Significant components of the provision for income taxes attributable to operations consist of the following:

The Company currently has approximately $34.1 million in net operating loss carryforwards along with $7.4 million in research and development tax credit carryforwards for U.S. federal tax purposes that will begin to expire in 2026 and 2023, respectively. The U.S. federal tax carryforwards are recorded with no valuation allowance. The Company has $211.5 million in state net operating loss carryforwards, primarily in Maryland, that will begin to expire in 2018. The Company has approximately $227.6 million in net operating losses from foreign jurisdictions that will have an indefinite life unless the foreign entities have a change in the nature or conduct of the business in the three years following a change in ownership. These foreign net operating losses are recorded with a valuation allowance as their realization is not more-likely-than-not. The use of any of these net operating losses and research and development tax credit carryforwards may be restricted due to changes in the Company's ownership.

The provision for income taxes differs from the amount of taxes determined by applying the U.S. federal statutory rate to loss before provision for income taxes as a result of the following:

The effective annual tax rate for the years ended December 31, 2013, 2012 and 2011 was 30%, 37% and 41%, respectively. The decrease in the effective annual tax rate in 2013 from 2012 is primarily related to research and development tax credits and orphan drug tax credits related to our otlertuzumab (formely TRU-016) product candidate. The decrease in the effective annual tax rate in 2012 from 2011 is primarily related to orphan drug tax credits related to our otlertuzumab (formerly TRU-016) product candidate.

The Company recognizes interest in interest expense and recognizes potential penalties related to unrecognized tax benefits in selling, general and administrative expense. The Company accrued approximately $15,000 and $25,000 for the payment of interest and penalties as of December 31, 2013 and 2012, respectively. Of the total unrecognized tax benefits recorded at December 31, 2013 and 2012, $132,000 and $153,000, respectively, is classified as a current liability and $991,000 and $863,000, respectively, is classified as a non-current liability on the balance sheet. As of December 31, 2013 and 2012, $152,000 and $75,000, respectively, of unrecognized tax benefits will reverse within the next twelve months.

When resolved, substantially all of these reserves would impact the effective tax rate.

The Company's federal and state income tax returns for the tax years 2010 to 2012 remain open to examination. The Company's tax returns in the United Kingdom remain open to examination for the tax years 2006 to 2013, and tax returns in Germany remain open indefinitely.

As of December 31, 2013, the Company's 2008, 2009 and 2010 federal income tax returns are in appeals with the Internal Revenue service. The Company believes appropriate provisions have been made for any outstanding issues.