|12 Months Ended|
Dec. 31, 2021
|Income Tax Disclosure [Abstract]|
NOTE 10 – INCOME TAXES
The Company is governed by the Income Tax Law of the PRC and the U.S. Internal Revenue Code of 1986, as amended. Under the Income Tax Laws of PRC, Chinese companies are generally subject to an income tax at an effective rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. The Company has a cumulative deficit from its foreign subsidiaries of $2,591,758 as of December 31, 2021, which is included in the consolidated accumulated deficit.
The Company’s loss before income taxes includes the following components:
Components of income taxes expense (benefit) consisted of the following:
The table below summarizes the differences between the U.S. statutory rate and the Company’s effective tax rate for the years ended December 31, 2021 and 2020:
For the years ended December 31, 2021 and 2020, the Company did not incur any income taxes expense since it did not generate any taxable income in those periods. The Company’s foreign entities did not pay any income taxes during the years ended December 31, 2021 and 2020. The Company’s components of deferred taxes as of December 31, 2021 and 2020 were as follows:
As of December 31, 2021 and 2020, the Company’s both federal and state net operating loss carryforwards amounted to $38,420,422 and $30,557,167, respectively. As of December 31, 2021, the Company has $35,932,868 of U.S. federal net operating loss carryovers that have no expiration date, and $2,487,554 of the federal net operating loss and state net operating loss carry-forwards begin to expire in 2034.
As of December 31, 2021, the Company had net operating loss carryforwards in China of $2,566,087 that begin to expire in 2022.
Additionally, as of December 31, 2021, $61,847 of the future utilization of the net operating loss carryforward to offset future taxable income is subject to special tax rules which may limit their usage under IRS Section 382 (Change of Ownership) and possibly the Separate Return Limitation Year (“SRLY”) rules.
A full valuation allowance has been provided against the Company’s deferred tax assets at December 31, 2021 as the Company believes it is more likely than not that sufficient taxable income will not be generated to realize these temporary differences.
The Company has been notified and assessed an IRS Section 6038 penalty of $10,000 for failure to file a foreign entity tax disclosure. The Company has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal. There is no assurance such appeal will be successful.
The Company has not been audited by any jurisdiction since its inception. The Company is open for audit by the U.S. Internal Revenue Service and U.S. state tax jurisdictions from 2018 to 2021, and open for audit by the Chinese Ministry of Finance from 2017 to 2021.
There were no material uncertain tax positions as of December 31, 2021 and 2020. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense, if any. The Company does not have any significant uncertain tax positions or events leading to uncertainty in a tax position.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef