XML 33 R20.htm IDEA: XBRL DOCUMENT v3.20.2

Income Tax

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAX

14. 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 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. All of the Company’s Chinese subsidiaries’ effective income tax rate for 2019 and 2018 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, CREG is taxed in the US and, as of March 31, 2020, had net operating loss (“NOL”) carry forwards for income taxes of $1.27 million; for federal income tax purposes, the NOL arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable income, and may be carried forward indefinitely. The 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 recently issued Coronavirus Aid, Relief and Economic Security Act (the CARES Act or the Act), provides four relief provisions for corporate taxpayers as follows:

1. Five-year net operating loss (NOL) carryback provision: the Act allows for the carryback of losses arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year of the loss.

2. Fiscal year NOL carryback fix from the Tax Cuts and Jobs Act (TCJA) of 2017: the Act corrects the language to provide fiscal year taxpayers who had NOLs arising in years that began prior to December 31, 2017 and ended after December 31, 2017 with the ability to carry back those NOLs.

3. Deferral of 80% income limitation on post-2017 NOLs to 2021: the Act suspends this 80% limitation for taxable years beginning before January 1, 2021, and instead allows the full offset of taxable income. For tax years beginning after December 31, 2020, the Act reinstates the 80% limitation.

4. Immediate Alternative Minimum Tax (“AMT”) tax credit refunds: the Act accelerates availability of AMT credits. The full remaining refundable AMT credit amount will be available for a corporation’s first taxable year beginning in 2019. Alternatively, a corporation may elect to use 100% of its AMT credits for its first taxable year beginning in 2018. 

As of March 31, 2020, the Company’s PRC subsidiaries had $65.35 million NOL that can be carried forward to offset future taxable income for five years from the year the loss is incurred. The NOL was mostly from Zhonghong, Zhonghong has not yet generated any sales yet; accordingly, the Company recorded a 100% deferred tax valuation allowance for PRC NOL.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended March 31, 2020 and 2019, respectively:

		2020				2019
U.S. statutory rates			(21.0	)%			(21.0	)%
Tax rate difference – current provision			(2.3	)%			(3.4	)%
Reversal of temporary difference due to disposal of Shenqiu			-	%			(52.9	)%
Permanent differences			4.0	%			4.3	%
Other			-	%			(0.7	)%
Utilization of NOL							(1.1	)%
Valuation allowance on PRC NOL			14.7	%			19.6	%
Valuation allowance on US NOL			4.6	%			-	%
Tax (benefit) per financial statements			-	%			(55.2	)%

The provision for income tax expense for the three months ended March 31, 2020 and 2019 consisted of the following:

		2020				2019
Income tax expense  – current		$	-			$	139,743
Income tax benefit – deferred			-				(2,530,614	)
Total income tax benefit		$	-			$	(2,390,871	)

X

- References

No definition available.

+ Details

Name:	us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix:	us-gaap_
Data Type:	xbrli:stringItemType
Balance Type:	na
Period Type:	duration

X

- 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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI http://asc.fasb.org/topic&trid=2144680

+ Details

Name:	us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix:	us-gaap_
Data Type:	nonnum:textBlockItemType
Balance Type:	na
Period Type:	duration