The recently passed American Taxpayer Relief Act provides immediate incentives for retail property and restaurant property owners.

Under pre-Act law, qualified restaurant property and qualified retail improvement property that was placed in service before 2012 was included in the 15-year MACRS class for depreciation purposes—that is, such property was depreciated over 15 years under MACRS. This law sunset on 1/1/12, but Congress reinstated it retroactively.

New law. The 2012 Taxpayer Relief Act retroactively extends for two years the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class. Such property qualifies for 15-year recovery if it is placed in service before Jan. 1, 2014. (Code Sec. 168(e)(3)(E), and Code Sec. 168(e)(8)(E), as amended by Act Sec. 311)

Here are some additional details.

Qualified restaurant property

(A) In general. The term “qualified restaurant property” means any section 1250 property which is—

(i) a building, or

(ii) an improvement to a building,

if more than 50 percent of the building’s square footage is devoted to preparation of, and seating for on-premises consumption of, prepared meals.

(B) Exclusion from bonus depreciation. Property described in this paragraph shall not be considered qualified property for purposes of subsection (k).

Qualified retail improvement property

(A) In general. The term “qualified retail improvement property” means any improvement to an interior portion of a building which is nonresidential real property if—

(i) such portion is open to the general public and is used in the retail trade or business of selling tangible personal property to the general public, and

(ii) such improvement is placed in service more than 3 years after the date the building was first placed in service.

(B) Improvements made by owner. In the case of an improvement made by the owner of such improvement, such improvement shall be qualified retail improvement property (if at all) only so long as such improvement is held by such owner. Rules similar to the rules under paragraph (6)(B) shall apply for purposes of the preceding sentence.

(C) Certain improvements not included. Such term shall not include any improvement for which the expenditure is attributable to—

(i) the enlargement of the building,

(ii) any elevator or escalator,

(iii) any structural component benefitting a common area, or

(iv) the internal structural framework of the building.

(D) Exclusion from bonus depreciation. Property described in this paragraph shall not be considered qualified property for purposes of subsection (k).

(E) Repealed.

Summary:  Although §179D of the IRS code expires at the end of 2013, opportunities exist in two areas: accelerating future projects into 2013 and reviewing projects dating back to January 1, 2006 that resulted in energy savings.  Either of these can allow the building owner, occupant, or designer to qualify for the deduction.

Worried that 2013 will be the end of your ability to deduct energy improvement investments under §179D of the Internal Revenue Code?  Fear not!  While energy efficiency upgrades need to be completed by December 31, 2013, the window for utilizing this deduction extends back to January 1, 2006.  As we head into tax season, it can be beneficial to review past energy projects and see if they may qualify for the §179D deductions.

§179D of the Internal Revenue Code supporting the Energy Policy Act of 2005 is one incentive that may provide major benefits to building owners, designers and contractors.  §179D includes full and partial tax deductions for investing in commercial building improvements that are designed to increase the efficiency of energy-consuming functions such as lighting, HVAC, and building envelope.  The deduction available is up to $.60 per square foot for each: lighting, HVAC, and building envelope – a potential for $1.80 per square foot if all three components/subsystems qualify.  The following factors need be taken into consideration:  1. Can the building owner take the deduction?  2. Does the project qualify?

There are several strategies that can be employed to take advantage of the §179D deduction.  First, it is important to understand that projects must be completed by December 31, 2013.  Building owners and operators planning on energy efficiency projects in 2014 and beyond should assess accelerating those projects into 2013 to take advantage of the deduction available. Accelerating projects into 2013 will qualify for the deduction and will also generate additional operational savings for the additional years they are in service.  This deduction may be taken on renovations/retrofits to existing buildings as well as new construction.  The act requires a reduction in annual energy and power consumption per subsystem to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) Standard 90.1-2001.

Now is the time to review past projects that resulted in energy savings to determine if they are eligible for the deduction.  The act specifies when the project must be completed, not when the deduction has to be taken.  Even after the sunset of §179D at the end of 2013, projects completed within the window are eligible.

Discussions on the tax code and its application are not something the average person enjoys, but this should not deter the building owner, occupants, architectural/design firms or builders.  The organizations that provide certification should be skilled in tax and engineering to understand and apply the requirements and application of §179D and to assist the owner, operator, or designer in navigating the process for both anticipated projects and past projects.

Don’t let §179D benefits expire without taking advantage of the allowable deduction for energy saving projects.  Consider accelerating future projects into 2013 to take advantage of the benefit.  Review projects completed since January 1, 2006 for opportunities to take advantage of the deduction.  Energy improvements may have resulted from a renovation that improved lighting and/or cooling efficiency, an upgrade to mechanical equipment as part of a maintenance program, and/or improvements to the building envelope.  Each of these, lighting, HVAC and building envelope, may meet the requirements for the $.60 per square foot deduction and/or for the total of $1.80 if all three areas show qualified improvements.  Contact Capital Review Group in assessing and applying §179D to potential past and planned projects.  CRG can guide you or your organization through the process and assist in the third party certification of projects.

About the author:  Wayne Haggstrom is a technical writer for Capital Review Group in Phoenix, Arizona.  He has over 25 years experience in construction, facilities operations and maintenance, and technology implementation.  He is a Certified Sustainable Building Advisor (CSBA) and a Certified Six Sigma Black Belt.

The American Taxpayer Relief Act extends (and in some cases modifies) a number of depreciation breaks, including (1) increased Section 179 expensing limitations and treatment of certain real property as eligible Section 179 property; (2) 50% bonus depreciation; and (3) 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.

Under pre-2012 Taxpayer Relief Act law (pre-Act law), the Code Sec. 168(k) additional first-year depreciation deduction (also called bonus first-year depreciation) generally is allowed equal to 50% of the adjusted basis of qualified property acquired and placed in service after Dec. 31, 2011, and before Jan. 1, 2013 (before Jan. 1, 2014 for certain longer-lived and transportation property). The additional first-year depreciation deduction is allowed for both regular tax and alternative minimum tax (AMT) purposes, but is not allowed for purposes of computing earnings and profits. The basis of the property and the depreciation allowances in the year of purchase and later years are appropriately adjusted to reflect the additional first-year depreciation deduction. A taxpayer may elect out of additional first-year depreciation for any class of property for any tax year.

In general, an asset qualifies for the bonus depreciation allowance if:

… It falls into one of the following categories: property to which the modified accelerated cost recovery system (MACRS) rules apply with a recovery period of 20 years or less; computer software other than computer software covered by Code Sec. 197; qualified leasehold improvement property; or certain water utility property.

… It is placed in service before Jan. 1, 2013. (Certain long-production-period property and certain transportation property may be placed in service before Jan. 1, 2014)

… Its original use commences with the taxpayer. Original use is the first use to which the property is put, whether or not that use corresponds to the taxpayer’s use of the property.

New law. The 2012 Taxpayer Relief Act extends 50% first-year bonus depreciation so that it applies to qualified property acquired and placed in service before Jan. 1, 2014 (before Jan. 1, 2015 for certain longer-lived and transportation property). (Code Sec. 168(k)(2), as amended by Act Sec. 331(a)) A conforming change is made to Code Sec. 460(c)(6)(B) (relating to 50% bonus depreciation not being taken into account as a cost in applying the percentage of completion method for certain long-term contracts).

15-Year Writeoff for Qualified Leasehold and Retail Improvements and Restaurant Property Reinstated and Extended

Under pre-Act law, qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property that was placed in service before 2012 was included in the 15-year MACRS class for depreciation purposes—that is, such property was depreciated over 15 years under MACRS.

New law. The 2012 Taxpayer Relief Act retroactively extends for two years the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class. Such property qualifies for 15-year recovery if it is placed in service before Jan. 1, 2014. (Code Sec. 168(e)(3)(E), and Code Sec. 168(e)(8)(E), as amended by Act Sec. 311)

Taking advantage of Bonus Depreciation and/or utilizing Qualified Improvements could have a major effect on your bottom line.  Capital Review Group can assist you in creating a strategy for obtaining the equipment or other assets that will enhance your business, while taking advantage of generous tax deductions, improving cash flow and increasing profits.

Phoenix-based tax and energy consulting firm, Capital Review Group (CRG)  CEO, Marky Moore, will speak at the Continental Automated Buildings Association (CABA) Intelligent and Integrated Buildings Council meeting during the 65^th annual International Air-conditioning, Heating, Refrigerating Exposition (AHR Expo) in Dallas, TX.  The AHR Expo runs from January 28-30, 2013 and is the world’s largest HVACR event, attracting an expected 30,000 attendees.

Ms. Moore will be presenting “Building the Business Case for Building Automation” which will review incentives that are available for building automation and energy efficiencies.  She says, “I am pleased to address a topic that has a significant impact on many forward-thinking businesses and building owners who are considering building automation to optimize building performance and savings.”

The CABA Intelligent & Integrated Buildings Council was established in 2001 to specifically review opportunities, take strategic action and monitor initiatives that relate to integrated systems and automation in the large building sector.  The IIBC works to strengthen the large building automation industry through innovative technology-driven research projects.

CABA is an international not-for-profit industry association dedicated to the advancement of intelligent home and intelligent building technologies supported by an international membership of nearly 400 companies.  Member companies are involved in the design, manufacture, installation and retailing of products relating to home automation and building automation. Public organizations, including utilities and government are also members.

Since 2004, CRG has been a leading partner for contractors, engineering firms, and architects in co-creating strategies to improve clients’ return on investment (ROI) through energy efficient design and tax incentives.  CRG works with clients to provide assurance that energy projects will achieve maximum value from the perspective of engineering and technical performance as well as federal tax incentives and financial performance.

CRG’s team of experts provide up-to-date, specialized services related to green tax incentives, energy tax deductions, IRS compliance regulations and energy strategies including renewables.  Using CRG’s Capital Discovery™ process, clients may benefit from successful identification of tax effects that yield immediate and dramatic financial advantage and application of discovered capital to high-value energy projects.

For more information, please visit www.capitalreviewgroup.com .

Architecture Billings Index Positive for Third Straight Month

All regions reporting positive business conditions

Contact: Scott Frank
sfrank@aia.org

For immediate release:
Washington, D.C. – November 21, 2012 – Billings at architecture firms accelerated to their strongest pace of growth since December 2010. As a leading economic indicator of construction activity, the Architecture Billings Index (ABI) reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the October ABI score was 52.8, up from the mark of 51.6 in September. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.4, compared to a mark of 57.3 the previous month.

“With three straight monthly gains – and the past two being quite strong – it’s beginning to look like demand for design services has turned the corner,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “With 2012 winding down on an upnote, and with the national elections finally behind us, there is a general sense of optimism. However, this is balanced by a tremendous amount of anxiety and uncertainty in the marketplace, which likely means that we’ll have a few more bumps before we enter a full-blown expansion.”

Key October ABI highlights:

• Regional averages: South (52.8), Northeast (52.6), West (51.8), Midwest (50.8)

• Sector index breakdown: multi-family residential (59.6), mixed practice (52.4), institutional (51.4), commercial / industrial (48.0)

• Project inquiries index: 59.4

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

About the AIA Architecture Billings Index
The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction spending activity. The diffusion indexes contained in the full report are derived from a monthly “Work-on-the-Boards” survey that is sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI.  These monthly results are also seasonally adjusted to allow for comparison to prior months. The monthly ABI index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline. The regional and sector data are formulated using a three-month moving average. More information on the ABI and the analysis of its relationship to construction activity can be found in the White Paper Architecture Billings as a Leading Indicator of Construction: Analysis of the Relationship Between a Billings Index and Construction Spending on the AIA web site.

About The American Institute of Architects
For over 150 years, members of the American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. Members adhere to a code of ethics and professional conduct to ensure the highest standards in professional practice. Embracing their responsibility to serve society, AIA members engage civic and government leaders and the public in helping find needed solutions to pressing issues facing our communities, institutions, nation and world. Visit www.aia.org.

With the introduction of the “Commercial Building Modernization Act” (S. 3591), Senators Cardin (D- MD), Snowe (R-ME), Bingaman (D- NM), and Feinstein (D-CA) are leading the way to extend and simplify the §179D tax deduction targeted at improving the energy efficiency of existing buildings as well as new construction.  This bill was assigned to a congressional committee on September 20, 2012, which will consider it before possibly sending it on to the House or Senate as a whole. The bill will extend the §179D deduction, scheduled to expire at the end of 2013, through the end of 2016.  The Commercial Building Modernization Act (CMBA) proposes several improvements to the original legislation that will improve the effectiveness of §179D and simplify its application.  CMBA recommended improvements include measuring energy savings and improvements against the existing building’s own consumption baseline prior to the retrofit, linking the amount of the deduction to the savings achieved, and making the §179D deduction available for a broader range of real estate owners.  These changes should make it attractive to complete energy efficiency projects on existing buildings as well as level the playing field for all building owners.  A joint report issued by the U.S Green Building Council (USGBC), the Natural Resources Defense Council (NRDC), the Real Estate Roundtable, and the American Council for an Energy Efficient Economy estimate that more than 77,000 construction, manufacturing, and service jobs would be generated nationwide.

The Energy Policy Act was signed into law in April 2005 – the first significant energy legislation since 1992.  Title XIII §1331 stated that energy efficiencies were to be encouraged through a procedure to apply tax deductions for the implementation of specific and broad based building efficiencies.  The Act includes a tax deduction, known as the Energy-Efficient Commercial Buildings Tax Deduction (26 U.S.C. §179D) for investments in “energy-efficient commercial building property” designed to significantly reduce the heating, cooling, water heating, and interior lighting energy cost – or improve the performance – of new or existing commercial buildings.  Section 179D includes full and partial tax deductions for investing in commercial building improvements that are designed to increase the efficiency of energy-consuming functions such as lighting and HVAC.  The deduction available is up to $.60 per square foot each for lighting, HVAC, and building envelope – a potential for $1.80 per square foot if all three components/subsystems qualify.

Mr. Duncan is a long-time resident of Washington, where he studied Construction Theory and Management in the Engineering Department at Washington State University in Pullman.  He brings over 20 years of successful sales-focused experience in the IT and Communications industry to CRG, with outstanding performance for companies such as Cray Research, Sun Microsystems and AT&T Mobility.

Mr. Duncan has proven to be a valuable asset to the CRG Pacific Northwest Territory team, and is pleased to continue building business for the company in this senior leadership role.   His keen understanding of the drivers influencing the construction and engineering business and how it is changing the Northwest landscape has been invaluable in promoting CRG’s mission throughout the Pacific Northwest.

According to CRG founder and CEO, Marky Moore, “Chuck is integral to CRG, demonstrating a thorough understanding of CRG’s mission and its relationship to the Pacific Northwest.  His leadership skills and sales acumen, combined with his knowledge of construction, §179D “green” building tax incentives and cost segregation have proven to be a great fit for the CRG team.  We are very excited about Chuck’s contribution to CRG’s growth in the Pacific Northwest.”

Capital Review Group is a leader in providing up-to-date, specialized services related to green tax incentives, energy tax deductions, IRS compliance regulations and energy strategies including renewables.  Using CRG’s Capital Discovery® process, numerous clients have benefited from successful identification of tax effects that yield immediate and dramatic financial advantage, as well as the application of discovered capital to high-value energy projects.

FOR IMMEDIATE RELEASE
(Phoenix, AZ – September 26, 2012) Capital Review Group CEO, Marky Moore, LEED AP BD+C, CSBA, will be a presenter at the 2012 World Energy Engineering Congress (WEEC) at Atlanta’s Georgia World Congress Center, October 31 – November 2, 2012. Ms. Moore is slated to deliver a poster presentation entitled, “Incentive Opportunities for Building Owners through Market Transformation”. Her presentation will expand upon accelerating change in the market through incentives and discuss origins, intents, and results of tax incentives for green buildings.

The 35th WEEC is known as one of the most significant international energy events for professionals and end-users in all areas of the energy field. According to the Association of Energy Engineers (AEE), the Congress is “the one truly comprehensive forum where you can fully assess the ‘big picture’ and see exactly how the economic and market forces, new technologies, regulatory developments and industry trends all merge to shape your critical decisions on your organization’s energy and economic future.”

The event will feature a large, multi-track conference agenda, a full line-up of seminars on a variety of current topics, and a comprehensive exposition of the market’s most promising new technologies.

Ms. Moore and associates from Capital Review Group will also be in attendance at the upcoming Greenbuild International Conference and Expo, the world’s largest conference and expo dedicated to green building. The event, held in San Francisco on November 14 – 16, 2012, promises to bring thousands of building professionals from all over the world for three days of outstanding educational sessions, renowned speakers, green building tours, special seminars, and networking events.

Capital Review Group is a multi-disciplined energy and incentives solutions leader who stays current on green tax incentives, energy tax deductions, IRS compliance regulations, and energy strategies, including renewables. CRG offers §179D analysis and financial recommendations for energy-related federal tax incentives, as well as providing the required third-party certification to claim those deductions. Since 2004, CRG has been a leading partner for contractors, engineering firms, and architects in co-creating strategies to improve clients’ return on investment through energy efficient design and tax incentives.