|12 Months Ended|
Dec. 31, 2017
|Income Tax Disclosure [Abstract]|
The Tax Act was enacted on December 22, 2017 and includes a number of changes to existing tax laws that impact the Company, most notably it reduces the US federal corporate tax rate from 35% to 21%, effective January 1, 2018. At December 31, 2017, we have made a reasonable estimate of the effects on our existing deferred tax balances. In other cases, we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which we were able to determine a reasonable estimate, we recognized a provisional amount of $32.4 million, which is included as a component of income tax expense from continuing operations.
In conjunction with the tax law changes, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act.
The components of the income tax expense (benefit) for continuing operations are as follows (in thousands):
A reconciliation of income tax expense (benefit) from continuing operations to the amount computed by applying the statutory federal income tax rate to the net income (loss) from continuing operations is summarized as follows:
We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was $32.4 million.
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2017 and 2016 are shown below. The Company assesses the positive and negative evidence to determine if sufficient future taxable income will be generated to use the existing deferred tax assets. The Company's evaluation of evidence resulted in management concluding that the majority of the Company's deferred tax assets will be realized. However, the Company maintains a valuation allowance to offset certain net deferred tax assets as management believes realization of such assets are uncertain as of December 31, 2017, 2016 and 2015. The valuation allowance decreased $8.4 million in 2017, increased $6.3 million in 2016 and decreased $231.7 million in 2015.
As of December 31, 2017, the Company had federal and state net operating loss carryforwards set to expire through 2036 of $387.9 million and $126.5 million of state net operating loss carryforwards. The Company also has $23.8 million of federal research and development credit carryforwards, which expire through 2036. The Company has $20.7 million of California research and development credit carryforwards that have no expiration date.
Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of the Company’s net operating losses and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of December 31, 2017 are net of any previous limitations due to Section 382 and 383.
The Company accounts for income taxes by evaluating a probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company’s remaining liabilities for uncertain tax positions are presented net of the deferred tax asset balances on the accompanying consolidated balance sheet.
A reconciliation of the amount of unrecognized tax benefits at December 31, 2017, 2016 and 2015 is as follows (in thousands):
Included in the balance of unrecognized tax benefits at December 31, 2017 is $26.8 million of tax benefits that, if recognized would impact the effective rate. There are no positions for which it is reasonably possible that the uncertain tax benefit will significantly increase or decrease within twelve months.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017 and December 31, 2016, the Company recognized an immaterial amount of interest and penalties. The Company files income tax returns in the United States and in various state jurisdictions with varying statutes of limitations. The federal statute of limitation remains open for the 2013 tax year to the present. The state income tax returns generally remain open for the 2012 tax year through the present. Net operating loss and research credit carryforwards arising prior to these years are also open to examination if and when utilized.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef