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Deferred Tax, Net

3 Months Ended

Mar. 31, 2024

7. DEFERRED TAX, NET

Deferred tax assets resulted from asset impairment loss which was temporarily non-tax deductible for tax purposes but expensed in accordance with US GAAP; interest income in sales-type leases which was recognized as income for tax purposes but not for book purpose as it did not meet revenue recognition in accordance with US GAAP; accrued employee social insurance that can be deducted for tax purposes in the future, and the difference between tax and accounting basis of cost of fixed assets which was capitalized for tax purposes and expensed as part of cost of systems in accordance with US GAAP. Deferred tax liability arose from the difference between tax and accounting basis of net investment in sales-type leases.

As of March 31, 2024 and December 31, 2023, deferred tax assets consisted of the following:

	2024			2023
Accrued expenses	$	614,269		$	615,336
Write-off Erdos TCH net investment in sales-type leases *		4,056,219			4,063,263
Impairment loss of Xi’an TCH’s investment into the HYREF fund		2,642,706			2,647,296
US NOL		1,086,706			1,086,706
PRC NOL		290,493			8,355,472
Total deferred tax assets		8,690,393			16,768,073
Less: valuation allowance for deferred tax assets		(8,690,393	)		(16,768,073	)
Deferred tax assets, net	$	-		$	-

This represents the tax basis of Erdos TCH investment in sales type leases, which was written off under US GAAP upon modification of lease terms, which made the lease payments contingent upon generation of electricity.