Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 16 - INCOME TAXES

In December 2017, the Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted into law and the new legislation contains several key tax provisions that affected the Company, including, among others, a reduction of the federal corporate income tax rate to 21% effective January 1, 2018, and a recognition of the U.S. corporate income tax based on the deemed repatriation to the United States of the Company's share of previously deferred earnings of certain non-U.S. subsidiaries of the Company upon enactment of the 2017 Tax Act. The Company is required to recognize the effect of the 2017 Tax Act in the period of enactment. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), Income Tax Accounting Implications of the 2017 Tax Act, which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date.

During the three months ended September 30, 2018, the Company recognized a one-time transition tax of $11,022,985 that represented management's estimate of the amount of U.S. corporate income tax based on the deemed repatriation to the United States of the Company's share of previously deferred earnings of certain non-U.S. subsidiaries of the Company mandated by the U.S. Tax Reform. The Company also recognized related interest and penalty in the amount of $587,821. The Company elected to pay the one-time transition tax over eight years commencing in 2018. The actual impact of the U.S. Tax Reform on the Company may differ from management's estimates, and management may update its judgments based on future regulations or guidance issued or changes in the interpretations taken that would adjust the provisional amounts recorded. As of December 31, 2018, $2,451,499 was included in income tax payable as a current liability which the Company believes will be paid within one year and the remaining balance was included in income tax payable, non-current. As of the filing date, no transition tax payment has been made.

The 2017 Tax Act also created a new requirement that, for the periods beginning after January 1, 2018, certain income (referred to as global intangible low-taxed income or "GILTI") earned by foreign subsidiaries in excess of a deemed return on tangible assets of foreign corporations must be included in U.S. taxable income. The GILTI income is eligible for a deduction, which lowers the effective tax rate to 10.5% for calendar years 2018 through 2025 and 13.125% after 2025. Under U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which a company is subject to the rules – the period cost method, or (ii) account for GILTI in a company's measurement of deferred taxes – the deferred method. The Company elected to account for GILTI in the period the tax is incurred. The Company did not generate any GILTI during the year ended December 31, 2018.

The Joint Venture is registered in the PRC, and is therefore subject to state and local income taxes within the PRC at the applicable tax rate on the taxable income as reported in the PRC statutory financial statements in accordance with relevant income tax laws.

In 2015, the Joint Venture was awarded the Chinese government's "High-Tech Enterprise" designation for a third time, which is valid for three years and it continues to be taxed at the 15% tax rate in 2015, 2016 and 2017. As the "High-Tech Enterprise" designation expired in 2018, the Joint Venture is undergoing the re-assessment by the government and the Company estimates it is highly probable that the designation will be awarded and therefore the 15% tax rate is used for the years ended December 31, 2018.

The reconciliation of the effective income tax rate of the Company to the respective statutory income tax rates in the United States and the PRC for the years ended December 31, 2018 and 2017 is as follows:

	Years Ended December 31,
	2018			2017
US statutory income tax rate		21.00	%		35.00	%
Valuation allowance recognized with respect to the loss in the US company		-21.00	%		-35.00	%
Impact of Tax Cuts and Jobs Act		37.45	%		-
China statutory income tax rate		25.00	%		25.00	%
Effects of income tax exemptions and reliefs		-10.00	%		-10.00	%
Effects of additional deduction allowed for R&D expenses		-4.42	%		-2.34	%
Effects of expenses not deductible for tax purposes		2.32	%		0.79	%
Other items		0.22	%		1.41	%
Effective tax rate		50.58	%		14.86	%

Income taxes are calculated on a separate entity basis. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The provisions for income taxes for the years ended December 31, 2018 and 2017, respectively, are summarized as follows:

	Years Ended December 31,
	2018			2017
Current	$	15,852,188		$	5,524,868
Deferred		(37,588	)		(807,058	)
Total	$	15,814,600		$	4,717,810

ASC 740-10 requires recognition and measurement of uncertain income tax positions using a "more-likely-than-not" approach. The management evaluated the Company's tax positions and considered that no provision for uncertainty in income taxes was necessary as of December 31, 2018 and 2017.