| 10. | INCOME TAXES |
The provision for income taxes consisted of the following for the years ended June 30:
| 2017 | 2016 | ||||||||
| Current | $ | - | $ | - | |||||
| Deferred | - | 2,403,996 | |||||||
| $ | - | $ | 2,403,996 | ||||||
The following table reconciles the effective income tax rates with the statutory rates for the years ended June 30:
| 2017 | 2016 | ||||||||
| Statutory rate | 25.00 | % | 25.00 | % | |||||
| Allowance | 0.08 | % | 0.32 | % | |||||
| Other | (25.08 | %) | 1176.98 | % | |||||
| Effective income tax rate | - | 1202.30 | % | ||||||
The stock compensation of approximately $37,762,400 in the year ended June 30, 2016 would be deductible only to the U.S. parent company and accordingly, there is no deferred tax benefit to be recognized.
Deferred tax assets and liabilities are recognized for expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effects for the year in which the differences are expected to reverse.
The tax laws of China permit the carry forward of net operating losses for a period of five years. Undistributed earnings from Xinhua Cattle and Yulong are not taxable until such earnings are actually distributed to Jiasheng Consulting. A deferred tax liability was provided for the tax to be paid when these earnings are distributed. On September 16, 2015 due to the termination of VIE structure (Note 1), Jiasheng Consulting would not be taxable in the future undistributed earnings from Xinhua Cattle and Yulong under the Enterprise Income Tax Law that Chinese resident enterprise is an exemption of dividend income received from another Chinese resident enterprise.
Deferred tax assets (liabilities) are comprised of the following:
June 30, 2017 | June 30, 2016 | ||||||||
| Net operating loss carryforwards | $ | 520,965 | $ | 497,542 | |||||
| Bargain purchase gain | (1,430,399 | ) | (1,430,399 | ) | |||||
| Undistributed earnings of subsidiaries under PRC law upon VIE structure terminated | (38,636,474 | ) | (39,446,504 | ) | |||||
| (39,545,908 | ) | (40,379,361 | ) | ||||||
| Less valuation allowance | (520,965 | ) | (497,542 | ) | |||||
| Net deferred tax (liabilities) | $ | (40,066,873 | ) | $ | (40,876,903 | ) | |||
At June 30, 2017 and 2016, Zhongxian Information had unused operating loss carry-forwards of approximately $2,084,000 and $1,990,000, respectively, expiring in various years through 2020. The Company has established a valuation allowance of approximately $521,000 and $498,000 against the deferred tax asset related to the net operating loss carry forward at June 30, 2017 and 2016, due to the uncertainty of realizing the benefit.
The Company’s tax filings are subject to examination by the tax authorities. The tax years from 2010 to 2016 remain open to examination by tax authorities in the PRC. The Company’s U.S. tax returns are subject to examination by the tax authorities for tax years 2014, 2015 and 2016. The year ended June 30, 2013 was examined by the Internal Revenue Service and resulted in no adjustment.