13. Income Taxes

The Company is subject to U.S. federal and Massachusetts state corporate income taxes. For the years ended December 31, 2011, 2010 and 2009, the Company did not have any federal or state income tax expense given its continued cumulative net operating losses. A reconciliation of the federal statutory corporate income tax rate to the effective income tax rate for the years ended December 31, 2011, 2010 and 2009 is as follows:

	2011		2010		2009
Statutory federal income tax rate	(35	)%	35	%	(35	)%
State income tax rate, net of federal benefit	(4	)	5		(6	)
Revaluation of warrant liability	13		8		3
Other permanent differences	---		1		1
Change in valuation allowance	26		(49	)	37
Effective tax rate	0	%	0	%	0	%

The components of deferred income taxes were as follows at December 31:

In thousands	2011			2010
Deferred tax liabilities:
Intangibles	$	2,385		$	2,813
Deferred tax assets:
Net operating loss carryforwards		161,951			134,065
Federal and state tax credit carryovers		23,380			24,489
Depreciation		4,924			4,837
Stock-based compensation		3,420			3,122
Other		2,158			1,289
Total deferred tax assets		195,833			167,802
Deferred tax assets, net		193,448			164,989
Valuation allowance		(193,448	)		(164,989	)
Total deferred taxes	$	---		$	---

At December 31, 2011, the Company had available estimated net operating loss carryforwards and research and development credit carryforwards for federal and state tax reporting purposes as follows:

	Amount		Expiring if not utilized
	(in 000s)
Net operating loss carryforwards:
Federal	$	457,459	2012 through 2031
State	$	79,197	2012 through 2016

Research and development credit carryforwards:
Federal	$	18,448	2012 through 2031
State	$	7,588	2012 through 2026

Since the Company has not yet achieved sustained profitable operations, management believes the deferred tax assets do not satisfy the more-likely-than-not realization criteria and has recorded a valuation allowance for the entire net deferred tax assets. The valuation allowance increased by $28.5 million and $21.9 million in 2011 and 2009, respectively, due to taxable losses and resulting increases in net operating loss carryforwards. The valuation allowance decreased by $43.5 million in 2010 due to the recognition of previously deferred revenue for tax purposes and utilization of net operating loss carryforwards. In 2010, the Company recognized a tax benefit from the utilization of net operating loss carryforwards for federal and state purposes of $7.9 million and $1.4 million, respectively. The Company does not have any material uncertain tax positions.

Due to the Company’s historical net operating loss position, the Company’s U.S. federal and Massachusetts tax returns remain open to examination for three years after the Company utilizes that year’s net operating loss carryforward. The Company’s earliest year which generated a net operating loss including in the Company’s current net operating loss carryforward is 1997 for U.S. federal tax purposes and 2006 for Massachusetts state tax purposes.