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

Income Tax (Tables)

12 Months Ended

Dec. 31, 2014

(In thousands)	2014			2013			2012
Income taxes at statutory rates (at a rate of 34% for all periods presented)	$	(8,922	)	$	(10,829	)	$	(7,152	)
Expenses not deducted for tax purposes		(452	)		(738	)		(1,212	)
Effect of tax rate changes on deferred tax assets and liabilities		(9	)		(744	)		—
Rate differential on foreign earnings		1,445			2,003			1,672
Reduction (increase) in benefit of operating losses		441			(10	)		15
Reduction in the benefit of other tax attributes		—			—			551
Investment tax credits		(357	)		(347	)		(485	)
Change in valuation allowance		7,854			10,538			6,324
Book to tax return adjustments		—			127			287
Other		—			—			—
Income tax expense	$	—		$	—		$	—

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

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

	2014			2013
Deferred tax assets:
Tax basis in excess of book value of assets	$	4,871		$	951
Non-capital loss carryforwards		76,403			72,115
Research and development deductions and credits		7,464			6,857
Stock options		3,163			2,578
Capital loss carryforward		—			—
Restructuring liability		(25	)		1,567
Other		110			70
Total deferred tax assets		91,986			84,138
Valuation allowance	$	(91,986	)	$	(84,138	)

A reconciliation of the unrecognized tax benefits of uncertain tax positions for the year ended December 31, 2014 is as follows (in thousands):

	Year ended
	December 31,
	2014		2013
Balance at January 1	$	2,007	$	1,967
Additions based on tax positions related to the current year		32		32
Additions based on tax positions related to prior years		—		8
Deductions based on tax positions related to the current year		—		—
Balance at December 31	$	2,039	$	2,007

Tax audits by their very nature are often complex and can require several years to complete.