Income Taxes

3 Months Ended

Sep. 30, 2011

Income Taxes

Income Tax Disclosure [Text Block]

NOTE 10.  INCOME TAXES

PRC Tax

The Company’s two operating subsidiaries, Harbin Yifeng and Yifeng Zhiye, are both registered and operate in Harbin, China. They are governed by the Income Tax Law of the People’s Republic of China concerning private-run enterprises, which are subject to tax at a statutory rate of 25%.  Management anticipates that substantially all of the profits generated by the Company’s subsidiaries will be retained in the PRC and not repatriated, except for transfers to the U.S. to pay administrative expenses of the parent corporation.

Upon the acquisition of Harbin Yifeng by the Company, Harbin Yifeng applied to be treated as a Wholly Foreign Owned Enterprise (“WFOE”). In accordance with the relevant income tax laws, the profits of WFOEs are fully exempted from income tax for two years, from the first profit making calendar year of operations after offset of accumulated taxable losses, followed by a 50% income tax reduction for the immediate next three calendar years (“tax holiday”).

Harbin Yifeng was granted the status of WFOE in the fourth quarter of 2006 with a choice of starting the tax holiday immediately or the next calendar year. Harbin Yifeng elected for this tax holiday to commence in January 2007. Its two-year tax exemption period was from January 1, 2007 to December 31, 2008 and the three-year income tax reduction period will be from January 1, 2009 to December 31, 2011.

The following table shows the estimated tax savings as a result of the tax holidays and the net effect on earnings per share (basic) had the income tax been applied:

	Three Months Ended September 30				Nine Months Ended September 30
	2011		2010		2011		2010
Estimated Tax Savings	$	224,690	$	317,260	$	619,264	$	848,587
EPS (Basic) - as reported	$	0.10	$	0.15	$	0.28	$	0.41
EPS (Basic) - without tax savings	$	0.08	$	0.13	$	0.23	$	0.34

United States Tax

The Company was incorporated in the United States.  It incurred net operating losses for U.S. income tax purposes for the nine months ended September 30, 2011 and 2010. Net operating loss carry forwards, including amortization of share-based compensation, for United States income tax purposes amounted to $1,279,733 and $1,154,669 as of September 30, 2011 and December 31, 2010, respectively, which may be available to reduce  U. S. taxable income in future periods. These carry forwards will expire, if not utilized, beginning in 2028 through 2029. Management believes that the realization of the benefits arising from this loss appear to be uncertain due to Company's limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at September 30, 2011 for the temporary difference related to the loss carry-forwards. Management reviews this valuation allowance periodically and makes adjustments as warranted.

Deferred tax assets and the related valuation allowance are set forth in the table below.  The deferred tax asset for purposes of Chinese income tax is based on the amortization of landfill development costs.

	September 30, 2011				December 31, 2010
USA		$	435,109			$	392,587
China			230,678				120,719
Less: Valuation Allowance			(435,109	)			(392,587	)
Net		$	230,678			$	120,719

For the three and nine months ended September 30, 2011 and 2010, the provision for income taxes were as follows:

 

	For the three months ended
	September 30, 2011			September 30, 2010
Current	$	224,736		$	317,260
Deferred tax expense (benefit)		(36,478	)		(32,935	)
Total	$	188,258		$	284,325

	For the nine months ended
	September 30, 2011			September 30, 2010
Current	$	624,709		$	848,587
Deferred tax expense (benefit)		(104,025	)		(95,077	)
Total	$	520,684		$	753,510