|12 Months Ended|
Dec. 31, 2016
|Income Tax Disclosure [Abstract]|
NOTE 11 – INCOME TAXES
Components of the net loss consist of the following (in thousands):
In 2016, the foreign losses were primarily comprised of $32.4 million related to the Bermudan operations of Tonix International Holding, which included a licensing fee of $2.0 million charged by Tonix Sub pursuant to a licensing agreement with Tonix Sub. In 2015, the foreign losses were comprised of $43.9 million related to the Bermudan operations of Tonix International Holding, which included a licensing fee of $4.0 million charged by Tonix Sub pursuant to a licensing agreement with Tonix Sub.
The operations and management of Tonix International Holding are located in Bermuda, and accordingly, are not subject to income taxes in Ireland, which is its country of incorporation. The operations of Tonix International Holding are not subject to income tax in Bermuda.
A reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate used to calculate the Company's income tax provision is as follows:
Deferred tax assets and related valuation allowance as of December 31, 2016 and 2015 were as follows (in thousands):
The Company has incurred research and development (“R&D”) expenses, a portion of which qualifies for tax credits. The Company conducted an R&D credit study to quantify the amount of credits and has claimed an R&D credit on its 2013, 2014, and 2015 tax returns. As of December 31, 2016, the Company has a credit carryforward of $1.6 million, which will begin to expire in 2033.
At December 31, 2016, the Company had available unused net operating loss (“NOL”) carryforwards of approximately $21.1 million that expire from 2027 to 2036 for federal tax purposes. The Company also has approximately $32.5 million of NOL carryforwards for New York State and $27.8 million for New York City purposes expiring from 2030 to 2036. Additionally, the Company has $1.8 million of foreign NOL balances in various jurisdictions with various expiration periods. A portion of these NOL carryforwards are subject to annual limitations in their use in accordance with Internal Revenue Code (“IRC”) section 382. At December 31, 2016, the NOL carryforward balance has been reduced to reflect IRC section 382 limitation.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2016. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. As such, the Company has determined that it is not more likely than not that the deferred tax assets will be realized and accordingly, has provided a full valuation allowance against its gross deferred tax assets. The increases in the valuation allowance for the years ended December 31, 2016 and 2015 were $1.8 million and 2.2 million, respectively.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. However, as of December 31, 2016 there were no unrecognized tax benefits recorded. The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2016, the Company's tax returns remained open and subject to examination by the tax authorities for the tax years 2013 and after.
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