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Income Tax | 9 Months Ended
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Sep. 30, 2022
Income Tax Disclosure [Abstract] |
INCOME TAX | 13. 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 the Company’s 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 2022 and 2021 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, SPC is taxed in the US and, as of September 30, 2022, had net operating loss (“NOL”) carry forwards for income taxes of $2.57 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. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. Management believes the realization of benefits from these losses uncertain due to the US parent company’s continuing operating losses. Accordingly, a 100% deferred tax asset valuation allowance was provided. As of September 30, 2022, the Company’s PRC subsidiaries had $36.60 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 Erdos TCH and Zhonghong. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets due to the recurring losses from operations of these entities, accordingly, the Company recorded a 100% deferred tax valuation allowance for the PRC NOL. The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the nine months ended September 30, 2022 and 2021:
|  | 2022 |  |  | 2021 |
U.S. statutory rates expense (benefit) |  |  | (21.0 | )% |  |  | 21.0 | %
Tax rate difference – current provision |  |  | 0.5 | % |  |  | 10.1 | %
Prior year income tax adjustment in current year |  |  |  |  |  |  | (8.8 | )%
Permanent differences |  |  | 10.0 | % |  |  | 16.1 | %
Change in valuation allowance |  |  | 13.9 | % |  |  | (45.1 | )%
Tax expense (benefit) per financial statements |  |  | 3.4 | % |  |  | (6.7 | )%
The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended September 30, 2022 and 2021:
|  | 2022 |  |  | 2021 |
U.S. statutory rates expense (benefit) |  |  | (21.0 | )% |  |  | (21.0 | )%
Tax rate difference – current provision |  |  | 0.5 | % |  |  | 0.3 | %
Permanent differences |  |  | 12.6 | % |  |  | 35.7 | %
Change in valuation allowance |  |  | 10.9 | % |  |  | (13.0 | )%
Tax expense (benefit) per financial statements |  |  | 3.0 | % |  |  | 2.0 | %
The provision for income tax expense (benefit) for the nine months ended September 30, 2022 and 2021 consisted of the following:
|  | 2022 |  |  | 2021 |
Income tax expense (benefit) – current |  | $ | 36,511 |  |  | $ | (87,051 | )
Income tax expense – deferred |  |  | - |  |  |  | - |
Total income tax expense (benefit) |  | $ | 36,511 |  |  | $ | (87,051 | )
The provision for income tax expense (benefit) for the three months ended September 30, 2022 and 2021 consisted of the following:
|  | 2022 |  |  | 2021 |
Income tax expense– current |  | $ | 12,954 |  |  | $ | 10,902 |
Income tax expense – deferred |  |  | - |  |  |  | - |
Total income tax expense |  | $ | 12,954 |  |  | $ | 10,092 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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