|9 Months Ended|
Sep. 30, 2019
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company does not expect to pay any significant federal, state, or foreign income taxes in 2019 as a result of the losses recorded during the three and nine months ended September 30, 2019 and the additional losses expected for the remainder of 2019 and cumulative net operating loss carryforwards. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As a result, as of September 30, 2019, the Company maintained a full valuation allowance for all deferred tax assets.
The Company recorded an income tax benefit for the three and nine months ended September 30, 2019 of $0.2 million resulting in a quarterly effective tax rate of 5.2% and an annual effective rate of 1.4%. The total income tax benefit is comprised of research and development tax credits recoverable, associated with Moleculin Australia Pty Ltd., (MAPL), a wholly owned subsidiary formed in June 2018, related to preclinical development in Australia for WP1732, an analog of WP1066. Aside from the Australia tax credit, the Company has recorded no income taxes for the three and nine months ended September 30, 2019 and 2018. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants and valuation allowances on the Company’s deferred tax assets. The Company estimates its annual effective tax rate at the end of each quarterly period. Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowance could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.
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