INCOME TAXES

9 Months Ended

Sep. 30, 2013

INCOME TAXES

INCOME TAXES

NOTE 10 - INCOME TAXES

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates are recognized in operations in the period that includes the enactment date.

Undistributed earnings of Helpson, the Company’s foreign subsidiary, since its acquisition, amounted to approximately $104.1 million at September 30, 2013. Those earnings, as well as the investment in Helpson of approximately $23.3 million, are considered to be indefinitely reinvested and, accordingly, no U.S. federal or state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. federal and state income taxes (net of an adjustment for foreign tax credits) and withholding taxes payable to the PRC. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits may be available to reduce a portion of the U.S. tax liability.

Under current tax law in the PRC, the Company is and will be subject to the following enterprise income tax rates: 

	Enterprise Income
Year	Tax Rate
2013	15%
2014	15%
2015	15%
2016	15%
Thereafter	25%

The provision for income taxes consisted of the following:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Current	$	-		$	256,421		$	-		$	1,215,568
Deferred		(472,512	)		(11,969	)		(1,129,506	)		(67,603	)
Total income tax (benefit) expense	$	(472,512	)	$	244,452		$	(1,129,506	)	$	1,147,965

The Company has net operating loss carryforwards for PRC tax purposes of approximately $2,880,000. The related deferred tax asset of $437,330 does not meet the more-likely-than-not criteria of realization and the Company has provided a valuation allowance in this same amount against the full amount of the deferred tax asset.

The Company has also incurred various other taxes, comprised primarily of business taxes, value-added taxes, urban construction taxes, education surcharges and others. Any unpaid amounts are reflected on the balance sheets as accrued taxes payable.