Kodiak Sciences Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 120 The tax effects of temporary differences that give rise to significant components of the deferred tax assets are as follows (in thousands): December 31, 2018 December 31, 2017 December 31, 2016 Deferred tax assets: Net operating loss carryforwards......................................................... $ 11,044 $ 11,270 $ 7,022 Intangible assets................................................................................... 7,588 618 783 Research and development tax credits................................................. 1,559 788 235 Accruals............................................................................................... 700 393 172 Stock-based compensation .................................................................. 394 — — Property and equipment....................................................................... 109 97 88 Other .................................................................................................... — 26 65 Total gross deferred tax asset......................................................... 21,394 13,192 8,365 Valuation allowance....................................................................... (21,394) (13,192) (8,365) Net deferred tax assets ................................................................... $ — $ — $ — The Company has recorded a full valuation allowance against its net deferred tax assets due to the uncertainty as to whether such assets will be realized. The net change in the total valuation allowance for the years ended December 31, 2018, 2017 and 2016 was an increase of approximately $8.2 million, $4.8 million and $6.2 million, respectively. On December 22, 2017, H.R. 1 (“Tax Act”) was enacted and included broad tax reforms. The Tax Act reduced the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The rate change resulted in a $2.5 million reduction in the Company’s deferred tax assets as of December 31, 2017 with an offsetting change in the valuation allowance. The Tax Act also imposed a deemed repatriation of foreign earnings of subsidiaries; Kodiak Sciences GmbH is considered an E&P deficit corporation for the purposes of this provision and thus no income inclusion was required. The Company has elected to treat taxes on Global Intangible Low Tax Income (“GILTI”) as period costs starting in 2018. The SEC released SAB 118 on December 22, 2017 to provide guidance in the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the tax reform. The Company had no adjustments related to changes in interpretation of tax reform since December 31, 2017. NOLs and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed a Section 382 study through December 31, 2018 which concluded no such ownership change had occurred through December 31, 2018. As of December 31, 2018, the Company has $21.9 million of federal and $71.3 million of state net operating loss available to offset future taxable income. The federal net operating loss carryforwards begin to expire in 2035 and the state net operating loss carryforwards begin to expire in 2035, if not utilized. As of December 31, 2018, the Company also had federal and state research and development credit carryforwards of $1.2 million and $0.7 million, respectively. The federal research and development credit carryforwards expire beginning 2035. The California tax credit can be carried forward indefinitely.