Federal Income Taxes

12 Months Ended

May 31, 2019

Income Tax Disclosure [Abstract]

Federal Income Taxes

Note 8. FEDERAL INCOME TAXES

Deferred taxes as of May 31, 2019 and 2018 are as follows:

	2019			2018
Deferred tax asset:
Net operating loss carryforward	$	4,807,616		$	2,015,616
Accrued expenses		88,298			101,320
Other		33,528			27,432
Total deferred tax asset		4,929,442			2,144,368
Deferred tax liability:
Depreciation and amortization, tax reporting in excess of financial		(2,877,573	)		(2,635,333	)
Valuation allowance		(2,978,511	)		-
Net deferred tax liability	$	(926,642	)	$	(490,965	)

A deferred tax asset is recognized for tax-deductible temporary differences and operating losses using the applicable enacted tax rate. In assessing the realizability of deferred tax assets, management considers the likelihood of whether it is more likely than not the net deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net operating losses and the reversal of timing differences may offset taxable income. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in carryforward periods under the tax law. Based on this evaluation, management has determined that Greystone will not be able to realize the full effect of the deferred tax assets and a valuation allowance of $2,978,511 has been recorded as of May 31, 2019. There was no valuation allowance as of May 31, 2018.

The net change in deferred taxes for the year ended May 31, 2019 and 2018 is as follows:

	2019			2018
Valuation allowance	$	(2,978,511	)	$	-
Net operating loss carryforward		2,792,000			(87,308	)
Depreciation and amortization, tax reporting in excess of financial		(242,240	)		(664,475	)
Allowance for doubtful accounts		-			(8,788	)
Accrued expenses		(13,022	)		(11,701	)
Other		6,096			(108	)
Net change	$	(435,677	)	$	(772,380	)

The provision for income taxes at May 31, 2019 and 2018 consists of the following:

	2019		2018
Current income tax – Federal and State	$	-	$	-
Deferred income tax provision		435,677		772,380
Provision for income taxes	$	435,677	$	772,380

Greystone’s provision for income taxes for the years ended May 31, 2019 and 2018 differs from the federal statutory rate as follows:

	2019			2018
Tax provision using statutory rates		21	%		21	%
State income taxes		9			9
Federal tax rate change adjustment		-			(2	)
Change in valuation allowance		(11	)		-
Expiring net operating losses		-			3
VIE income passed to members		(2	)		(2	)
Tax provision per financial statements		17	%		29	%

During fiscal year 2019, Greystone conducted a reassessment of its net operating losses (NOL) and corrected an error which resulted in an increase in the amount of NOL deductions which were available. Additionally, the correction to the NOLs was accompanied by an offsetting increase in the valuation allowance based on management’s estimate of Greystone’s ability to utilize the NOLs. As a result, this correction had no impact on Greystone’s results from operations or financial position.

At May 31, 2019, Greystone had NOL deductions for Federal income tax purposes from inception through May 31, 2005 of $11,953,302, expiring in fiscal years 2022 through fiscal year 2025 of which approximately $4,200,000 is management’s estimate of the usable amount pursuant to Internal Revenue Code Section 382. The limitation is due to a change in control of Greystone during the fiscal year ended May 31, 2005. The utilization of NOL’s accumulated through fiscal year 2005 is limited to approximately $437,000 per year and is available to carryforward.

At May 31, 2019, management conducted an evaluation of its valuation allowance which resulted in a reduction to the previously established allowance of approximately $233,000.

A summary of Federal net operating losses (NOL) for Federal income tax purposes at May 31, 2019 is as follows:

	NOL Carryforward		Year Expiring
Year ended May 31, 2002	$	1,950,345	2022
Year ended May 31, 2003		4,154,960	2023
Year ended May 31, 2004		1,632,774	2024
Year ended May 31, 2005		5,620,289	2025
Year ended May 31, 2006		2,622,921	2026
Year ended May 31, 2007		2,151,837	2027
Year ended May 31, 2011		746,484	2031
Year ended May 31, 2015		321,625	2035
Year ended May 31, 2016		1,060,747	2036

On December 22, 2017, the President signed into legislation The Tax Cuts and Jobs Act (the Act). The Act changes existing U.S. tax law and included numerous provisions that will affect Greystone’s business, including income tax accounting, disclosure and tax compliance. Greystone revalued all deferred tax assets and liabilities as of the date of the Act. The result of this revaluation was an increase in deferred taxes during fiscal year 2018 in the amount of $57,039 and a like decrease in the provision for income taxes.