Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
13. Income Taxes
As of December 31, 2015, we had net operating loss carryforwards for federal income tax purposes of approximately $241.1 million that expire at various dates through 2035, and federal research and development tax credits of approximately $8.4 million that expire at various dates through 2035. We also had net operating loss carryforwards for California income tax purposes of approximately $161.1 million that expire at various dates through 2035 and state research and development tax credits of approximately $8.3 million which do not expire. Approximately $4.2 million of federal and state net operating loss carryforwards represent stock option deductions arising from activity under our stock option plans, the benefit of which will increase additional paid in capital when realized.
Current federal and California tax laws include substantial restrictions on the utilization of net operating losses and tax credits in the event of an ownership change of a corporation. We have performed a change in ownership analysis through December 31, 2015 and all of our net operating loss and tax credit carryforwards are available to offset future taxable income, if any.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss and credit carryforwards. Significant components of our deferred tax assets are as follows (in thousands):
December 31,
Deferred tax assets:
Net operating loss carryforwards
Research credit carryforwards
Other, net
Deferred revenue
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $2.7 million during 2015, increased by $0.5 million during 2014 and increased by $1.7 million during 2013.
Under ASC 718, the deferred tax asset for net operating losses as of December 31, 2015 excludes deductions for excess tax benefits related to stock based compensation.
The provision for income taxes consists of state minimum taxes due. The effective tax rate of our provision (benefit) for income taxes differs from the federal statutory rate as follows (in thousands):
Year Ending December 31,
Computed at 34%
State taxes
Book gains (losses) not currently benefited
Disallowed interest expense
Revaluation of warrant liability
Research and development credits
Non-cash gain from termination of royalty purchase agreement
Non-cash gain on settlement of long-term debt
We had no unrecognized tax benefits or any amounts accrued for interest and penalties for the three year period ended December 31, 2015. Our policy is to recognize interest and penalties related to income taxes as a component of income tax expense.
We file tax returns in the U.S. Federal jurisdiction and some state jurisdictions. We are subject to the U.S. federal and state income tax examination by tax authorities for such years 1995 through 2015, due to net operating losses that are being carried forward for tax purposes.
The Credit for Increasing Research Activities expired for amounts incurred after December 31, 2011. However, The American Taxpayer Relief Act of 2012, which was signed into law on January 2, 2013, extended the credit for amounts incurred before January 1, 2014. The Act also retroactively restored the credit for amounts incurred in 2012. However, since the Act was not signed until January 2, 2013 the amount of credit generated in 2012 was not reflected in the deferred tax amounts as of December 31, 2012. The amount of this credit that was generated in 2012 was approximately $340,000. The deferred tax asset for this credit was increased by this amount in 2013.