|12 Months Ended|
Dec. 31, 2018
|Income Tax Disclosure [Abstract]|
Deferred tax assets and liabilities are provided for significant revenue and expense items recognized in different years for tax and financial reporting purposes. The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible profits. As of December 31, 2018 and 2017, the Company established valuation allowances equal to the full amount of its deferred tax assets, net of certain tax liabilities, due to the uncertainties regarding the realization of the deferred tax assets in future years.
The following table summarizes the significant components of the Company's deferred tax assets and liabilities as of December 31, 2018 and 2017:
The valuation allowance increased by $586 for the year ended December 31, 2018 and decreased by $2,494 for the year ended December 31, 2017.
The Company completed an analysis of incentive stock options outstanding as of December 31, 2018. The analysis determined that certain options do not meet the requirements of IRC Section 422 and, therefore, are treated as non-qualified stock options for income tax purposes. A deferred tax asset, and a related valuation allowance, of $3,538 was recorded for the temporary book/tax differences related to disqualified incentive stock options as of December 31, 2018.
As of December 31, 2018, the Company has federal and California net operating loss (“NOL”) carryforwards of approximately $6,107 and $4,682, respectively, which are available to offset future taxable income. The NOL carryforwards expire from 2033 to 2037. The annual utilization of NOL carryforwards may be limited if a significant ownership change occurs as defined by IRC Section 382. There are no significant limitations on the annual utilization of NOL carryforwards as of December 31, 2018.
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted containing a broad range of tax reform provisions including a reduction in the U.S. corporate tax rate from 34% to 21% beginning in 2018. The Company re-measured its deferred tax assets and liabilities as of December 31, 2017 based on the reduction in the U.S. corporate tax rate. The re-measurement and other immaterial items resulted in a tax benefit of $482 for the year ended December 31, 2017.
A reconciliation of the expected income tax expense (benefit) at the federal statutory rate of 21% for the year ended December 31, 2018 and 34% for the year ended December 31, 2017 and the income tax expense (benefit) reported in the financial statements is as follows:
The income tax expense (benefit) for the years ended December 31, 2018 and 2017 was comprised of the following:
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://fasb.org/us-gaap/role/ref/legacyRef