XML 38 R21.htm IDEA: XBRL DOCUMENT v3.25.1
Income Taxes
 3 Months Ended
Mar. 31, 2025
Income Taxes [Abstract]  
Income Taxes

(15) Income Taxes

 

United States

 

The Company may be subject to the United States of America Tax laws at a tax rate of 21%. No provision for the US federal income taxes has been made as the Company had no US taxable income for the first quarter ended March 31, 2025, and management believes that its earnings are permanently invested in the PRC.

 

PRC

 

Dongfang Paper and Baoding Shengde are PRC operating companies and are subject to PRC Enterprise Income Tax. Pursuant to the PRC New Enterprise Income Tax Law, Enterprise Income Tax is generally imposed at a statutory rate of 25%.

 

The provisions for income taxes for three months ended March 31, 2025 and 2024 were as follows:

 

   Three Months Ended 
   March 31, 
   2025   2024 
Provision for Income Taxes        
Current Tax Provision U.S.  $
-
   $36,793 
Current Tax Provision PRC   
-
    
-
 
Deferred Tax Provision PRC   
-
    
-
 
Total Income Tax Expenses (Benefits)  $
-
   $36,793 

 

In addition to the reversible future PRC income tax benefits stemming from the timing differences of items such as recognition of asset disposal gain or loss and asset depreciation, the Company was incorporated in the United States and incurred net operating losses of approximately $568,358 and $62,499 for U.S. income tax purposes for the years ended December 31, 2024 and 2023, respectively. The net operating loss carried forward may be available to reduce future years’ taxable income. These carry forwards would expire, if not utilized, during the period of 2030 through 2035. As of March 31, 2025, management believed that the realization of all the U.S. income tax benefits from these losses, which generally would generate a deferred tax asset if it can be expected to be utilized in the future, appears not more than likely due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, As of March 31, 2025 and December 31, 2024, the Company provided a 100% valuation allowance on the U.S. deferred tax asset benefit to reduce the total deferred tax asset to the amount realizable for the PRC income tax purposes. Management reviews this valuation allowance periodically and will make adjustments as warranted. A summary of the otherwise deductible (or taxable) deferred tax items is as follows:

 

   March 31,   December 31, 
   2025   2024 
Deferred tax assets (liabilities)        
Depreciation and amortization of property, plant and equipment  $18,901,983   $18,875,162 
Impairment of property, plant and equipment   602,995    602,139 
Impairment of inventory   181,788    181,530 
Provision for doubtful debts   446,698    446,064 
Miscellaneous   248,322    247,969 
Net operating loss carryover of PRC company   432,979    432,365 
(Gain) Loss on asset disposal   (63,213)   (63,123)
Total deferred tax assets   20,751,552    20,722,106 
Less: Valuation allowance   (20,751,552)   (20,722,106)
Total deferred tax assets, net  $
-
    
-
 

During the three months ended March 31, 2025 and 2024, the effective income tax rate was estimated by the Company to be 0% and 1%, respectively.

 

   Three Months Ended 
   March 31, 
   2025   2024 
PRC Statutory rate   25.0%   25.0%
Effect of different tax jurisdiction          
Effect of tax and book difference   (24.2)%   (3.4)%
Change in valuation allowance   (0.8)%   (22.6)%
           
Effective income tax rate   
-
    (1.0)%

 

As of March 31, 2025, except for the one-time transition tax under the 2017 TCJA which imposes a U.S. tax liability on all unrepatriated foreign E&Ps, the Company does not believe that its future dividend policy and the available U.S. tax deductions and net operating losses will cause the Company to recognize any other substantial current U.S. federal or state corporate income tax liability in the near future. Nor does it believe that the amount of the repatriation of the VIE’s earnings and profits for purposes of paying dividends will change the Company’s position that its PRC subsidiary Baoding Shengde and the VIE, Dongfang Paper are considered or are expected to be indefinitely reinvested offshore to support our future capacity expansion. If these earnings are repatriated to the U.S. resulting in U.S. taxable income in the future, or if it is determined that such earnings are to be remitted in the foreseeable future, additional tax provisions would be required.

 

The Company has adopted ASC Topic 740-10-05, Income Taxes. To date, the adoption of this interpretation has not impacted the Company’s financial position, results of operations, or cash flows. The Company performed self-assessment and the Company’s liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed, which in the PRC is usually 5 years. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of March 31, 2025 and December 31, 2024, management considered that the Company had no uncertain tax positions affecting its consolidated financial position and results of operations or cash flows, and will continue to evaluate for any uncertain position in future. There are no estimated interest costs and penalties provided in the Company’s consolidated financial statements for the three months ended March 31, 2025 and 2024, respectively. The Company’s tax positions related to open tax years are subject to examination by the relevant tax authorities and the major one is the China Tax Authority.