Cost Segregation Services
As performed by The Born Group, a Cost Segregation study is a fully-engineered analysis of all costs associated with the construction or acquisition of a facility. The purpose of a Cost Segregation study is to accelerate the allowable tax depreciation deductions, by properly classifying these costs as either real or personal property. Otherwise, these costs are generally assigned a 39-year depreciable life for tax purposes as real property and depreciated on a straight-line basis.
However, as a result of having a Cost Segregation analysis performed, some of these costs may qualify as personal property and thereby are allowed to be depreciated on either a 5, 7 or 15-year life basis. In addition, the personal property building components are allowed to be depreciated on an accelerated basis. Any type of structure including: Office Buildings, Distribution Centers, Warehouses, Restaurants, Manufacturing Plants, Retail Operations, Shopping Centers, and Hotels, have tax savings potential. The amount of tax savings is directly attributable to the type and complexity of construction, with property reclasses ranging from 10-15% on distribution centers, to 20-30% on retail and office facilities, and as high as 60%+ on some manufacturing plants.
When to Consider Cost Segregation Services:
- New Building Construction
- Property Acquisitions
- Expansion of Existing Facility
- Tenant Leasehold Improvements
- Rehabilitation or Remodeling of Existing Facility
- Maximization of Available State Tax Credits
Benefits of Analyzing Building Construction:
- Reclasses from 39-yr. to 5-yr. life = NPV of 21%
- Reclasses from 39-yr. to 7-yr. life = NPV of 19%
- Reclasses from 39-yr. to 15-yr. life = NPV of 11%
- 40% Effective Tax Rate (34% Federal + 6% State)
- 7% Long-term Cost of Capital
Who should use Cost Segregation?
- Any Company w/Significant Depreciable Real Property Company Paying Income Taxes
- Any Industry and Any Type of Building
Also able to “Look-Back” as far as 1987 to Re-Claim Overlooked Depreciation Deductions, via IRS’s Revenue Procedures 2002-9 & 2002-19.
- Automatic IRS Consent
- No Filing Fees
- No Amended Returns
- Depreciation Difference Taken as Current Year Additional Deduction
- Focused on Significant Investments in Depreciable Realty; i.e., Buildings, Building Improvements, Land Improvements, + Leasehold Improvements – that were not previously analyzed.
Recent Example of Completed Study
|Expansion of Chemical (fragrance) manufacturing plant; $10.5M
- NPV (Net Present Value) of $1.1M
- Increased Cash Flow Savings – 1st 5 Yrs. = $1.4M
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