Capital Discovery® from CRG has been developed over years of successfully identifying tax effects that yield immediate and dramatic financial advantage for our clients and applying discovered capital to high-value energy projects. CRG’s Capital Discovery® process has been refined and advanced by our team of experts who apply specialized knowledge to maximize savings and significantly enhance return on investment on energy projects.
Achieve maximum savings and cost effective energy incentives for your business
Instead of looking to outside funding sources or reducing valuable equity to fund energy efficient upgrades or systems, it makes sense to enlist the skill and knowledge of qualified professionals to coordinate green building improvement and incentives. Whether in the planning and design stages of a new facility or making decisions on retrofits or upgrades of existing commercial buildings, working with these pros may allow commercial building owners to not only pinpoint the most efficient improvements, but also create a cohesive plan to ensure that maximum energy savings and tax benefits result from the capital expenditure.
Many business owners may assume that funding for energy efficient upgrades must come from dipping into equity in the facility, or from an outside funding source such as a bank loan. Fortunately, there are alternative strategies that may be employed to pay for energy efficiency projects by significantly lowering the tax liability including:
Cost Segregation Analysis
• The ideal time to begin a Cost Segregation Study is when you or your client first places the property into service, the building is remodeled, or there has been an expansion of an existing building.
• A Cost Segregation specialist may then identify, segregate and reclassify the assets and project-related costs that qualify for a shorter depreciable life.
• For capital construction projects and newly acquired buildings, an accurate assignment of costs will allow a taxpayer to “front load” cost recovery and cash flow, maximizing them in the immediate years following the construction or purchase.
• The benefits of a cost segregation study are retroactive, including buildings that have been purchased, constructed, expanded or remodeled since 1987 (the effective date is 1992). This allows taxpayers to recover previously unrecognized depreciation, which increases cash flow in the current – and often subsequent – years.
• An engineering based analysis of an existing property purchased or placed in service after 1987 or a new construction can lead to a significant portion of the building value to be reclassified, based on IRS explicit guidance, to short-lived assets (1245 property) as opposed to 39 year (Commercial) or 27.5 (Commercial Residential) year property (1250 property).
When certain assets in the building are replaced and are not separately stated within the accounting records, these assets have a certain value within the lump sum we have called “Building” and accordingly a tax deduction based upon unused depreciation may be taken for all remaining value associated with those assets. An abandonment study can help identify that value and ensure the proper deduction is taken and that the tax burden is minimized.
Many building owners are unaware that the Energy Policy Act of 2005 includes a tax deduction for investments in “energy efficient commercial building property” designed to significantly reduce the heating, cooling, water heating and interior lighting cost of new or existing commercial buildings placed into service between January 1, 2006 and December 31, 2013.
Incentivized areas under §179D:
- Building envelope or
- Whole building
Available for New Construction and Existing Buildings (retrofit)
Also available for:
- Tenant owned lease-hold improvements
- “Primary Designers” of Government Buildings (All public facilities)
The maximum deduction is $1.80 per square foot*; however, within this deduction there are three potential subsystem deductions:
- HVAC and Hot Water Heater: $0.60 per square foot
- Interior Lighting: $0.60 per square foot
- Building envelope: $0.60 per square foot
- Whole Building $1.80 per square foot
Lighting – as a standalone – falls under the “Interim Rule for Lighting”:
- Lighting meets prescriptive watts per square foot
- Each Certification follows both ASHRAE Standards 90.1-2001 and IRS Guidelines
- BI-LEVEL SWITCHING IS MANDATORY (Have controls in compliance)
- EXCLUSIONS: Lobbies, guest rooms, rest rooms, storerooms, and garages
- Equipment/assets installed as part of the interior lighting systems
- Sliding scale from $.30/sq ft for 25% reduction up to $.60/sq ft for 40% energy savings (50% for warehouse – no sliding scale) of the minimum requirements (ASHRAE 90.1-2001)
CERTIFICATION FOR SECTION 179D
- Third – party certification
- Party “not-related” to taxpayer
- Approved software (by IRS) required
Choosing the right company, one which is reliable and experienced, when IRS and taxes are involved, is especially important. Capital Discovery® is the only holistic approach available to business owners combining engineering solutions, tax strategies, and financial analysis to create high value, low risk investments in energy projects. To find out more on achieving maximum savings and cost effective energy security for your business call us at 877.666.5539 or Contact Us.