IRS recently issued Temporary Regulations for Repairs Expenditures and Capitalization - Capital Review Group will be developing a future White Paper on this topic and how it effects Cost Segregation and reclassification of assets.  Here are some interesting articles on this topic.

For Immediate Release

Phoenix, AZ – January, 2012

Phoenix-based tax and energy consulting firm, Capital Review Group (CRG) has joined the Continental Automated Buildings Association (CABA).  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 300 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.

CABA is dedicated to advancing integration of automation for residential and commercial buildings, helping members create increased market opportunities, supporting multi-disciplinary partnerships, while serving as a preferred global source of information, knowledge and networking for key stakeholders.

“We are pleased that Capital Review Group has joined our organization,” says Ronald J. Zimmer, CABA President & CEO.  “The Continental Automated Buildings Association is dedicated to growing business opportunities throughout the respective home and building automation industries through networking opportunities and insightful market research.  The addition of Capital Review Group will ensure that CABA members have access to a fellow member that offers high-quality energy advisory services.”

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 founder and CEO, Marky Moore, says, “We are excited to join the other members of CABA and have the opportunity to share our expertise in the industry, especially regarding tax strategies related to automated building projects.  We believe that our experience and industry focus ties in perfectly with the mission of CABA and will add valuable perspective to CABA’s existing body of knowledge.”

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As 2011 comes to a close, Capital Review Group (CRG) stands ready to work with CPAs and other tax accounting professionals to reduce clients’ tax burden and discover capital ~ we call this Capital Discovery™.  Our specialized consulting services are invaluable to tax professionals, as we make it our business to stay current on the latest in green tax incentives, energy tax deductions, IRS compliance regulations and energy strategies including renewables; working with you to provide maximum benefit to your business clients.  Over the years we have seen dramatic financial advantages for clients emerge from our analyses and certification of energy projects.

§179d Analysis and Certification

We offer §179d analysis and financial recommendations for energy-related federal tax incentives, as well as providing the required third-party certification to claim those deductions. If energy efficient improvements (lighting, HVAC or building envelope) have been performed on an existing building or as part of a new construction (between 1/1/06-12/31/2013), the taxpayer footing the bill may be entitled to: $.60 per sq/ft for lighting, $.60 per sq/ft for HVAC and $.60 per sq/ft for building envelope, creating a potential deduction of $1.80 per sq/ft.

It’s important to note that IRS mandated software must be used and the qualification must be certified by an independent qualified individual such as CRG. The resulting deduction is a basis adjustment to the 39 year property. Any missed deductions for prior years can be taken by amending tax returns for open years or by filing a 3115 with a current year return. If the deduction is ever challenged, CRG represents the client directly before the IRS.

Architects, engineers and contractors may also benefit from §179d certification of government projects (public schools, colleges, military bases, government office, etc.). The deduction may be allocated to the architect/engineer/contractor or combination thereof of the energy efficient property. The deduction is taken as an M-1 item on the tax return of the designer being allocated the designer(s). Any missed deductions for prior years may be taken by amending tax returns for open years or by filing a 3115 with a current year return. If the deduction is ever challenged, CRG represents the client directly before the IRS.

Cost Segregation

CRG performs an engineering-based analysis of an existing property purchased or placed in service after 1987 or new construction, which can lead to a significant portion of the building value being reclassified, based on IRS explicit guidance, to short-lived assets (1245 property) as opposed to 39 year or 27.5 year property. CRG follows the IRS Audit Technique Guide, step by step, which ensures maximum value for the building owner and work performed exactly as the IRS prescribes. CRG provides a full report, identifying each and every asset that qualifies to be reclassified as personal property as well the updated depreciation schedules, reconciliation and a draft of Form 3115 if the assets were placed in service in a prior year. We also represent the client directly with the IRS if the report is ever challenged.

Abandonment Studies

In replacing assets that exist within a building there may be a substantial opportunity to reduce tax burden through abandonment. If a building was purchased and the individual assets were never segregated out on the accounting records of the Company, the value of each individual asset is encompassed with the large asset on the books, generally called “Building”. This “Building” is typically being depreciated over 39 years for commercial property or 27.5 years for commercial residential. 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 should 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 the tax burden is minimized. CRG issues a full report, with before and after photos as well as the calculation of the remaining depreciable value of the abandoned assets that acts as support for the deduction taken. We also represent the client directly with the IRS if the report is ever challenged.

Whether working with property owners or occupants, or architectural/design firms and builders, CRG’s specialized services provide assurance that clients receive maximum value from their commercial building projects, from the perspective of engineering and technical performance, federal tax incentives and enhanced financial performance.

Contact us today to find out how we can put our federal energy tax incentive expertise to work for you and your clients, and make the most of 2011 returns.

This article warrants consideration and a read:  “The Math Changes on Bulbs” by Kate Linebaugh Wall Street Journal.

Kate Linebaugh covers not only the cost savings of replacing standard bulbs with LED bulbs for energy efficiency, but also the cost-savings associated with “lowered maintenance costs.”  LED’s savings from energy use to labor savings is one way to look at the Simple Payback Period/ROI.  The SPP/ROI on new, energy-efficient systems may be longer, but the equipment will perform more reliably while providing better working conditions and lowering energy costs along the way.   Most business owners will assume that funding for energy efficient upgrades has to come from dipping into their equity in the facility, or from an outside funding source such as a bank loan.  Fortunately, there are alternative strategies that can be put into place to pay for energy efficiency projects by significantly lowering your tax burden.

One such tax benefit that can be applied to energy efficient construction or improvements is found in section 179D of the Energy Policy Act of 2005.  §179D includes full and partial tax deductions for investments in energy efficient commercial buildings that are designed to increase the efficiency of energy-consuming functions.  The deduction available is up to $.60 per square foot for lighting, HVAC and building envelope, creating potential for $1.80 per square foot if all three components qualify. These deductions are applicable to buildings that were either built or retrofitted after December 31, 2005.  In order to qualify for the deduction, the taxpayer must receive a third party energy efficiency certification.

In addition, the issuance of Revenue Procedure 2011-14 will allow some taxpayers to claim the §179D deduction all the way back to January 1, 2006 without filing one single amended income tax return. This means that a taxpayer could potentially claim deductions from 2006-2010 (or 2011) all on one return and significantly reduce their tax burden, if not eliminate it altogether, which goes a long way toward funding energy efficiency.

Instead of looking to outside sources or reducing your valuable equity to fund energy efficiency, look to your own building for the answers.  Putting the right strategy into place can result in surprisingly significant savings and painless way to pay for your project.

Business and building owners often face a dilemma when considering replacing or updating their HVAC system.  Although operating an energy efficient HVAC system saves money for business and building owners in the long run, many are concerned by significant first cost.  Too often the recommendation is to retrofit an existing building with energy efficient HVAC in order to save money on energy costs, but then the question arises – how to fund the investment?  The considerations:  Would a quick fix or band-aid on the system do for the time being? Would a very low first cost make sense?  The owner is faced with the choice of coming up with the required capital or continuing to face increased operating costs and future repairs.  The ROI/SPP (Simple Pay-back Period) on new, energy-efficient systems may take a bit longer, but the equipment will perform more reliably, provide a better environment and lower operating costs both short and long-term.   Most business owners will assume that funding for energy efficient upgrades must come from dipping into their equity in the facility, or from an outside funding source such as a bank loan.

Fortunately, there are alternative strategies that may be initiated to fund energy efficiency projects by significantly lowering the business or building owner’s tax burden.  One tax benefit unfamiliar to facility owners is found in Section (§) 179D of the Energy Policy Act of 2005.  §179D includes full and partial tax deductions for investments in energy efficient commercial buildings that are designed to increase the efficiency of energy-consuming functions.  The deduction available is up to $.60 per square foot for each of the following:  Lighting, HVAC, and Building Envelope, creating potential for $1.80 per square foot if all three components/subsystems qualify. These deductions are applicable to buildings that were either built or retrofitted after December 31, 2005.  In order to qualify for the deduction, the taxpayer must receive a third party energy efficiency certification.

Professional expertise is essential when looking at HVAC system upgrades that will qualify for the §179D deduction.  In order to qualify – the building that is to be improved with the new HVAC system must be modeled by a qualified individual using IRS prescribed software. Required data may be blueprints/plans and specifications for the building and the new system.  Based on the specific needs and characteristics of the property, as well as the variety of HVAC and control systems available in the marketplace today, it may be prudent to model any and all possible systems to identify the most appropriate solution for the facility.  Third party certification is required in order for the system to qualify for Section 179d – per the IRS.

There are a variety of options for improving the efficiency of heating and cooling systems – including: first replacing an older, maintenance intense system; controls, and building automation systems (EMS/BMS).  Also known as Direct Digital Control (DDC), Business Management Systems range from simple programmable thermostats to complex, sophisticated systems that control multiple facilities and a variety of systems.  Control systems typically contain three primary components:

1. The automated system that provides controls for HVAC, lighting and/or other systems within the facility,

1. Energy information systems that work with the controls to provide energy data to operators and energy managers,
2. The participants in the automated system that result in system efficiency.

These systems perform functions of programmed commands for HVAC, ventilation, temperature and may include lighting commands.  These systems typically record data, including utility demand and energy use, building conditions, climatic data and status of controlled equipment.  The data furnished by the control system is vital to managing energy usage – “only if it is measured can it be managed”.

New or existing systems need adjustment based on conditions and use, which is sometimes difficult for staff to manage.  Sequencing multiple processes is best completed by automatic controls designed specifically for that purpose.  Leaving control of energy systems to the occupants may have a major – and historically negative – impact on energy usage.  Even if an old HVAC system is replaced with a new, energy efficient unit, the effect of individuals manually raising and lowering the temperature may be extremely detrimental.  Human interaction with manual controls often taxes the system and decreases efficiency and consistency in the equipment that is being controlled.  The efficiency of facilities is improved radically when control routines are established and implemented within an automated control system.

Additionally, the target for thermal comfort according to ASHRAE Standard 55-2004 is 80% of occupants within a space.  Thermal comfort is one of the most subjective dynamics of environmental conditions.

There are countless configurations and “smart” technologies that can be put to work in building automation systems.  Occupancy modes such as Unoccupied, Warm Up and Night Setback may be used to set schedules for lighting and temperature control and often safety and security systems.

Certainly, the technology is advancing – virtually on a daily basis – so that when considering a retrofit the component parts that may improve efficiency and ultimately operating expenses are also a major dynamic in the system application as well as the financial picture of the project.  After making the decision to implement an automated control system, it’s important not to just assume that the system is providing energy efficiencies.  A thorough verification and measurement approach is the only way to provide evidence that systems are properly automated and actually resulting in savings and greater energy efficiency.

Instead of looking to outside funding sources or reducing valuable equity to fund energy efficient HVAC upgrades or systems, it makes sense to enlist the skill and knowledge of qualified professionals to coordinate green building improvements.   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 effective improvements to implement but also create a cohesive plan to ensure that maximum energy savings and tax benefits result from the capital expenditure.

By BOB SALSBERG

BOSTON

http://www.businessweek.com/ap/financialnews/D9QTTVBO0.htm

A Massachusetts law requiring utilities to purchase more electricity from renewable energy sources has helped make the state more energy efficient but also threatens to increase the delivery costs of electricity by 7 percent over the next four years, Attorney General Martha Coakley told a legislative committee on Wednesday.

The Green Communities Act, signed in 2008 by Gov. Deval Patrick, was intended to help Massachusetts wean itself off fossil fuels and reduce emissions that lead to global warming.

In remarks prepared for a legislative oversight hearing, Coakley indicated that a review by her office found plenty to like about the three-year-old law, along with some concerns.

“In short, we have found a number of benefits — including increased energy efficiency programs that lead to savings for many consumers,” Coakley said. “But we also have found that the (law’s) programs have escalating costs that will cause an increase in electricity rates.”

The cost of implementing the law will exceed $4 billion over the next four years, Coakley said, resulting in the estimated 7 percent increase in the total delivered costs of electricity to consumers and businesses. She noted that Massachusetts electric customers already pay some of the highest rates in the nation and that the state is “likely to remain at the top of that list.”

The attorney general told the panel she supported the policy goals of the law, particularly the desire to address climate change and make the state more energy efficient. She cited a report from the American Council for an Energy-Efficient Economy that ranked Massachusetts as the nation’s most energy efficient state.

Enhanced regulatory provisions under the law have helped save $389 million for consumers in utility rate-setting procedures, Coakley added.

The Green Communities Act requires utilities to purchase more electricity from renewable power sources, with a goal of having 25 percent of electricity coming from renewables — including wind turbines, solar panels and biomass generators — by 2030. It also asks utilities to consider cost-effective alternatives to buying more electricity or constructing new power plants when demand for electricity increases.

Richard Sullivan, the state Secretary of Energy and Environmental Affairs, said the law was the administration’s most significant green energy achievement to date. He said solar energy has become “commonplace” in Massachusetts, and by one count the state now has nearly 5,000 clean energy companies employing more than 64,000 workers.

State officials said a requirement that utilities seek long-term contracts for renewable energy has made solar, wind and other clean energy projects more viable and easier to finance. Sulllivan and Ann Berwick, chairwoman of the state Department of Public Utilities, both cited a 15-year contract National Grid signed to buy half the power from Cape Wind, the nation’s first offshore wind farm planned for Nantucket Sound.

“A long-term contract provides the certainty that can be critical in making financing available,” Berwick said.

In her testimony, Coakley outlined a number of steps that could be taken to improve the law, including adding a requirement that all long-term contracts for renewable energy be put through a competitive procurement process.

“This will go a long way to ensure transparency and competition to reduce costs,” Coakley said.

She also criticized “overly-generous incentives” the law provides for companies that meet energy efficiency goals, including the guarantee of at least a 4 percent profit on contracts for long-term renewable energy contracts.

Hotel owners face some unique challenges in maintaining a financially viable business.  There are building maintenance and renovation concerns, interior furnishings and often extensive exterior elements to oversee, as well as day to day operations, staffing and customer service.  The good news is that hotel owners can take advantage of targeted tax and energy strategies that can significantly increase operating cash flow and generate a substantial ROI.

A real property analysis may identify and reclassify personal property assets to shorten the depreciation time into lives of 5 to 15 years for taxation purposes, which reduces current and potentially future income tax obligations.  Personal property assets include a building’s non-structural elements, some exterior land improvements and indirect construction costs.  Although the list is long, a few examples of items that can be reclassified include cabinetry, decorative millwork and specific lighting, some types of flooring and wall coverings, and specialty electrical and plumbing.  Hotels can typically benefit from this analysis because they contain large amounts of personal property in guest rooms, restaurants, and conference facilities. Exterior features such as paving, fencing, sidewalks and lighting are also eligible.  When these assets’ lives are shortened, depreciation expense is accelerated and tax payments are decreased, which frees up cash for other uses.

These benefits are retroactive, including buildings that have been purchased, constructed, expanded or remodeled since 1987.  This allows taxpayers to recapture previously unrecognized depreciation, which increases cash flow in the current year.

Another potential tax benefit for hotel properties goes hand in hand with energy efficient building projects and improvements.  §179D of the Energy Policy Act of 2005 provides guidelines for tenants and building owners who may be eligible for tax deductions for implementing energy efficiency components in commercial buildings.  These deductions are applicable to buildings that were either built or retrofitted after December 31, 2005, and must be certified by a qualified third party.

§179D includes full and partial tax deductions for investments in energy efficient commercial buildings that are designed to increase the efficiency of energy-consuming functions.  The deduction available is up to $.60 per square foot for lighting, HVAC and building envelope, creating potential for $1.80 per square foot if all three components qualify.  Hotel owners may look at anything from energy efficient lighting and HVAC systems to air barrier systems, green roof or cool roof systems, insulation and sealant systems, insulated exterior cladding and deck coating, and window glazing or tinting to qualify for the §179D deduction.  Enlisting the aid of qualified professionals to coordinate your green building improvements can not only pinpoint the most effective improvements to make initially, but should result in a cohesive plan to ensure that you receive the maximum energy savings and tax benefit from your capital expenditure.   With §179D deductions and future energy cost savings as incentives, making qualifying improvements to hotel facilities offers taxpayers powerful strategies to fund energy projects or increase cash flow.

In addition, the issuance of Revenue Procedure 2011-14 will allow some taxpayers to claim the §179D deduction all the way back to January 1, 2006 without filing one single amended income tax return. This means that a taxpayer could potentially claim deductions from 2006-2010 (or 2011) all on one return and significantly reduce their tax burden, if not eliminate it altogether.

The net affect may be that your energy efficiency projects may be funded by monies already owed from overpaid depreciation reducing your overhead energy costs or reducing your tax burden…or both.  It is a prudent move in this economy to explore the CRG Capital Discovery™ – pro bono preliminary review.

Had to re-post…very interesting information to share about the Energy Efficiency of States. 

ACEEE: MASSACHUSETTS OVERTAKES CALIFORNIA AS #1 ENERGY EFFICIENCY STATE, MICHIGAN AND ILLINOIS AMONG THE MOST IMPROVED

2011 Energy Scorecard Top 10 Also Includes NY, OR, VT, WA, RI, MN, CT, MD; States Most in Need of Improvement Are: ND, WY, MS, KS, OK, SC, WV, MO, AL, and SD … While MI, IL, NE, TN, AL and MD Are Six Most Improved States.

WASHINGTON, D.C. (October 20, 2011): A sour U.S. economy, tight state budgets, and a failure by Congress to adopt a comprehensive energy strategy have not slowed the growing momentum among U.S. states toward increased energy efficiency, according to the fifth edition of the annual ACEEE State Energy Efficiency Scorecard released today by the American Council for an Energy-Efficient Economy (ACEEE) during a National Press Club news conference.

 

Available online at http://aceee.org/research-report/e115, the ACEEE Scorecard shows that the top 10 states are: Massachusetts (taking the #1 position for the first time); California (slipping from the top spot it held for the first four editions of the ACEEE Scorecard); New York State; Oregon; Vermont; Washington State; Rhode Island; Minnesota, Connecticut; and Maryland (making its first appearance in the top 10 and also one of the six most improved states in the 2011 ACEEE Scorecard).

 

The 10 states most in need of improvement (from dead last to #42) are: North Dakota; Wyoming; Mississippi; Kansas; Oklahoma; South Carolina; West Virginia; Missouri; Alabama (also one of the top six most improved states); and South Dakota.

 

The six most improved states include Michigan, Illinois, Nebraska, Alabama, Maryland, and Tennessee.

 

“Energy efficiency is America’s abundant, untapped energy resource and the states continue to press forward to reap its economic and environmental benefits,” said ACEEE Executive Director Steven Nadel. “The message here is that energy efficiency is a pragmatic, bipartisan solution that political leaders from both sides of the aisle can support. As they have over the past decades, states continue to provide the leadership needed to forge an energy-efficient economy, which reduces energy costs, spurs job growth, and benefits the environment.”

 

“Thanks to our investments in innovation and infrastructure, Massachusetts is now leading the nation in energy efficiency,” said Massachusetts Governor Deval Patrick. “Through our Green Communities Act, we set aggressive goals and laid the foundation for greater investment in energy efficiency — and now we are proud to be a model for the nation and world.”

 

“I am thrilled that Maryland is being recognized as one of the top ten states and one of the most improved states for energy efficiency,” said Malcolm Woolf, director of the Maryland Energy Administration. “As a result of Governor O’Malley’s vision in establishing one of the nation’s most aggressive energy efficiency goals, Marylanders have already saved over 700,000 MWh of electricity and over $91 million dollars since 2009, and our peak demand program has helped us avoid major blackouts during our record-setting summer heat wave.”

 

“Illinois is a purposeful leader in the area of sustainability, investing more than $600 million in energy efficiency projects over the last four years alone,” Illinois Department of Commerce and Economic Opportunity Director Warren Ribley said. “By supporting aggressive policies including the state’s energy efficiency portfolio standard and advanced building industry training and education, we are creating jobs, building more sustainable communities and securing our place in the new energy economy.”

 

“We are excited that Michigan’s positive action on energy efficiency is being recognized nationally,” said Valerie Brader, the chief energy policy officer for the Michigan Economic Development Corporation. The ACEEE report observed that Michigan’s improvement is particularly due to the implementation of energy efficiency programs advanced in state legislation P.A. 295.

 

The fifth edition of the ACEEE State Energy Efficiency Scorecard presents a comprehensive ranking of the states based on an array of metrics that capture best practices and recognize leadership in energy efficiency policy and program implementation. The Scorecard benchmarks progress and provides a roadmap for states to advance energy efficiency in the residential, commercial, industrial, and transportation sectors. A new, diverse set of states has followed a group of leading states by adopting significant energy efficiency policies, which will lead to innovative and effective programs. Tremendous potential remains for energy efficiency savings in all of the states should motivate decision-makers to advance energy efficiency.

 

“Clearly, 2011 has not been kind to our economy, but energy efficiency remains a growth sector that attracts investment and creates jobs,” said Michael Sciortino, ACEEE senior policy analyst and the report’s lead author. “With even higher energy savings possible, we expect leading states to continue pushing the envelope next year and inspire those at the bottom of the rankings to embrace energy efficiency as a core strategy to gain a competitive advantage by generating cost-savings, promoting technological innovation, and stimulating growth.”

 

OTHER KEY FINDINGS

Facing uncertain economic times, states are continuing to use energy efficiency as a key strategy to generate cost-savings, promote technological innovation, and stimulate growth. The ACEEE Scorecarddocuments the following trends:

• Total budgets for electricity efficiency programs increased to $4.5 billion in 2010, up from $3.4 billion in 2009. Combined with natural gas program budgets of about $1 billion, total energy efficiency budgets in 2010 equal about $5.5 billion. Given the increasing regulatory commitments to energy efficiency, this growth will likely continue over the next decade.

• Twenty-nine (29) states have either adopted or have made significant progress toward the adoption of the latest energy-saving building codes for homes and commercial properties – up from twenty in 2010 and ten in 2009.

• Twenty-four (24) states have adopted an Energy Efficiency Resource Standard (EERS), which sets long-term energy savings targets and drives utility-sector investments in energy efficiency programs. States that adopted EERS policies in 2007 and 2008 are now realizing significant energy savings and moving ahead in the Scorecard rankings.

• States continue to improve policies to reduce financial, technical, and regulatory barriers to adoption and deployment of combined heat and power (CHP) systems, which generate electricity and thermal energy in an integrated system. Tremendous potential remains for CHP, particularly in states with heavy industrial and manufacturing bases.
• A group of leading states remains ahead of the curve in adopting policies to reduce vehicle miles traveled and promote the purchase and manufacture of efficient vehicles. A major gap exists, however, as over half the states have minimal or no policies to encourage efficiency in the transportation sector.

Methodology

This ACEEE Scorecard provides a comprehensive assessment of policy and programs that improve energy efficiency in our homes, businesses, industry, and transportation sectors. The Scorecardexamines six state energy efficiency policy areas and presents these results in six chapters: (1) utility and public benefits programs and policies; (2) transportation policies; (3) building energy codes; (4) combined heat and power; (5) state government initiatives; and (6) appliance efficiency standards. States can earn up to 50 possible points in these six policy areas combined, with the maximum possible points in each area weighted by the magnitude of its potential energy savings impact.

 

ABOUT ACEEE

The American Council for an Energy-Efficient Economy acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors. For information about ACEEE and its programs, publications, and conferences, visitwww.aceee.org.

 

MEDIA CONTACT: Patrick Mitchell at (703) 276-3266 or pmitchell@hastingsgroup.com.

 

Year-end is fast approaching, and if your business has been considering purchasing, financing or leasing new equipment you can take advantage of both §179 Depreciation and Bonus Depreciation if you act before the end of the year.  With Bonus Depreciation, businesses can deduct the full purchase price (within specified dollar limits) of equipment purchased or leased and put into service in 2011.

The Economic Stimulus Act of 2008 increased the §179 deduction limit to $500,000 and increased the total amount of equipment that can be purchased to $2 million from the previous amount of $200,000. A one-time Bonus Depreciation was also added, which now allows businesses to write off 100 percent of the purchase price of new equipment or other assets during the year they were purchased, as opposed to taking depreciation through annual deductions over time.

Another big “bonus” identifies and reclassifies personal property assets to shorten the depreciation time for taxation purposes, which reduces current income tax obligations. Personal property assets include a building’s non-structural elements, exterior land improvements and indirect construction costs. Depreciation expense is accelerated and tax payments are decreased when an asset’s life is shortened, which frees up cash – often a lot of cash.  If you purchased real estate in 2011 you may be entitled to a large bonus depreciation deduction by property identifying 5-year and 15-year assets within your property.

When originally established, Bonus Depreciation allowed 30 percent of the purchase price to be deducted, then 50 percent, and now 100 percent.  This is a temporary rule change, however, and limits are scheduled to revert in future years, so this is a great time to take advantage of these generous allowances while they are available.

Most business equipment, software, office furniture and even some vehicles can qualify for the §179 deduction, including the following:

• Equipment or machinery purchased for business use
• Tangible personal property used in business
• Business Vehicles with a gross vehicle weight in excess of 6,000 lbs
• Computer Software
• Office Furniture & Equipment
• Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
• Partial Business Use (equipment that is purchased for business use and personal use – generally, your deduction will be based on the percentage of time you use the equipment for business purposes.)

Consider a scenario where you lease or finance some of the above equipment during 2011.  Your business can deduct the full purchase price of that equipment in 2011, yet you’ve only made a few payments.  Additionally, you have the benefit of putting the new equipment into use.

Taking advantage of §179 Depreciation and Bonus Depreciation in 2011 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.

Although creating an energy efficient facility saves money for business and building owners in the long run, the cost of getting there can be prohibitive.  You might want to retrofit your existing building with energy efficient lighting, HVAC or upgrades to the building envelope in order to save money on energy costs, but you’ve first got to come up with the funding for those improvements.   Do you provide the required capital or continue to face increased operating costs?  The ROI on new, energy-efficient systems may be longer, but the equipment will perform more reliably while providing better working conditions and lowering energy costs along the way.   Most business owners will assume that funding for energy efficient upgrades has to come from dipping into their equity in the facility, or from an outside funding source such as a bank loan.

Fortunately, there are alternative strategies that can be put into place to pay for energy efficiency projects by significantly lowering your tax burden.  A cost segregation analysis identifies and reclassifies personal property assets to shorten the depreciation time for taxation purposes, which reduces current income tax obligations. Personal property assets include a building’s non-structural elements, exterior land improvements and indirect construction costs.  Depreciation expense is accelerated and tax payments are decreased when an asset’s life is shortened, which frees up cash for investment in energy efficiency projects.

The benefits of a cost segregation study are retroactive, including buildings that have been purchased, constructed, expanded or remodeled since 1987.  This allows taxpayers to recapture previously unrecognized depreciation, which increases cash flow in the current year.

Another tax benefit that can be applied to energy efficient construction or improvements is found in section 179D of the Energy Policy Act of 2005.  §179D includes full and partial tax deductions for investments in energy efficient commercial buildings that are designed to increase the efficiency of energy-consuming functions.  The deduction available is up to $.60 per square foot for lighting, HVAC and building envelope, creating potential for $1.80 per square foot if all three components qualify. These deductions are applicable to buildings that were either built or retrofitted after December 31, 2005.  In order to qualify for the deduction, the taxpayer must receive a third party energy efficiency certification.

In addition, the issuance of Revenue Procedure 2011-14 will allow some taxpayers to claim the §179D deduction all the way back to January 1, 2006 without filing one single amended income tax return. Taxpayers who wish to take the deduction without amending any returns will file a Form 3115 (Application for Change in Accounting Method) and will get to take the entire “catch up” deduction on the return that is being filed. This means that a taxpayer could potentially claim deductions from 2006-2010 (or 2011) all on one return and significantly reduce their tax burden, if not eliminate it altogether, which goes a long way toward funding energy efficiency.

Instead of looking to outside sources or reducing your valuable equity to fund energy efficiency, look to your own building for the answers.  Putting the right strategy into place can result in surprisingly significant savings and painless way to pay for your project.