INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11         INCOME TAXES

U.S.FEDERAL CORPORATE INCOME TAX

Temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and tax credit and operating loss carryforwards that create deferred tax assets and liabilities are as follows:

	2013		2012
Tax Operating Loss Carryforward - USA	$	6,830,000	$	4,665,000
Accelerated Depreciation – USA		(61,300)		(57,900)
Valuation Allowance - USA		(6,768,700)		(4,607,100)
	$	-	$	-

The valuation allowance increased approximately $2,100,000, primarily as a result of the increased net operating losses of the operation in the USA.

As of December 31, 2013, the Company has federal net operating loss carryforwards for income tax purposes of approximately $17,000,000 which will begin to expire in 2025. The Company also has Arizona, California and Minnesota net operating loss carryforwards for income tax purposes of approximately $9,624,000, $1,890,000 and $105,000 which will begin to expire in 2013. These carryforwards have been utilized in the determination of the deferred income taxes for financial statement purposes. The following table accounts for federal net operating loss carryforwards only.

Year Ending	Net Operating		Year of
December 31,	Loss:		Expiration:
2013	$	5,600,000	2033
2012		2,850,000	2032
2011		2,427,000	2031
2010		1,799,000	2030
2009		1,750,000	2029
2008		1,308,000	2028
2007		429,000	2027
2006		476,000	2026
2005		414,000	2025
	$	17,053,000

The tax provision differs from the expense that would result from applying Federal statutory rates to income before income taxes due to the effect of state income taxes and because certain expenses are deducted for financial reporting that are not deductible for tax purposes.

	2013		2012
Tax Benefit of 34%	$	(2,300,000)	$	(1,148,400)
Increase (Decrease) in Income Taxes Resulting from:
State Income Tax Benefit, Net of Federal Tax		(245,631)		(134,458)
Nondeductible Expenses		1,126,943		175,851
Valuation Allowance		1,418,688		1,107,007
Total	$	-	$	-

TAIWAN (REPUBLIC OF CHINA) CORPORATE TAX

Sole-Vision Technologies, Inc. is a subsidiary of the Company which is operating in Taiwan as a profit-seeking enterprise. Its applicable corporate income tax rate is 17%. In addition, Taiwan’s corporate tax system allows the government to levy a 10% profit retention tax on undistributed earnings for the prior year. This tax will not be provided if the company distributed the earnings before the ended of the fiscal year.

According to the Taiwan corporate income tax (“TCIT”) reporting system, the TCIT sales cut-off base is concurrent with the business tax classified as value-added type (“VAT”) which will be reported to the Ministry of Finance (“MOF”) on a bi-monthly basis. Since the VAT and TCIT are accounted for on a VAT tax basis that recorded all sales on business tax on a VAT tax reporting system, the Company is bound to report the TCIT according to the MOF prescribed tax reporting rules. Under the VAT tax reporting system, sales cut-off did not take the accrual base but rather on a VAT taxable reporting basis. Therefore, when the company adopted US GAAP on accrual basis, the sales cut-off TCIT timing difference which derived from the VAT reporting system will create a temporary sales cut-off timing difference and this difference is reflected in the deferred tax assets or liabilities calculations on the income tax estimation reported in the Form 10-K. 

Temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and VAT tax reporting system and operating loss carryforwards that create deferred tax assets and liabilities are as follows:

		December 31, 2013
		US Dollar
Tax Operating Income – Taiwan	$	(21,267)
Temporary Difference:
VAT reporting system – Sales cut-off		(63,123)
VAT reporting system – Cost & expenses cut-off		(87,192)
Provision of Bad Debt		(109,106)
Research & Development		(183,387)
Permanent Difference:
Non-deductible expenses		(4,397)
Adjusted Net Loss Before Tax – Taiwan	$	(468,472)

Income tax expense (benefits) for the years ended December 31, 2013 and 2012 is summarized as followings: 

		2013	2012
Current:
Provision for Federal Income Tax (34%)	$		$	—
Provision for TCIT (17%)				6,007
Provision for Undistributed Earnings Tax (10%)				—
Increase (Decrease) in Income Taxes Resulting from:
Pre-acquisition TCIT				—
Temporary Difference		1,580		(88,509)
Income Tax Expenses (Benefit)	$	1,580	$	(82,502)

RECONCILIATION OF DEFERRED TAX ASSET/(LIABILITIES)

Deferred Tax Assets	2013
Balance at Beginning of Year	$	94,785
Temporary Difference		(1,580)
Foreign currency difference		66,993
Balance at End of Year	$	160,198