Business Tax Incentives
G.R. Reid Associates, LLP marries the science of engineering with the principles of tax and accounting to arrive at financial solutions that result in increased cash flow, minimized tax payments and maximum return on investment and energy. We have aligned ourselves with licensed engineers, including LEED Accredited Professionals as part of our team.
These IRS-sanctioned services include:
Cost Segregation Studies | Energy and Carbon Audits
Repair and Maintenance Studies | Historic Tax Credits Studies
Energy Tax Credits - 179D Federal Energy Tax Deductions
Research and Development Studies | Engineering Insurance Appraisals
Cost Segregation Studies
IRS Cost Segregation Techniques Guide
Your commercial property has assets which have probably been overlooked – per the IRS. Through our cost segregation studies, we work to uncover potential tax savings and increase cash flow through reclassification and depreciation of property. We provides a “Detailed Engineering” review as part of our reporting process and works seamlessly with the IRS and your CPA firm for minimal disruption to your business.
A cost segregation study is a federal income tax tool that increases your near term cash flow, in the form of a deferral, by utilizing shorter recovery periods to accelerate the return on capital from your investment in property. Whether newly constructed, purchased or renovated, the components of your building may be properly classified, through a cost segregation study, into shorter recovery periods for computing depreciation studies. The study carves out, into 5, 7 and 15 year lives, certain qualifying portions of your building that are normally buried in 39 or 27.5 year categories.
The following identifies what G.R. Reid Associates, LLP will provide within your study:
:: Our Steps to a Cost Segregation Study: Free – No Risk Initial Review will determine
if you would like to proceed.
:: Evaluate your current tax status and future business plans to determine the
feasibility and applicability of a Cost Segregation Study specifically for your project.
:: Evaluate the building’s construction costs by component or systems.
:: Review the project’s/facility’s construction documents,
including as-built drawings and project specifications.
:: Visit the facility/project to determine and identify how the components and
systems are utilized – as well as to document the systems and components.
:: Provide a “Detailed Engineering” review of the assets
including special purpose mechanical and electrical systems, decorative finishes,
site improvements, and any process related to and special purpose construction.
:: Classify or reclassify each building component into the appropriate tax life
as prescribed by IRS guidelines. We identify and allocate indirect costs to each asset.
:: Compiles a written report with the asset detail supporting the reclassifications and
completes the necessary tax form(s).
We insure every report which allows us to provide full warranty of all reports in the event of an IRS audit, which would be managed by our IRS controversy department. We take our service and products seriously. We do not want to expose our clients to any undue risk. We will include all necessary elements in your Cost Segregation Study to make the process seamless. Like you, we believe that there is no reason to overpay taxes. Let us provide a preliminary review of your property at no cost or obligation. We can provide you with an estimate of immediate cash benefits and long term savings.
Energy and Carbon Audits
G.R. Reid Associates, LLP closes the gap by assisting corporations and organizations with more energy solutions. We add value to commercial, industrial, and institutional clients by improving their bottom line today and generating future savings for years to come. We achieve this by reducing our clients’ most significant facility operating expenses. We focus on the billings of your telecommunications, solid waste, medical waste, recycling, water/sewer, gas, electricity, shipping, as well as property taxes. G.R. Reid Associates, LLP has assembled an outstanding team of professionals who are knowledgeable, talented, and passionate about their mission. Our teams evaluates and monitors utility billings to determine if refunds or cost reductions are available. By utilizing the knowledge, experience, and insider information of our auditing team, we will research your accounts for savings opportunities and submit recommendations for your approval. Additionally, our seasoned negotiators will interface directly with the utility vendors to insure the savings are actually implemented and reflected on the utility bill. Then we will monitor, free of charge, the monthly utility billings to ensure accuracy. Even those clients with staff dedicated to cost containment are astonished at the percentage of utility bills that contain errors or are billed inappropriately. Most utility providers contend that it is the customer’s responsibility to notify them of errors and misapplication of rates. However, the vast majority of businesses do not possess the specific knowledge or experience to challenge their rate or bill accuracy.
Our team can save you substantial profit dollars in the future. As you know, profit dollars are worth many times more than revenue dollars. By adding profit to the bottom line, value is added to your business.
Since we have no ties to any utility vendor, we offer pure, unbiased recommendations. With our contingency fee arrangement, we are not paid a cent until true savings are reflected on the bill. In essence, our fee comes from money that is presently being paid to the utility vendor. We offer a true win-win opportunity. At G.R. Reid Associates, LLP, we are committed to providing our clients with excellent service.
Expertise in Utility Bill Auditing and Property Tax Appeals
Our our clients may receive substantial savings, refunds, or rate reductions. We know the laws, rules, procedures, and policies (both written and unwritten) of the utility providers and taxing authorities.
Contingency Fee Based Services
Our contingency fee basis offers no risk to our clients. In the unlikely scenario we do not discover available credits or overcharges, you have no financial obligation whatsoever.
Constant Utility Monitoring
We will monitor and review your bills each month. We have the expertise, knowledge, and experience of utility tariff and rate structures. We analyze the industry – every day – so our clients can dedicate their time to operating their business.
Monthly Utility Savings Analysis
Every month you will receive a comprehensive spreadsheet detailing implemented savings.
You maintain 100% control over implementing recommended savings.
Repair and Maintenance Studies
Recent tax courts cases have paved the way for RandM studies, which are generating significant tax benefits for many business owners.
After a thorough analysis of your expenses for repairs and maintenance, we can help you reduce your tax liability and improve cash flow by properly reclassifying these expenditures.
First, we will identify which asset costs are not properly classified, then reclassify them as deductible repairs as defined by IRS Code Sections 162 and 263. Deductible repairs may include “incidental repairs” that help to maintain efficient operating condition but do not necessarily prolong its life, add material value or adapt the property for new or different use. Expenses incurred or paid for incidental repairs and maintenance are not considered as capital expenditures and may be reclassified to accelerate deductions in the current year.
How it Works?
If you perform regular maintenance and repairs to your assets, you may be able to recapture thousands of dollars by reclassifying improperly classified capital expenses as deductible costs to accelerate depreciation. Through IRC Section 481(a), routine and incidental repairs and maintenance costs may be adjusted to reduce taxable income in the current tax year and increase any net operating loss (NOL) for a potential carry-back up to five years.
Capital Expenditures vs. Deductible Repairs
Capital expenditures include those for building improvements or other long-term betterments, new equipment, architects’ fees – even the cost of defending or perfecting your title to the property. Generally, a capital expenditure either adds an asset or increases the value of an existing one. Whether it's a deductible repair or a capital improvement often depends on the context. For example, if an expenditure is part of a general plan of rehabilitation, modernization or improvement to equipment or other business property, it usually must be capitalized, even though by itself it would be currently deductible. According to IRS Code, you must capitalize expenses that:
- Substantially prolong useful life(including replacement of deteriorating assets),
- Materially increase value, or
- Adapt the property to a new or difference use
On the other hand, you are allowed to deduct fees and expenses related to routine repairs and maintenance that help maintain the property in efficient operating condition. You can deduct the cost of parts and labor in order to repair or maintain your business assets, provided that this expense does not increase the value of the asset or prolong the useful life of the asset.
A proposed regulation may also allow certain cosmetic and remodeling expenses, such as those that would improve branding, retail or merchandising, or provide a property “facelift”, as deductible under the repairs and maintenance rules. Deductible repair and maintenance expenses may include:
:: Replacing lighting
:: Roof repairs
:: Resurfacing parking lots
:: Replacing doors and windows
:: Resurfacing interior or external floors
:: Painting (interior or exterior)
:: Rekeying locks
Who Can Benefit from an Repair and Maintenance Analysis?
A variety of industries may benefit from these rules, including those in the banking, retail, hospitality, manufacturing, pharmaceutical, warehouse, distribution and utility industries, to name a few. The rules may apply to most capital-intensive companies that invest significant dollars on routine and incidental repairs and maintenance expenses.
Historic Tax Credits Studies
By either rehabilitating directly, or investing in the rehabilitation of eligible buildings, taxpayers can take advantage of one of two tax credit.
Preserve Tax Credits - Historic Preservation Tax IncentivesThe federal tax law offers an effective incentive to taxpayers who contribute to the preservation of our nation’s old and historic buildings. By rehabilitating directly or investing in the rehabilitation of eligible buildings, taxpayers can take advantage of one of a two tax credits.
The rehabilitation credit is available for historic and non-historic buildings used in a trade or business or held for the production of income. The federal income tax credit is equal to 20% of the cost of rehabilitating historic buildings or 10% of the cost of rehabilitating non-historic buildings constructed before 1936. These credits provide a dollar-for-dollar reduction of income tax owed. Buildings eligible for the 20% rehabilitation credit include those used for rental residential as well as nonresidential purposes. Buildings eligible for the 10% rehabilitation credit must be nonresidential, commercial and industrial buildings.
Engineered Tax Services can help you reap the tax benefits of rehabilitation and preservation projects as well as all related incentives and processes.
Historic Preservation Federal Income Tax Credit Applications:
Historic properties listed in the National Register of Historic Places may be eligible for the 20% Federal Income Tax Credit. We prepare the three-part application and advises property owners as to how to meet these requirements and successfully obtain the credits. For properties eligible for, but not yet listed in the National Register, we will prepare the nomination proposal needed.
New Markets Tax Credits:
New Markets Tax Credits can sometimes be combined with Historic Preservation Tax Credits when historic properties are located in qualified census tracts. We assist developers and property owners in determining if properties might qualify for both of these programs and facilitates the twinning of these programs.
Historic Preservation Ad Valorem Tax Exemption Applications:
Certain historic properties listed in the National Register of Historic Places and/or designated as historic properties by local governments may be eligible for up to a ten-year exemption from a portion of local property taxes in communities in Florida who have adopted this exemption program. Similar tax exemption programs are available in some other states. We prepare the application necessary for property owners to apply for the exemption.
Historic Preservation Design Review:
Where properties are located in city or county historic districts or designated as local historic landmarks, they typically are subject to design review by an architectural review board or commission. We represent property owners before these boards, assisting them and sometimes their architects with necessary board approvals, while helping owners meet their design goals. Some municipal historic districts provide financial incentives, such as a property tax exemption, for the appropriate rehabilitation of historic properties. We assist property owners in learning about these incentives and helping clients obtain them.
Additional historic preservation services include:
:: National Register Proposal Preparation
:: Cultural Resources Survey
:: Grant Writing
:: Written and Illustrated Design Guidelines
:: Historic Ordinance Consultation
Energy Tax Credits - 179D Federal Energy Tax Deductions
What are the requirements?
Must reduce total annual energy and power costs with respect to the interior lighting, systems, heating, cooling, ventilation and hot water systems by 50%, but partial deductions are allowed; Energy simulation is required to justify the deduction; inspection and testing must be completed by a qualified engineer or contractor registered in the jurisdiction.
How much is the deduction?
:: Maximum deduction – $1.80 per square foot = 50% reduction in total annual
energy and power costs (compared to a reference building that meets the minimum requirements of
ASHRAE Standard 90.1-2001); not to exceed the amount equal to the cost of energy efficient
commercial property placed in service during the taxable year.
:: Partial deduction – $.60 per square foot = 16 2/3% reduction for building envelope,
HVAC and service hot water systems and lighting
:: Partial deduction (interim lighting) – $.30 – .60 per square foot = 25 – 40%
reduction in lighting power density (50% in the case of warehouses)
:: Commercial buildings (any size)
:: Apartments, four or more stories, for lease
:: Commercial energy renovations
Who qualifies for the deduction?
:: Building owner at the time of building improvements
:: Public buildings – the owner may allocate the deduction to the designer
(architect, engineer, contractor, environmental consultant or energy services provider)
for the taxable year that includes the date on which the property is placed in service
What is the time frame for eligibility?
Units must be completed or renovated after December 31, 2005 but before January 1, 2013
What is needed from the builder?
:: Current full set of architectural plans that includes all specifications
:: Energy compliance documents for lighting, HVAC and envelope (Title 24 or IECC)
:: EnergyPro File – computer file used to generate T-24 documentation
:: A contact person and phone number
What do I get from a 179D review?
:: FTD certificate package – requires documentation for deduction
:: Provide review of existing T-24 or IECC to verify compliance with current code requirements
:: Review building lighting, HVAC and envelope systems for Federal Tax Deduction qualification
:: Contract for analysis and certification documentation
How do I claim the deduction?
:: The deduction is taken on the “Other Deductions” line of the taxpayer’s return
:: Tax returns may be amended going back three consecutive tax years
Research and Development Studies
The Research & Development (R&D) tax credit is one of the most significant domestic tax credits remaining under current tax law – a substantial tool for maximizing a company’s cash flow and bottom line. No one can afford to leave money on the table. Nevertheless, when it comes to the R&D credit, cash is left untouched all the time. Despite the fact that the R&D credit has been available since 1981, less than a third of eligible companies recognize that they qualify for the credit. Even if companies claim an R&D credit, they frequently do not claim the entire credit to which they are entitled, either because they do not understand what qualifies or do not have the processes in place to properly document the credit. We can help you identify and capture the R&D credit and increase cash flow. Credits for qualified activities are available in addition to deductions. The credit is a dollar-for-dollar cash offset against your taxes and can be significant if properly pursued. You don’t have to be a manufacturer to claim the R&D credit. Companies of all sizes in a wide range of industries throughout the United States have used the R&D tax credit.
According to a report released by the R&D Credit Coalition, an advocacy group:
:: 17,700 public and private companies claimed research tax credits for a total of $6.6 billion
in tax breaks
:: Firms in all major industries claim the R&D credit; principal industries include manufacturing,
professional, scientific and technical services and information sectors
:: States with the most companies reporting R&D activity include Florida, California, Texas,
Massachusetts, Pennsylvania, New York and Michigan
What qualifies for the R&D credit?
:: Developing or formulating new or improved products
:: Functionally enhancing existing products or formulas
:: Developing new or improved production processes
:: Assisting customers with technical problem-solving
:: Developing new or improved software for use or sale
:: Applying for patents and prototyping
Our R&D studies dig deep for better credits
We perform a study that digs much deeper into the fundamentals of your business activities – incorporating operations, engineering, financial and tax expertise that results in more credits and meticulous documentation that is necessary to support your activities, costs and credit. There is a direct correlation between the amount of your defensible credit and the expertise of the advisor performing the tax credit study.
G.R. Reid has a dedicated team committed to preserving your rights to claim federal and state R&D credits. These professionals focus solely on R&D credit issues and have significant audit defense experience (unlimited audit defense is included in our project agreement). We have assisted in recovering in excess of $100 million in cash refunds from previously unclaimed credits and in developing proprietary methodology for defending past, present and future credits. We want to work WITH you to help you benefit from this substantial tax credit.
Engineering Insurance Appraisals
What is an Insurance Appraisal?
An insurance appraisal is a replacement cost analysis which provides an accurate estimate of the amount of insurance required to replace each structure and/or amenity exactly as it stands on the day the report was prepared. The appraisal provides both a hazard and flood insurable value (if the property is in a flood zone). The G.R. Reid team calculates each buildings reproduction cost on a component-by-component basis from the ground up. Our software processes the complex calculations needed to correctly estimate the labor and material costs for each building component and system. Our software also calculates the taxes, fees, overhead and profit to provide an accurate estimate of what it would cost to reproduce the structure today. We may be able to take advantage of additional savings from our report as it relates to your property insurance. Our detailed engineering report can eliminate the guess work that goes into underwriting property casualty policies and believe me that guess work never works to your favor. There is also potential savings in shifting insurance rates from real estate assets to personal property assets.
Why obtain an Insurance Appraisal?
Most property owners, managers, boards and/or insurance agents believe that obtaining an insurance appraisal for their property is one of the best decisions they have ever made. The reasons for this are simple: Our reports are unmatched in the industry and can serve as a cost segregation study, as well as an appraisal. A Cost Segregation Study was initiated out of a 1999 IRS memorandum allowing taxpayers to segregate various building costs into shorter depreciable lives was combined with an additional memorandum that personal property such as furniture, fixtures and equipment should be depreciated over a 5-year recovery period.
The IRS memorandum was significant to all real estate investors because the structure of a building does not only consist of the walls and roof and some interior rooms, but such other items as land improvements (storm sewers, curbs and sidewalks, parking lots, swimming pools, landscaping, etc.) and personal property (flooring, interior finishes, decorative lighting, kitchens, interior glass and electrical wiring for appliances, etc.)
While a property’s structure is subject to a 39-year recovery period, land improvements qualify for a 15-year recovery period and personal property qualifies for a 5-year recovery period. The IRS allows owners through the process of a Cost Segregation Study to identify land improvements and personal property which can be separately depreciated over the shorter recovery period such as 5 years. A building will typically yield 25%-35% of the total costs that can be segregated into land improvements and personal property.
Who needs an Insurance Appraisal?
Home Owner Associations
Golf and Tennis Clubs
Hotels and Resorts
Bed and Breakfast Inns
Colleges and Universities
The valuation of historical properties is as much an art as a science, there are several different basis of value, and these must be matched with both the needs of the carrier and the expectations of the property owner. The variance in TIV between “Historical Reproduction” and “Historical Replacement” can be substantial. It is critical in meeting your valuation needs that appropriate valuation procedures be used, and that the policy be reviewed.
We can help determine the insurable value of your property, but more important we can help assure that the proper value is determined. We can help with the LEED certification, and the Energy Tax Credits that may be shared or transferred to your architect. (This can help offset some of their costs.) Our experts have been involved in hundreds of valuations for Historical and Antique buildings. There is no fee for our consultation, we will be happy to discuss your questions and to assist you in assessing your needs and requirements.