|12 Months Ended|
Dec. 31, 2015
|Income Tax Disclosure [Abstract]|
6. Income taxes
The provision (benefit) for income taxes consists of the following:
The components of deferred tax assets and liabilities consist of the following:
As a result of the realization requirements of ASC 718, the table of deferred tax assets and liabilities does not include certain deferred tax assets as of December 31, 2015 and December 31, 2014, respectively, that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation that are greater than the compensation recognized for financial reporting. Equity will be increased by $12,225 if and when excess tax benefits are ultimately realized. The Company uses ASC 740 ordering when determining when excess tax benefits have been realized.
Reconciliation of the federal statutory income tax rate to the effective income tax rate for the last three years is as follows:
The Company is a C-Corporation for both federal and state income tax purposes.
The Company operates in multiple states. The statute of limitations has expired for all tax years prior to 2012 for federal and 2011 to 2012 for various state tax purposes. However, the net operating loss generated on the Company’s federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities.
As of December 31, 2015, the Company had $58,434 and $38,991 of federal and state net operating loss carryforwards, respectively, that begin to expire in 2023 and 2016 for federal and state purposes, respectively, if not utilized. As of December 31, 2015, the Company has federal and California research and development credit carryforward of $1,537 and $1,554, respectively. The federal credit will begin to expire in 2022; the California credit has indefinite carryforward.
The Company’s existing net operating losses (NOLs) and credit carryforwards are subject to limitations arising from ownership changes subject to the provisions of Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and if the Company undergoes one or more future ownership changes, the Company’s ability to utilize its NOLs and credit carryforwards could be further limited.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. Due to overall cumulative losses incurred over the years, the Company maintained a full valuation allowance against its deferred tax assets as of December 31, 2012. As of December 31, 2013, the Company evaluated the current facts and circumstances and concluded that it was appropriate to release $22,909 of the valuation allowance at December 31, 2013.
As of December 31, 2015 and 2014, the Company was able to determine that, based upon future projections of income, it is more likely than not that all of its federal NOLs will be utilized before they expire. However, the Company determined that some of its California NOLs will expire unused and therefore has a valuation allowance of $1,735 relating to these NOLs as of December 31, 2015. In the current period, the Company released (or reversed) $1,164 of the California NOLs valuation allowance due to expiration of California NOLs and changes in estimates of future projections of income, resulting in a determination that is more likely than not that all but $29,773 ($1,735 tax effected) of the California NOLs will be utilized.
The Company recognizes interest accrued and penalties related to unrecognized tax benefits as income tax expense. No significant interest or penalties were recognized during the periods presented.
Included in the balance of unrecognized tax benefits as of December 31, 2015, 2014 and 2013, are $773, $577 and $306, respectively, of tax benefits that, if recognized, would affect the effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
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