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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Taxes [Abstract] |
Income Taxes | 13. Income Taxes Loss before provision for income taxes was distributed geographically for the years ended December 31, as follows (in thousands):
|  | 2013 |  |  | 2012 |  |  | 2011 |
Domestic |  | $ | (12,877 | ) |  | $ | (10,283 | ) |  | $ | (16,867 | )
Foreign |  |  | (94 | ) |  |  | 1,121 |  |  |  | (200 | )
Total |  | $ | (12,971 | ) |  | $ | (9,162 | ) |  | $ | (17,067 | )
The provision for income taxes is as follows for the years ended December 31 (in thousands):
|  | 2013 |  |  | 2012 |  |  | 2011 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | -- |  |  | $ | -- |
State |  |  | 2 |  |  |  | 2 |  |  |  | 2 |
Foreign |  |  | 107 |  |  |  | 123 |  |  |  | 76 |
Change in deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3,794 | ) |  |  | (3,653 | ) |  |  | (1,856 | )
Federal valuation allowance |  |  | 3,794 |  |  |  | 3,653 |  |  |  | 1,856 |
State |  |  | 129 |  |  |  | 453 |  |  |  | (206 | )
State valuation allowance |  |  | (129 | ) |  |  | (453 | ) |  |  | 206 |
Foreign |  |  | 111 |  |  |  | 276 |  |  |  | 122 |
Foreign valuation allowance |  |  | (111 | ) |  |  | (276 | ) |  |  | (122 | )
Total current |  | $ | 109 |  |  | $ | 125 |  |  | $ | 78 |
The differences between our effective income tax rate and the U.S. federal statutory federal income tax rate for the years ended December 31, are as follows:
|  | 2013 |  |  | 2012 |  |  | 2011 |
Amounts at statutory tax rates |  |  | 34 | % |  |  | 34 | % |  |  | 34 | %
Non-deductible loss on revaluation of embedded conversion features and extinguishment of convertible debt |  |  | -- |  |  |  | - |  |  |  | (29 | )%
Foreign losses taxed at different rates |  |  | -- |  |  |  | 1 | % |  |  | 2 | %
Stock-based compensation |  |  | (3 | )% |  |  | (7 | )% |  |  | -- |
Other |  |  | (1 | ) |  |  | -- |  |  |  | -- |
Total |  |  | 30 | % |  |  | 28 | % |  |  | 7 | %
Valuation allowance |  |  | (31 | )% |  |  | (29 | )% |  |  | (7 | )%
Effective tax rate |  |  | (1 | )% |  |  | (1 | )% |  |  | -- |
Significant components of the deferred tax asset balances at December 31 are as follows (in thousands):
|  | 2013 |  |  | 2012 |
Deferred tax assets: |  |  |  |  |  |
Accruals |  | $ | 1,519 |  |  | $ | 873 |
Stock compensation |  |  | 1,070 |  |  |  | 1,050 |
Net operating losses |  |  | 9,760 |  |  |  | 6,417 |
Total deferred tax assets |  | $ | 12,349 |  |  | $ | 8,340 |
Basis difference in fixed assets |  |  | (14 | ) |  |  | (38 | )
Valuation allowance |  |  | (12,335 | ) |  |  | (8,302 | )
Total net deferred tax assets |  | $ | -- |  |  | $ | -- |
Valuation allowances are recorded to offset certain deferred tax assets due to management’s uncertainty of realizing the benefits of these items. Management applies a full valuation allowance for the accumulated losses of Neonode Inc., and its subsidiaries, since it is not determinable using the “more likely than not” criteria that there will be any future benefit of our deferred tax assets. This is mainly due to our history of operating losses. Due to the reorganization, the Company believes that the U.S. net operating losses and credits would be subject to the provisions of Section 382 and therefore subject to strict limitations. The Company has not completed a study of the limitations and therefore has not included these loss carryforwards or credits in the analysis of the deferred tax assets. At December 31, 2013, the Company has federal, state and foreign net operating losses of $28.1 million, $9.3 million and $0, respectively. The federal loss carryforward begins to expire in 2029, the California loss carryforward begins to expire in 2019 and the foreign loss carryforward is indefinite. On December 9, 2008, Neonode AB filed for liquidation under the Swedish bankruptcy laws and effective with the filing we are no longer responsible for the liabilities and no longer have any ownership interest in the assets of Neonode AB, including any tax net operating loss carryforwards. Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating losses and tax credit carryforwards before utilization. As of December 31, 2013, the Company has not completed the determination of the amount to be limited under the provision. As of December 31, 2013, the Company did not recognize $526,000 and $26,000 of federal and state deferred tax assets relating to excess tax benefits for stock-based compensation deductions. Unrecognized deferred tax benefits will be accounted for as a credit to additional paid-in capital when realized through a reduction in income taxes payable. Effective January 1, 2007, we adopted the provisions of accounting guidance which includes a two-step approach to recognizing, de-recognizing and measuring uncertain tax positions accounted for in accordance with accounting guidance. A reconciliation of the unrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011 is as follows:
Balance at January 1, 2011 |  | $ | - |
Additions for tax positions of prior years |  |  | - |
Reductions for tax position of prior years |  |  | - |
Additions based on tax positions related to the current year |  |  | - |
Decreases - Settlements |  |  | - |
Reductions - Settlements |  |  | - |
Balance at December 31, 2011 |  | $ | - |
Balance at January 1, 2012 |  | $ | - |
Additions for tax positions of prior years |  |  | - |
Reductions for tax position of prior years |  |  | - |
Additions based on tax positions related to the current year |  |  | - |
Decreases - Settlements |  |  | - |
Reductions - Settlements |  |  | - |
Balance at December 31, 2012 |  | $ | - |
Balance at January 1, 2013 |  | $ | - |
Additions for tax positions of prior years |  |  | - |
Reductions for tax position of prior years |  |  | - |
Additions based on tax positions related to the current year |  |  | - |
Decreases - Settlements |  |  | - |
Reductions - Settlements |  |  | - |
Balance at December 31, 2013 |  | $ | - |
We adopted a policy to classify accrued interest and penalties as part of the accrued tax liability in the provision for income taxes. For the years ended December 31, 2013, 2012 and 2011 we did not recognize any interest or penalties related to unrecognized tax benefits. Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2013 and 2012, we had no accrued interest and penalties related to uncertain tax matters. As of December 31, 2013, we had no uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations. We do not anticipate the adjustments would result in a material change to our financial position. Payments related to the license agreement with Sony Corporation are net of 10% income tax withholding as required by the Japanese government under the Sweden and Japan international tax treaty (“Tax Treaty”). The amounts withheld may be used to offset future payables for income tax in Sweden. In the years ended December 21, 2013, 2012 and 2011, $42,000, $123,000 and $78,000 was withheld, respectively. Any unused taxes withheld under the Tax Treaty expire five years after the initial withholding date. We file income tax returns in the U.S. federal jurisdiction, California and Sweden. The 1998 through 2013 tax years are open and may be subject to potential examination in one or more jurisdictions. We are not currently under any federal, state or foreign income tax examinations.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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