H. Income Taxes

At December 31, 2016, we had U.S. federal net operating loss and research and development tax credit carryforwards of approximately $113,080,000 and $5,842,000, respectively. Such operating losses and tax credits may be used to reduce future taxable income and tax liabilities and will expire at various dates between 2020 and 2036. We also had foreign net operating loss carryforwards and foreign tax credit carryforwards of approximately $14,863,000 and $175,000, respectively. Such foreign net operating loss carryforwards do not expire and foreign tax credit carryforwards will expire between 2017 and 2021. We also had state and city net operating loss carryforwards aggregating approximately $57,881,000. Such operating losses may be used to reduce future taxable income and tax liabilities and will expire at various dates between 2017 and 2036.

The utilization of net operating loss and tax credit carryforwards generated prior to October 2012 (the “Section 382 Limited Attributes”) is substantially limited under Section 382 of the Internal Revenue Code of 1986, as amended, as a result of our equity offering that occurred in October 2012. We generated U.S. federal net operating loss carryforwards of $76,420,000, research and development tax credits of $5,842,000, and state and local net operating loss carryforwards of $56,919,000 since 2012. We will update our analysis under Section 382 prior to using these attributes.

A reconciliation of the Federal statutory income tax rate to our effective tax rate is as follows:

 

		Percent of Income before Income Taxes
		2016				2015
Statutory Federal income tax rate			34.0	%			34.0	%
State income taxes - net of Federal tax benefit			0.8	%			1.5	%
Other permanent differences			(8.1	%)			(3.5	)%
Valuation allowances			(37.0	%)			(40.2	%)
Research and development - U.S.			10.3	%			8.2	%
Research and development - Foreign			0.2	%			0.2	%
Effective tax rate for the year			0.2	%			0.2	%

Significant components of our deferred tax assets are as follows (in thousands):

 

		December 31,
		2016				2015
Net operating loss carryforwards		$	44,929			$	40,215
Research and development credit carryforwards			6,017				4,454
Compensation expense			2,735				3,300
Other			1,266				1,129
Total deferred tax assets			54,947				49,098
Valuation allowance for deferred tax assets			(54,772	)			(48,921	)
Net deferred tax assets		$	175			$	177

Because of our cumulative losses, substantially all of the deferred tax assets have been fully offset by a valuation allowance. We have not paid income taxes for the three-year period ended December 31, 2016. In 2016, 2015 and 2014, we recognized a refundable tax benefit related to research and development credits associated with a foreign subsidiary.