|12 Months Ended|
Dec. 31, 2020
8. INCOME TAXES
Deferred tax assets consisted of the following at December 31:
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:
As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $143,722,000. Federal net operating loss generated as of December 31, 2017 will expire in 2021 through 2037, net operating loss generated during 2018 and later will be carried forward indefinitely until utilized. As of December 31, 2020, the Company also had state net operating loss carryforwards of approximately $54,283,000. State net operating loss will expire in 2028 through 2040.
As of December 31, 2020, the Company had federal research and development and orphan drug credit carryforwards of approximately $7,064,000 which will expire in 2021 through 2040. As of December 31, 2020, the Company also had state credit carryforwards of approximately $850,000which will expire in 2024 through 2035.
As of December 31, 2020, the company had federal NOLs and research and development credit carryforwards of $1,690,848 and $65,675, respectively, that expired in 2020.
The amount of NOLs and tax credit carryforwards which may be utilized annually in future periods will be limited pursuant to Section 382 and 383 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.
During 2019, the Company changed its state tax rate applied to the deferred tax assets and liabilities based on the expected reversal of the deferred tax assets and liabilities. This state deferred tax benefit is offset by a corresponding increase valuation allowance.
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 CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Under the Tax Act, federal net operating losses generated after 2017 could not be carried back and utilization was limited to 80% of taxable income. The CARES Act allows for a five-year carryback of federal net operating losses generated in 2018 through 2020 and eliminates the 80% taxable income limitation by allowing entities to fully utilize net operating loss carryforwards to offset taxable income in 2018 through 2020. In addition, the CARES Act generally allows taxpayers to deduct interest up to 50% of adjusted taxable income (30% limit under the Tax Act) for tax years 2019 and 2020.
The enactment of the CARES Act did not result in any material adjustments to the Company’s income tax provision for the year ended December 31, 2020, or to its deferred taxes and related allowance as of December 31, 2020.
Effective January 1, 2019, the Company adopted ASU 2016-02, which resulted in the recognition of lease liabilities and right-of-use assets. The Company’s deferred tax balances have been adjusted to reflect the adoption of ASU2016-02.
The Company did not have unrecognized tax benefits or accrued interest and penalties at any time during the years ended December 31, 2020 or 2019 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, 2017. Additionally, the Company may be subject to examination by the IRS for years beginning prior to January 1, 2017 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.
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/disclosureRef