Achieve Life Sciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Tax (Tables)

Income Tax (Tables)

12 Months Ended

Dec. 31, 2018

Reconciliation of Income Tax Attributable to Operations

Income tax expense consisted of the following (in thousands):

(In thousands)	2018			2017			2016
Income taxes at statutory rates (at a rate of 21% for 2018 and 34% for 2017 and 2016)	$	(2,664	)	$	(4,636	)	$	(504	)
Expenses not deducted for tax purposes		70			(174	)		—
Effect of tax rate changes on deferred tax assets and liabilities		(1,416	)		3,158			—
Rate differential on foreign earnings		(165	)		314			—
Reduction in benefit of operating losses		—			—			—
Reduction in the benefit of other tax attributes		—			—			—
Investment tax credits		—			—			—
Change in valuation allowance		4,182			(1,683	)		—
Book to tax return adjustments		20			—			—
Other		(27	)		(14	)		—
Income tax expense	$	—		$	(3,035	)	$	(504	)

Summary of Investment Tax Credits and Non-Capital Losses and Net Operating Losses

The investment tax credits and non-capital losses and net operating losses for income tax purposes expire as follows (in thousands):

			US		Canadian			UK
	Investment		Net Operating		Non-capital			Net Operating
	Tax Credits		Losses		Losses			Losses
2022		—		—		—			—
2023		—		—		—			—
2024		—		—		—			—
2025		—		—		—			—
2026		244		—		7,364			—
2027		71		—		4,949			—
2028		148		—		8,020			—
2029		317		9		(9	)		33
2030		346		5		6,288			20
2031		486		17		12,121			34
2032		363		43		17,278			41
2033		193		2		23,240			53
2034		215		3		17,077			45
2035		122		654		3,112			27
2036		79		611		16,664			56
2037		19		8,763		4,254			633
2038		52		7,491		2,937			887
	$	2,655	$	17,598	$	123,295		$	1,829

Significant Components of Company's Deferred Tax Assets and Deferred Tax Liabilities

Significant components of our deferred tax assets as of December 31 are shown below (in thousands):

	2018			2017
Deferred tax assets
Tax basis in excess of book value of assets	$	886		$	850
Non-capital loss carryforwards		37,332			33,524
Research and development deductions and credits		5,707			5,506
Stock options		171			51
§59(e) Capitalized R&D expenses		3,334			3,252
Accrued expenses		—			—
Other		170			246
Total deferred tax assets		47,600			43,429
Valuation allowance		(47,123	)		(42,914	)
Net deferred assets		477			515
Deferred tax liabilities
Intangible assets		(474	)		(513	)
Other		(3	)		(2	)
Total deferred tax liabilities		(477	)		(515	)

Net deferred tax assets		—			—

Reconciliation of Unrecognized Tax Benefits of Uncertain Tax Positions

A reconciliation of the unrecognized tax benefits of uncertain tax positions for the year ended December 31, 2018 is as follows (in thousands):

	Year ended
	December 31,
	2018			2017		2016
Balance at January 1	$	715		$	715	$	699
Additions based on tax positions related to the current year		6			—		16
Deductions based on tax positions related to prior years		(4	)		—		—
Balance at December 31	$	717		$	715	$	715

Summary of Years Open to Examination Under Different Jurisdiction

We are subject to taxes in Canada, the UK and the U.S. until the applicable statute of limitations expires. Tax audits by their very nature are often complex and can require several years to complete.

Tax		Years open to
Jurisdiction		examination
Canada		2010 to 2018
United Kingdom		2011 to 2018
US		2010 to 2018