to income before taxes as follows:



	2016			2015			2014
Tax provision computed at the federal statutory rate	$	(24,777	)	$	(17,619	)	$	(15,236	)
State tax, net of federal benefit	(261		)	232			66
Research credits	(3,232		)	(2,974		)	(2,134		)
Change in tax credit carryforwards	11,042			(4,965		)	—
Transaction costs	—			—			(11		)
Officers compensation	1,159			1,577			1,895
Stock based compensation	556			535			299
Permanent items and other	12			(487		)	21,742
Domestic manufacturing deduction	—			—			(630		)
Tax differential on foreign earnings	15			1,435			1,570
Change in tax rate	(744		)	(903		)	(519		)
Valuation allowance	13,917			23,575			(4,856		)
Income tax (benefit) provision	$	(2,313	)	$	406		$	2,186

The Protecting Americans from Tax Hikes Act of 2015, which President Obama signed into law on December 18, 2015, reinstated the research and development credit for 2015 and included a permanent extension of the research credit under Section 41. We recorded a $0.4 million benefit, before impact of valuation allowance, related to the research and development credit in 2016 and 2015, respectively.

Significant components of our deferred tax assets and liabilities as of December 31, 2016 and 2015 are presented below. A valuation allowance has been recognized to offset the net deferred tax assets as realization of such deferred tax assets no longer meets the “more-likely-than-not” threshold under GAAP.



	2016			2015			2014
Deferred tax assets:
Net operating loss carry forwards	$	57,404		$	41,251		$	40,505
Research credits	11,480			22,082			9,045
Stock based compensation	5,546			4,828			3,703
Deferred revenue	1,380			2,280			1,893
Development costs	7,180			5,504			5,950
Returns and allowances	2,178			1,363			4,161
Other, net	10,530			9,887			9,082
Total deferred tax assets before valuation allowance	95,698			87,195			74,339
Valuation allowance	(84,822		)	(71,815		)	(45,983		)
Total deferred tax assets	10,876			15,380			28,356
Deferred tax liabilities:
Basis difference in debt	(447		)	(713		)	(907		)
Depreciation and amortization differences	(17,104		)	(21,446		)	(34,088		)
Net deferred tax liabilities	$	(6,675	)	$	(6,779	)	$	(6,639	)

At December 31, 2016, 2015, and 2014, we recorded a valuation allowance of $84.8 million, $71.8 million and 46.0 million, respectively. The valuation allowance increased by $13.0 million and $25.8 million, during 2016 and 2015, respectively and decreased by $3.6 million during 2014. The increase in the valuation allowance in 2016 and 2015 was due to an increase in net operating loss carryforwards from operating losses and the reversal of deferred tax liabilities from the financial statement amortization of intangible assets which have no basis. The decrease in the valuation allowance in 2014 was due to the write down of Talon acquired deferred tax assets that would never be realized as a result of limitations under section 382 of the Internal Revenue Code.

At December 31, 2016, we had federal and state net operating loss carryforwards of approximately $157.1 million and $91.6 million, respectively. We have approximately $7.5 million of foreign loss carryforwards that will begin to expire in 2022. The federal and state loss carry forwards will begin to expire in 2018 and 2017, respectively, unless previously utilized. At December 31, 2016, we had federal and state tax credits of approximately $11.6 million and $3.8 million, respectively. The federal tax credit carryovers begin to expire in 2027 unless previously utilized. The state research and development credit carryforwards have an indefinite carryover period.

As a result of the prior ownership changes, the utilization of certain net operating loss and research and development tax credit carryforwards including those acquired in connection with the acquisition of Allos and Talon are subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state provisions. Any net operating losses or credits that would expire unutilized as a result of Section 382 and 383 limitations have been removed from the table of deferred tax assets and the accompanying disclosures of net operating loss and research and development carryforwards.

Accounting guidance clarifies the accounting for uncertain tax positions and prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, the authoritative guidance addresses the de-recognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized.

The following tabular reconciliation summarizes activity related to unrecognized tax benefits:



	2016			2015		2014
Balance at beginning of year	$	4,498		$	1,944	$	2,212
Adjustments related to prior year tax positions	(1,638		)	1,318		(915		)
Increases related to current year tax positions	411			1,236		647
Decreases due to settlements	—			—		—
Decreases related to prior year tax positions	—			—		—
Balance at end of year	$	3,271		$	4,498	$	1,944

We continue to believe that our tax positions meet the more-likely-than-not standard required under the recognition phase of the authoritative guidance. However, we consider the amounts and probabilities of the outcomes that can be realized upon ultimate settlement with the tax authorities and determined unrecognized tax benefits primarily related to credits should be established as noted in the summary rollforward above.

Approximately $0.7 million, $0.7 million, and $0.7 million of the total unrecognized tax benefits as of December 31, 2016, 2015, and 2014, respectively, would reduce our annual effective tax rate if recognized. Additional amounts in the summary rollforward could impact our effective tax rate if we did not maintain a full valuation allowance on our net deferred tax assets.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months. With a few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations for years before 2009. Our policy is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of operations.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts by jurisdiction. For public business entities, the guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. We decided to early adopt these provision on a prospective basis as of December 31, 2015, and the adoption did not have a material impact on the accompanying Consolidated Financial Statements.

As of December 31, 2016, we had cumulative excess benefits related to share based compensation of $2.7 million which have not been reflected as a deferred tax asset. Under current accounting guidance, the excess benefits when realized would increase additional paid in capital. As a result of the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, on January 1, 2017 the excess benefits will be reclassified to our net operating loss carryover resulting in an increase in our deferred tax assets and valuation allowance of $2.7 million.