14. Income Taxes

The Company is subject to U.S. federal and various state corporate income taxes as well as taxes in foreign jurisdictions where subsidiaries have been established. Loss before provision for income taxes and the provision for income taxes consist of the following for the years ended December 31, 2015, 2014 and 2013:


*In thousands*	2015			2014			2013
Loss before provision for income taxes
Domestic	$	(182,246	)	$	(100,860	)	$	(192,998	)
Foreign		(52,304	)		(61,112	)		(80,721	)

Total	$	(234,550	)	$	(161,972	)	$	(273,719	)

Benefit from (provision for) income taxes
Current:
State	$	(262	)	$	(237	)	$	(216	)
Foreign		(930	)		(393	)		(223	)
Deferred:
Federal		4,586			—			—

Total	$	3,394		$	(630	)	$	(439	)

The Company had a deferred income tax benefit in 2015 of $4.6 million and no deferred tax provision or benefit in both 2014 and 2013.

A reconciliation of the federal statutory corporate income tax rate to the effective income tax rate for the years ended December 31, 2015, 2014 and 2013 is as follows:


	2015			2014			2013
Statutory federal income tax rate		(35	)%		(35	)%		(35	)%
State income tax rate, net of federal benefit		(2	)		(4	)		(2	)
Tax benefit from unrealized gain		(2	)		—			—
Other permanent differences		2			(5	)		—
Foreign rate differential		6			9			9
Change in valuation allowance		30			35			28

Effective tax rate		(1	)%		—	%		—	%

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


*In thousands*	2015			2014
Deferred tax liabilities:
Lease items	$	2,958		$	377
Unrealized gain		4,586			—

Total deferred tax liabilities		7,544			377

Deferred tax assets:
Net operating loss carryforwards		254,601			205,793
Federal and state tax credit carryovers		36,870			32,318
Depreciation		3,773			4,383
Stock-based compensation		14,431			12,803
Tax Credits		36,424			9,008
Debt-related deductions		757			934

Total deferred tax assets		346,856			265,239

Deferred tax assets, net		339,312			264,862
Valuation allowance		(339,312	)		(264,862	)

Total deferred taxes	$	—		$	—

At December 31, 2015, the Company had available estimated net operating loss carryforwards and research and development credit carryforwards for federal, foreign and state tax reporting purposes as follows:


	Amount		Expiring if not utilized
	(in thousands)
Net operating loss carryforwards:
Federal	$	661,063		2020 through 2036
State	$	292,111		2020 through 2036
Foreign	$	266,024		2020 through 2022
Research and development credit carryforwards:
Federal	$	32,348		2019 through 2036
State	$	6,718		2020 through 2036

Included in the federal net operating loss carryforwards above is approximately $35 million related to stock-based compensation tax deductions in excess of book compensation expense which will be credited to additional paid-in-capital when such reductions reduce taxes payable. Although these net operating losses are included in the carryforwards above, they are not reflected in the table of deferred tax assets as the excess tax benefits are not yet realized.

During 2012, the Company transferred certain intellectual property rights related to Iclusig to its wholly-owned subsidiary in Switzerland. Although the transfer of intellectual property rights between consolidated entities did not result in any gain in the consolidated results of operations, the Company generated a taxable gain in the U.S. that was substantially offset by existing tax loss and credit carryforwards. Any taxes incurred related to the intercompany transactions are treated as a prepaid tax in the Company’s consolidated balance sheet and amortized to income tax expense over the life of the intellectual property. The amount of tax amortized to the provision for income taxes for the year ended December 31, 2015, 2014 and 2013 was approximately $0.2 million, $0.2 million and $0.2 million, respectively.

Since the Company has not yet achieved sustained profitable operations, management believes its deferred tax assets do not satisfy the more likely than not realization criteria and has recorded a valuation allowance for all deferred tax assets as of December 31, 2015 and 2014. The valuation allowance increased by $74.4 million in 2015, $61.2 million in 2014 and $80.8 million in 2013.

The Company does not recognize a tax benefit unless it is more likely than not that the tax position will be sustained upon examination by tax authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized for these positions is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Deferred tax assets that do not meet these recognition criteria are not recorded and the Company recognizes a liability for uncertain tax positions that may result in tax payments. The Company recognizes interest and penalties as a component of the provision for incomes taxes. For the years ended 2015, 2014 and 2013, the Company recorded approximately $110,000, $84,000 and $65,000 respectively, of interest expense as a component of the provision for income taxes.

In 2015, the Company’s uncertain tax positions increased to approximately $25.5 million. If such unrecognized tax benefits were realized and not subject to valuation allowances, the Company would recognize a tax benefit of $21.9 million. A reconciliation of the reserve for uncertain tax benefits (including state tax matters without federal benefits) is as follows:


*In thousands*	2015		2014
Uncertain tax positions, beginning of the year:	$	24,984	$	24,653
Gross increases – tax positions in current period		501		331

Uncertain tax positions, end of year	$	25,485	$	24,984

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 included in the Company’s current net operating loss carryforward is 2004 for U.S. federal tax purposes. The Company’s Massachusetts state tax returns from 2010 to 2014 remain open to examination. All tax years for foreign subsidiaries are also open to audit in their respective jurisdictions.

In 2015, the Internal Revenue Service (“IRS”) completed an examination of our U.S. income tax return for 2012. As a result of this audit, no change was made to the Company’s income tax return for that year and there has been no change to the amount of the Company’s unrecognized tax benefits.