Cost Segregation
Energy Efficiency Studies

Cost Segregation

Cost Segregation provides significant tax savings to companies involved in the following activities:

• constructing a new building or facility
• expanding an existing one
• purchasing real estate
• renovating an old building or facility
• making leasehold improvements

TAX PROJECTS GROUP’s Cost Segregation Study provides significant tax savings and cash flow improvement. We seek detail isolation of depreciable acquisition expenses. The isolated expenses are then assigned to considerably shorter depreciation lives. Commercial real estate, in general, is depreciated over 39 years for tax purposes. With our Cost Segregation Study, however, these expenditures can be moved to much shorter depreciation lives (5, 7, or 15 year).

Owners/tenants of various types of property can reap significant benefits from our Cost Segregation Study. Shorter depreciation lives of certain expenditures can be found in the following types of properties:

• Apartments
• Banks
• Distribution facilities
• Grocery stores
• Hotels
• Manufacturing
• Offices
• Restaurants
• Retail
• Warehouses

Our Process

1. Assessment Analysis

Information is requested of the client and reviewed by our cost segregation engineer specialist. The net present value of future depreciation savings is calculated and relayed to the client along with a completed engagement letter. The client is fully aware of the benefits to be derived and our engagement pricing.

2. Construction Expenditure Analysis

Client provides information on capitalized expenditures incurred over the Study period. Our analysis will include a thorough review of historical purchase price allocations, closing statements, rent roll analysis, and details on any other capitalized expenditures.

3. Review of Construction Drawings and Blue Prints

Detail review of construction drawings and blue prints is imperative to the Cost Segregation Study and the shifting of assets to shorter depreciation lives. This will include an analysis of all mechanical, electrical, structural and civil aspects of the construction expenditures.

4. Location Visit

Visiting the actual locations where significant expenditures have been incurred allows us to confirm our findings from the construction drawing analysis and often unveils significant expenditures deserving shorter depreciation lives. We will look to generate additional required documentation and photographs for support of our Study.

5. Technical Report Generation

This phase includes the preparation and delivery of the Cost Segregation Study and its quantitative and qualitative components. The Study will serve as the client’s documentation supporting the depreciation claimed. This phase entails a full analysis of technical issues related to the segregated expenditures as well as full identification, documentation and quantification of the expenditures at issue.

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Energy Efficiency Studies

ARE YOU READY TO TAKE ADVANTAGE OF THE NEWEST COMMERCIAL TAX INCENTIVES?

Improving the energy efficiency of your existing commercial buildings, or designing new energy- efficient buildings could make your company eligible for a tax deduction of up to $1.80 per square foot.

The Energy Policy Act of 2005 includes a tax deduction for investments in “energy efficient commercial building property” designed to significantly reduce the energy costs associated with heating, cooling, water heating, and interior lighting of existing commercial buildings. To be eligible for this deduction, the energy-efficient commercial building property—such as a state-of-the-art lighting system—must be placed in service between January 1, 2006 and December 31, 2008.

To qualify for the full deduction, a building owner or tenant must make investments designed to reduce energy costs by 50% or more. A partial deduction of $0.60 per square foot is also available for investments in one of three systems—lighting; heating and cooling; or building envelope—designed to reduce energy costs by 16 and 2/3% (i.e., one-third of the 50% requirement).

Who Can Benefit from the Deduction?

The person or entity that pays for construction is generally the recipient of the deduction. This is usually the building owner, but some HVAC or lighting efficiency projects could benefit the building tenant. For government-owned buildings, the person primarily responsible for designing the building or project may be able to claim the deduction.

Our Process

1. Assessment Analysis and Review of Blue Prints

Initial data is gathered to evaluate the potential tax savings for implementation of an Energy Efficiency Study and Certification. The potential tax savings is documented in a formal engagement letter.

2. Location Visit

A physical inspection of the installed equipment must occur by our engineering staff.

3. Calculations

Prescribed calculations will be made on the energy usage and proposed usage. The Performance Rating Method (PRM) must be used to compute the percentage reduction in the total annual energy and power costs with respect to combined usage of a building’s heating, cooling, ventilation, hot water and interior lighting systems as compared to the minimum requirements of Standard 90.1-2001.

4. Technical Report Generation

This phase includes the preparation and delivery of the Energy Efficiency Study and its quantitative and qualitative components. This study includes the calculations and the certification of the qualifying assets as well as the tax deduction allowed by the taxpayer / property owner.

Certification

Tax Projects Group will analyze, calculate, make recommendations and/or Certify subject property that reduces annual energy and power consumption (combined power consumption) by 50% or qualifying appropriate Sub-System qualifying percentages.

Before a taxpayer may claim a Section 179D deduction with respect to property installed on or in a commercial building, the taxpayer must obtain a Certification with respect to the property. The Certification must be provided by a qualified individual and satisfy the requirements of Section 179D(1). Statements of Certification must meet the minimum requirements of Standard 90.1-2001 for interior lighting systems, heating, cooling, and ventilation and hot water systems. Statements must also illustrate the energy reduction by 50% or more. Statements for Energy Efficient Lighting Systems meeting the requirements of the permanent rule Section 2.03(1)(a) – will be made satisfying a reduction by 16 2/3% or more. Statements for Energy Efficient Lighting Systems meeting the requirements of the interim rule of Section 2.03(1)(b) – must satisfy the requirements stated in Section 2.03(1)(a) of Notice 2006-52.

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