Cellectar Biosciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2016

10. INCOME TAXES

	2016		2015

Tax provision (benefit)
Current
Federal	$	—	$	—
State		—		—
Total current		—		—

Deferred
Federal		(4,053,114)		(3,105,641)
State		99,883		42,562
Total deferred		(3,953,231)		(3,063,079)

Change in valuation allowance		3,953,231		3,063,079
Total	$	—	$	—

Deferred tax assets consisted of the following at December 31:

	2016		2015

Deferred tax assets
Federal net operating loss	$	36,472,996	$	32,565,906
Federal research and development tax credit carryforwards		3,808,862		2,858,628
State net operating losses and tax credit carryforwards		2,628,006		2,619,290
Capitalized research and development expenses		8,834,640		9,883,932
Stock-based compensation expense		2,162,703		1,993,664
Other		235,681		289,643
Total deferred tax assets		54,142,888		50,211,063

Deferred tax liabilities
Depreciable assets		(150,196)		(171,602)
Total deferred tax liabilities		(150,196)		(171,602)

Net deferred tax assets		53,992,692		50,039,461
Less– valuation allowance		(53,992,692)		(50,039,461)
Total deferred tax assets	$	—	$	—

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:

	Year ended December 31,
	2016			2015
Income tax benefit using U.S. federal statutory rate		34.00	%		34.00	%
State income taxes		(1.07)	%		(0.50)	%
Permanent items		17.88	%		20.11	%
Federal tax credits		9.55	%		3.07	%
Change in valuation allowance		(63.97)	%		(55.76)	%
Other		3.61	%		(0.92)	%
Total		0.00	%		0.00	%

As of December 31, 2016, the Company had federal and state net operating loss carryforwards (“NOLs”) of approximately $107,274,000 and $34,119,000 respectively, which expire in 2018 through 2036 and in 2023 through 2034, respectively. In addition, the Company has federal and state research and development and investment tax credits of approximately $3,809,000 and $1,268,000, respectively, which expire in 2018 through 2036 and in 2018 through 2031, respectively. The amount of NOLs and tax credit carryforwards which may be utilized annually in future periods will be limited pursuant to Section 382 of the Internal Revenue Code as a result of substantial changes in the Company’s ownership that have occurred or that may occur in the future. The Company has not quantified the amount of such limitations.

Because of the Company’s continuing losses and uncertainty associated with the utilization of the deferred tax assets in the future, management has provided a full allowance against the net deferred tax asset.

The Company did not have unrecognized tax benefits or accrued interest and penalties at any time during the years ended December 31, 2016 or 2015, and does not anticipate having unrecognized tax benefits over the next twelve months. The Company is subject to audit by the IRS and state taxing authorities for tax periods commencing January 1, 2010. Additionally, the Company may be subject to examination by the IRS for years beginning prior to January 1, 2010 as a result of its NOLs. However, any adjustment related to these periods would be limited to the amount of the NOL generated in the year(s) under examination.