|12 Months Ended|
Dec. 31, 2018
|Income Tax Disclosure [Abstract]|
11. INCOME TAX
[a] On August 2, 2017, OncoGenex completed a reverse takeover with Achieve. OncoGenex changed its name to Achieve Life Sciences, Inc. We are a Delaware incorporated company subject to blended US Federal and state statutory rates for December 31, 2018, 2017 and 2016 of 21%, 34% and 34%, respectively. For the purposes of estimating the tax rate in effect at the time that deferred tax assets and liabilities are expected to reverse, management uses the furthest out available future tax rate in the applicable jurisdictions.
Income tax expense consisted of the following (in thousands):
[b] At December 31, 2018, we have investment tax credits of $2.6 million (2017—$2.6 million) available to reduce future Canadian income taxes otherwise payable. We also have non-capital loss carryforwards of $123.3 million (2017—$120.4 million) available to offset future taxable income in Canada, UK net operating loss carryforwards of $1.8 million (2017—$0.8 million) to offset future taxable income in the UK and federal net operating loss carryforwards of $17.6 million (2017—$9.9 million) to offset future taxable income in the United States.
The investment tax credits and non-capital losses and net operating losses for income tax purposes expire as follows (in thousands):
In addition, we have unclaimed tax deductions of approximately $14.5 million related to scientific research and experimental development expenditures available to carry forward indefinitely to reduce Canadian taxable income of future years. We also have research and development tax credits of $0.1 million available to reduce future taxes payable in the United States. The research and development tax credits expire in 2038.
[c] Significant components of our deferred tax assets as of December 31 are shown below (in thousands):
The potential income tax benefits relating to these deferred tax assets have not been recognized in the accounts as their realization did not meet the requirements of “more likely than not” under the liability method of tax allocation. Accordingly, a valuation allowance has been recorded and no net deferred tax assets have been recognized in all jurisdictions as at December 31, 2018.
[d] Under ASC 740, the benefit of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of the benefit of an uncertain tax position may be recognized if the position has less than a 50% likelihood of being sustained.
A reconciliation of the unrecognized tax benefits of uncertain tax positions for the year ended December 31, 2018 is as follows (in thousands):
As of December 31, 2018, unrecognized benefits of approximately $0.7 million, if recognized, would affect our effective tax rate, and would reduce our deferred tax assets.
Our accounting policy is to treat interest and penalties relating to unrecognized tax benefits as a component of income taxes. As of December 31, 2018 and December 31, 2017 we had no accrued interest and penalties related to income taxes.
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.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to,
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://fasb.org/us-gaap/role/ref/legacyRef