3. TAXATION

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

TAXATION

3.  TAXATION

The Company and Feihe China Nutrition Company are subject to U.S. federal and state income taxes, and the Company’s subsidiaries incorporated in the People’s Republic of China (the “PRC”) are subject to enterprise income taxes in the PRC.

The Company recorded an income tax expense of approximately $3.5 million and $1.9 million for the three months ended March 31, 2013 and 2012, respectively. The increase in income tax expense for the three months ended March 31, 2013 was primarily due to the increase in profits of Feihe Dairy, which is one of our major operating entities.

The Company had cumulatively accrued approximately $1.4 million and $1.4 million for estimated interest and penalties related to uncertain tax positions as of March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013 and 2012, the Company recorded a benefit of $0.5 million and $0.5 million for estimated interest and penalties, respectively.

Aggregate undistributed earnings of approximately $166 million as of March 31, 2013 of the Group’s PRC subsidiaries that are available for distribution to the Company are considered to be indefinitely reinvested, and, accordingly, no provision has been made for the Chinese dividends withholding taxes that would be payable upon distribution to the Company. Additionally, the Chinese tax authorities have clarified that distributions made out of pre-January 1, 2008 retained earnings would not be subject to the withholding tax.

Years from 2008 to 2012 of the Company remain open for US federal and state income tax purposes, and tax years from 2008 to 2012 of the PRC subsidiaries remain open to examination by tax authorities in the PRC.