INCOME TAXES

We file income tax returns in the U.S. federal jurisdiction, as well as in various state and local jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2016. Our practice is to recognize interest and penalties related to income tax matters in income tax expense when and if they become applicable. At December 31, 2019 and 2018, respectively, there were no accrued interest and penalties related to uncertain tax positions.

The following table shows the components of the provision for income taxes (in thousands):



	For the year ended December 31,
	2019		2018		2017
Current:
State	$	10	$	11	$	10
Deferred:
U.S. Federal	—		—		(125		)
Provision for (benefit from) income taxes	$	10	$	11	$	(115	)

The principal items accounting for the difference between income taxes computed at the U.S. statutory rate and the provision for income taxes reflected in our Consolidated Statements of Operations are as follows:



	For the year ended December 31,
	2019		2018		2017
U.S. statutory rate	21.0	%	21.0	%	34.0	%
State taxes (net of federal tax benefit)	2.0		2.5		2.3
Valuation allowance	(20.7	)	(25.0	)	17.4
Deferred rate change due to changes in tax laws	—		—		(51.7	)
Other	(2.4	)	1.4		(1.0	)
	(0.1	)%	(0.1	)%	1.0	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are as follows (in thousands):



	At December 31,
	2019			2018			2017
Accrued expenses and other reserves	$	1,505		$	1,964		$	1,749
Right-of-use-asset	(378		)	—			—
Lease liabilities	461			—			—
Tax credits, deferred R&D, and other	44			65			197
Net operating loss	12,758			10,793			8,610
Valuation allowance	(14,390		)	(12,822		)	(10,556		)
Net deferred tax assets	$	—		$	—		$	—

In 2019, our effective tax rate was lower than the statutory rate due to an increase in the valuation allowance as a result of the $8.3 million additional federal net operating loss we recognized for the year. In 2018, our effective tax rate was lower than the statutory rate due to an increase in the valuation allowance of the $8.7 million additional federal net operating loss we recognized for the year. In 2017, our effective tax rate was lower than the statutory rate due to the remeasurement of our deferred tax assets resulting from the Tax Cuts and Jobs Act of 2017 (the “Act”) and decrease in the valuation allowance.

On December 22, 2017, the Act was signed into law making significant changes to the Internal Revenue Code (“IRC”). Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, repeal of the corporate Alternative Minimum Tax, elimination of certain deductions, and changes to the carryforward period and utilization of Net Operating Losses generated after December 31, 2017. We have calculated the impact of the Act in our year end income tax provision in accordance with our understanding of the Act and guidance available as of the date of this filing. As a result of the Act, we have recorded $0.1 million as additional income tax benefit in the fourth quarter of 2017, the period in which the legislation was enacted. The amount related to the release of the valuation allowance on the Alternative Minimum Tax Credit carry-forward which is expected to be fully refunded by 2021. We remeasured the deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future. The impact of the remeasurement was $5.9 million of additional tax expense which was offset by a $5.9 million reduction of the valuation allowance resulting in a net zero impact to the financial statements. The U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies could interpret or issue guidance on how provisions of the Act will be applied or otherwise administered that is different from our interpretation. We may make adjustments to amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made.

At December 31, 2019, we had net operating loss carry-forwards of approximately $108.8 million for federal income tax purposes ($64.5 million for state and local income tax purposes). However, due to changes in our capital structure, approximately $54.5 million of the $108.8 million is available after the application of IRC Section 382 limitations. As a result of the Act, net operating loss carry-forwards generated in tax years beginning after December 31, 2017 can only offset 80% of taxable income. These net operating loss carry-forwards can no longer be carried back, but they can be carried forward indefinitely. The $8.3 million and $8.7 million in net operating losses generated in 2019 and 2018 will be subject to the new limitations under the Act. If not utilized, the carry-forwards generated prior to December 31, 2017 of $37.3 million will begin to expire in 2021 for federal purposes and have begun to expire for state and local purposes.

Since we believe it is more likely than not that the benefit from net operating loss carry-forwards will not be realized, we have provided a full valuation allowance against our deferred tax assets at December 31, 2019 and 2018, respectively. We had no net deferred tax liabilities at December 31, 2019 or 2018, respectively. In 2019, we recognized various states tax expense as a result of the adjustment from the 2018 provision to the actual tax on the 2018 returns that were filed in 2019. In 2018, we recognized various states tax expense as a result of the adjustment from the 2017 provision to the actual tax on the 2017 returns that were filed in 2018. In 2017, we recognized U.S. federal and various states income tax benefit of $0.1 million as a result of the reduction in the valuation allowance on the portion of Alternative Minimum Tax Credits that are expected to be refunded.