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Income Tax | 12 Months Ended
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Dec. 31, 2017
Income Tax [Abstract] |
INCOME TAX | 16. INCOME TAX The Company’s Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning privately-run enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriate tax adjustments. Under the Chinese tax law, the tax treatment of finance and sales-type leases is similar to US GAAP. However, the local tax bureau continues to treat CREG sales-type leases as operating leases. Accordingly, the Company recorded deferred income taxes. The Company’s subsidiaries generate all of their income from their PRC operations. Yinghua and Shanghai TCH’s effective income tax rate for 2017 and 2016 was 25%. During 2013, Xi’an TCH was re-approved for high tech enterprise status and enjoyed 15% preferential income tax rate for three years effective January 1, 2013 through December 31, 2015, and is subject to 25% income tax rate in 2017 and 2016 due to the renewal of preferential income tax rate was not approved by the tax authority. Huahong, Zhonghong and Erdos TCH’s effective income tax rate for 2017 and 2016 was 25%. Yinghua, Shanghai TCH, Xi’an TCH, Huahong, Zhonghong and Erdos TCH file separate income tax returns. There is no income tax for companies domiciled in the Cayman Islands. Accordingly, the Company’s CFS do not present any income tax provisions related to Cayman Islands tax jurisdiction, where Sifang Holding is domiciled. The US parent company, China Recycling Energy Corporation, is taxed in the US and, as of December 31, 2017, had net operating loss (“NOL”) carry forwards for income taxes of $14.32 million, which may be available to reduce future years’ taxable income as NOLs can be carried forward up to 20 years from the year the loss is incurred. Our management believes the realization of benefits from these losses may be uncertain due to the US parent company’s continuing operating losses. Accordingly, a 100% deferred tax asset valuation allowance was provided. The following table reconciles the US statutory rates to the Company’s effective tax rate for the years ended December 31, 2017 and 2016, respectively:
|  | 2017 |  |  | 2016 |
U.S. statutory rates |  |  | (34.0 | )% |  |  | 34.0 | %
Tax rate difference – current provision |  |  | 7.3 | % |  |  | (16.9 | )%
Other |  |  | (- | )% |  |  | 0.7 | %
Tax rate change for future deferred tax items |  |  | 11.2 | % |  |  | (10.1 | )%
Prior periods income tax adjustment per income tax return filed |  |  | (1.5 | )% |  |  | (2.8 | )%
Section 965 one-time transition tax |  |  | 747.3 | % |  |  |  |
Permanent differences |  |  | 0.4 | % |  |  | (165.9 | )%
Valuation allowance on PRC NOL |  |  | 84.2 | % |  |  | 0.1 | %
Valuation allowance on US NOL |  |  | 6.0 | % |  |  | 30.0 | %
Tax (benefit) per financial statements |  |  | 820.9 | % |  |  | (130.9 | )%
The provision for income taxes expense for years ended December 31, 2017 and 2016 consisted of the following:
|  | 2017 |  |  | 2016 |
Income tax expense – current |  | $ | 9,101,025 |  |  | $ | 1,899,005 |
Income tax benefit – deferred |  |  | (788,276 | ) |  |  | (2,737,993 | )
Total income tax expense (benefit) |  | $ | 8,312,749 |  |  | $ | (838,988 | )
On December 22, 2017, the Tax Cut and Jobs Act (“Tax Act”) was signed into law in the United States. The Tax Act introduced a broad range of tax reform measures that significantly change the federal income tax laws. The provisions of the Tax Act that may have significant impact on the Company include the permanent reduction of the corporate income tax rate from 35% to 21% effective for tax years including or commencing on January 1, 2018, a one-time transition tax on post-1986 foreign unremitted earnings, the provision for Global Intangible Low Tax Income (“GILTI”), the deduction for Foreign Derived Intangible Income (“FDII”), the repeal of corporate alternative minimum tax, the limitation of various business deductions, and the modification of the maximum deduction of net operating loss with no carryback but indefinite carryforward provision. Many provisions in the Tax Act are generally effective in tax years beginning after December 31, 2017. At December 31, 2017, the Company reflected the provisional income tax effects of the Tax Act under Accounting Standards Codification Topic 740, Income Taxes. The Company has recorded a provisional tax expense in the Statement of Operations of approximately $8.31 million, comprised of approximately $7.61 million tax expense from recording the estimated one-time transition tax on post-1986 foreign unremitted earnings. The Company continues to examine the impact of certain provisions of the Tax Act that will become applicable in calendar year 2018 related to Base Erosion and Anti Abuse Tax (“BEAT”), GILTI, deduction for FDII, and other provisions that could affect its effective tax rate in the future. The Company will record the income tax effects of GILTI and other provisions of the Tax Act as incurred beginning in calendar year 2018. Also, because there may be additional state income tax implications, the Company will continue to monitor changes in state and local tax laws to determine if state and local taxing authorities intend to conform or deviate from changes to U.S. federal tax legislation as a result of the Tax Act. The prospects of supplemental legislation or regulatory processes to address questions that arise because of the Tax Act, or evolving technical interpretations of the tax law, may cause the final impact from the Tax Act to differ from the provisionally recorded amounts. The Company expects to complete its analysis within the measurement period allowed by Staff Accounting Bulletin (“SAB”) No.118, no later than the fourth quarter of calendar year 2018. China maintains a “closed” capital account, meaning companies, banks, and individuals cannot move money in or out of the country except in accordance with strict rules. The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) regulate the flow of foreign exchange in and out of the country. For inward or outward foreign currency transactions, the Company needs to make a timely declaration to the bank with sufficient supporting documents to declare the nature of the business transaction. Consolidated foreign pretax earnings (loss) approximated $(0.83) million loss and $1.21 million income for the years ended December 31, 2017 and 2016, respectively. Pretax earnings of a foreign subsidiary are subject to US taxation when repatriated. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $99.37 million as of December 31, 2017, of which all was subject to the one-time transition tax on foreign unremitted earnings required by the Tax Act or has otherwise been previously subject to U.S. tax. Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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