(7) Income Taxes

Tax positions must meet a “more likely than not” recognition threshold at the effective date to be recognized. At December 31, 2018 and 2017, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2018 and 2017. Our tax returns for fiscal years 2015, 2016 and 2017 are open to examination.

We did not record an income tax benefit or provision for the years ended December 31, 2018 and 2017.

Significant items making up the deferred tax assets and deferred tax liabilities as of December 31, 2018 and 2017 are as follows:

A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. Accordingly, a valuation allowance was established in 2018 and 2017 for the full amount of our deferred tax assets due to the uncertainty of realization. We believe based on our projection of future taxable operating income for the foreseeable future, it is more likely than not that we will not be able to realize the benefit of the deferred tax asset at December 31, 2018.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law by President Trump. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. Under ASC 740, the tax effects of changes in tax laws must be recognized in the period in which the law was enacted. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. The Company re-measured its deferred tax assets and liabilities at the 21% federal corporate tax rate. The remeasurement resulted in no change in the Company’s recorded tax provision, as the remeasurement of the company’s deferred tax assets and liabilities resulted in a reduction of approximately $5,843,000 which was fully offset by a change in the Company’s valuation allowance.

We have net operating loss carry-forwards for federal income tax purposes of approximately $50,997,000 as of December 31, 2018. Included in these numbers are loss carry-forwards that were obtained through the acquisition of BioSeq, Inc. and are subject to Section 382 NOL limitations. These net operating loss carry-forwards expire at various dates from 2018 through 2038. Under the Tax Reform Act, NOL’s generated after December 31, 2017 can offset only 80% of a corporation’s taxable income in any year. With limited exceptions, NOL’s generated after 2017 cannot be carried back, but they can be carried forward indefinitely.

We have net operating loss carry-forwards for state income tax purposes of approximately $44,406,000 at December 31, 2018. These net operating loss carry-forwards expire at various dates from 2030 through 2037.

We have research and development tax credit carry-forwards for federal income tax purposes of approximately $1,138,000 as of December 31, 2018 and research and development tax credit carry-forwards for state income tax purposes of approximately $487,000 as of December 31, 2018. The federal credit carry-forwards expire at various dates from 2019 through 2039. The state credit carry-forwards expire at various dates from 2023 through 2034.

In addition, we have federal alternative minimum tax credit carry-forwards for federal income tax purposes of approximately $217,000 as of December 31, 2018. These credits do not expire.

Our effective income tax (benefit) provision rate was different than the statutory federal income tax (benefit) provision rate as follows for the years ended December 31: