13. INCOME TAXES

For the years ended December 31, 2022 and 2020, we did not recognize provision for income taxes due to our pre-tax book losses and a full valuation allowance was recorded against our deferred tax assets. For the year ended December 31, 2021, we recorded provision for income tax of $0.6 million. This provision for income tax was related to the state tax liability primarily due to revenue recognized for the Lilly Agreement. We did not have federal income taxes due to the sufficient NOL carryforwards that were generated prior to the enactment of the Tax Act, as well as significant research and development credit carryforwards. We continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):

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The reconciliation of the statutory federal income tax rate to the effective tax rate was as follows:

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In general, under Section 382 of the Internal Revenue Code (Section 382), a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its pre-change NOL carryovers and tax credits to offset future taxable income. Our existing NOL carryforwards and tax credits are subject to limitations arising from ownership changes which occurred in previous periods. We finalized our analysis of potential ownership changes and concluded our Section 382 owner shift analysis during the year ended December 31, 2012. We have updated our NOL carryforwards to reflect the results of the Section 382 owner shift analysis as of December 31, 2022. We did not experience any significant changes in ownership in the periods presented. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 and result in additional limitations.

As of December 31, 2022, we had NOL carryforwards for federal income tax purposes of approximately $976.4 million. Of the federal NOL carryforward, $837.9 million, which expire beginning in the year 2025 and the remaining NOL carryforwards can be carried forward indefinitely, subject to annual limitation of 80% of taxable income. We also had state NOL carryforwards of approximately $379.4 million, which expire beginning in the year 2028.

We have general business credits of approximately $52.4 million, which will expire beginning in 2023, if not utilized, and is consisted of research and development credits and orphan drug credits. We also have state research and development tax credits of approximately $31.3 million, which have no expiration date.

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, our deferred tax assets have been fully offset by valuation allowance considering our cumulative losses in prior years and forecasted losses in the future. The valuation allowance increased by approximately $15.3 million, $6.6 million and $4.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The following table summarizes the activity related to our gross unrecognized tax benefits (in thousands):

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During the years ended December 2022, 2021 and 2020, the amount of unrecognized tax benefits increased due to additional research and development and orphan drug credits generated during those years. The reversal of the uncertain tax benefits would not affect our effective tax rate to the extent that we continue to maintain a full valuation allowance against our deferred tax assets.

We are subject to federal income tax and various state taxes. Because of NOL and research credit carryovers, substantially all of our tax years remain open to examination.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We currently have no tax positions that would be subject to interest or penalties.