Cost Segregation – The Best ROI Available!
Great Benefits are Available
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The US Congress has been generous with its incentives to invest in real estate and improvements. Modified Accelerated Cost Recovery System (MACRS) was instituted in the Internal Revenue Code of 1986. MACRS provides guidance to the allocation of specific building components for reclassification from Section 1250 real property to Section 1245 personal property, with depreciation lives of 5, 7 and 15 years. These allocations analyses, known as “cost segregation”, can provide a great deprecation and therefore cash flow benefit to property owners and tenants who pay for their own tenant improvements. Marshall & Stevens has been providing cost segregation to our clients since the beginning of MACRS and has provided great results to our clients by doing the analysis the right way – the engineering- based approach.
Imagine the change in your cash flow by moving 20%, 30%, 40% of your depreciable basis out of a 39.5 year depreciable life (27.5 years for multifamily) into 5, 7 and 15 years. The savings can be huge!
Several times since the initiation of MACRS, Congress has provided greater incentives to invest in real estate and tenant improvements by providing windows for bonus depreciation, in essence, turbo charging the accelerated depreciation provided in MACRS. We are in one of those bonus situations today.
More good news – you don’t need to have had a cost segregation analysis performed when you first purchased or improved a property. Retroactive analyses are permitted and do not require a restatement of prior tax filings.
Cost Segregation for Renewable Energy Projects: ITC, PTC and 1603
The Wind Production Tax Credit (PTC) was first enacted in 1992. The Solar Investment Tax Credit (ITC) was originally established in 2005. Congress has extended the expiration date of both incentives multiple times, and may again. The Section 1603 grant program was created in 2009, to incentivize renewable energy project development during a time of economic distress. The 1603 program did not replace ITC and PTC, and 1603 is no longer available.
Applying for these ITC and PTC requires an allocation of project costs through a residual approach Cost Segregation analysis (see Treasury Regulation sections 1.338-6 and 1.338-7). The Cost Segregation analysis calculates the basis of project costs that are eligible for ITC under the guidance of Section 48 of the Code. Upon request, we provide an additional allocation of project costs into specific categories per IRC 1060.
Our experience in this arena of cost segregation includes analyses of solar, wind, energy storage, fuel cells, geothermal and biomass projects.
For more information about our Cost Segregation practice, please see the links and articles listed to the right or contact one of our professionals listed below.
How Marshall & Stevens can help with Cost Segregation
Our Real Estate Valuation team collaborates with our internal multi-disciplinary professionals to provide the value analyses and fresh independent opinions to fiduciaries, financing sources and investors for public and private company transactions.
Bankruptcy, Reorganization and Restructuring Services
Investigative accounting, business and asset valuations, financial consulting, and expert witness testimony are the tools Marshall & Stevens brings to distressed entities looking for a fresh start.
Property Tax Valuation Services
Property taxes are applied ad valorem, meaning based on the assessed value of the property. To assure the reasonableness of property tax basis, it is vital to work with independent professionals who have the right...
Buy/Sell Consideration
For over 90 years, Marshall & Stevens has helped businesses, financing sources, and others answer the question: What is the investment worth?
Frequently Asked Questions
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Marshall & Stevens performs hundreds of valuations and cost segregation analyses every year for renewable energy project developers, sponsors, and investors.
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The accelerated depreciation benefits from a cost segregation analysis on acquired real estate (or improvements for leased space) can typically pay for a material percentage of the transaction costs and/or multiple financing payments.
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The accelerated depreciation benefits (tax savings) from a cost segregation analysis on acquired real estate (or just improvements to a leased space) can typically pay for a material percentage of the transaction costs and/or multiple financing payments.
The cost segregation analysis provides an allocation of a portion of 1250 real property assets to 1245 personal property, which may result in quicker depreciation of some assets on the property tax rolls.
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Real estate should be looked at strategically for potential beneficial tax reporting, financial reporting, depreciation including cost segregation and bonus depreciation, financing including sale leaseback, etc.
The fair market value of acquired real estate is often much higher than the seller’s capitalized basis and the allocation between land (not depreciable) and improvements (depreciable) is often different than what the assessor has determined.
For financial reporting, the value of acquired real estate needs to be allocated to land, building and improvements, and intangible assets.
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The accelerated depreciation benefits (tax savings) from a cost segregation analysis on acquired real estate (sometimes just tenant improvements) can typically pay for a material percentage of the transaction costs and/or multiple financing payments.
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Real estate should be looked at strategically for potential beneficial tax reporting, financial reporting, depreciation including cost segregation and bonus depreciation, financing including sale leaseback, etc.
For financial reporting, the value of acquired real estate needs to be allocated to land, building and improvements, and intangible assets.
The fair market value of acquired real estate is often much higher than the seller’s capitalized basis and the allocation between land (not depreciable) and improvements (depreciable) is often different than what the assessor has determined.
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The accelerated depreciation benefits (tax savings) from a cost segregation analysis on acquired real estate (sometimes just tenant improvements) can typically pay for a material percentage of the transaction costs and/or multiple financing payments.
The Marshall & Stevens Difference
Marshall & Stevens provides Fairness and Solvency Opinions, valuation analyses, investigative accounting, and expert witness services to assist public and private clients with their important transactions and litigation matters.
- 11 offices
- over 200 employees
- 26 Unique Professional Certifications
- 8 firms acquired since 2023
- 93 years (founded 1932)
- over 55 staff with tenure of 9+ years
Client Highlights
Here are a few client success stories from public and private companies we’ve worked with
Cost Segregation Contacts at Marshall & Stevens
Background
Ralph Consola is a Principal and Executive Managing Director working from the corporate headquarters in Los Angeles, California. His responsibilities include leading the West Region of Marshall & Stevens and the firm’s Sales and Marketing efforts nationally.
Mr. Consola works with trusted advisors, investors, and corporations, both public and private, providing valuation and transaction advisory services related to mergers, acquisitions, divestitures, restructurings, financings and corporate tax matters, estate and gift tax reporting, insurance placement, and litigation support. Services provided include Fairness and Solvency Opinions, transaction consulting and the valuation of business enterprises, debt and equity instruments, intangible assets, real estate, and equipment.
Specific experience includes:
- Leading Marshall & Stevens’ national Structured Finance (now Energy & Infrastructure) practice from 2016-2019.
- Fairness Opinion and Solvency Opinion for a $750 Million recapitalization of a $2 Billion revenue produce company.
- Valuation of approximately 1,000 pieces of real estate, and their related fixed assets, for buy/sell consideration, insurable value, and financial reporting for one of the largest religious institutions in the US.
- Purchase price allocation of approximately 5,000 single family residential properties across the US prior to IPO.
- Valuation of fixed assets at over 1,500 locations across the US in support of over 80 FDIC Bank sales.
Mr. Consola joined Marshall & Stevens in 1999. He assumed the responsibilities of Principal in 2005 and Executive Managing Director in 2010. Before joining Marshall & Stevens, Mr. Consola worked for 11 years in the University Relations Division of Loyola Marymount University, where he served as Director of Alumni Relations, Senior Development Officer and on the Capital Campaign Committee.
Download a copy of Ralphs article Fair or Not Fair - Fairness Transparency and the SEC by clicking here.
Professional Highlights
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December 1999-present
‣ Executive Managing Director, Business Development, 2020-present
‣ Director, Board of Directors, 2017-present
‣ Executive Managing Director, Structured Finance Practice Leader, 2010-2019
‣ Principal, 2005-2016 - Loyola Marymount University
Director of Alumni Relations, Senior Development Officer, 1988-1999
Background
Patrick Craig is a Principal, Executive Managing Director, and National Practice Leader for the Real Estate Valuation Practice at Marshall & Stevens Incorporated.
Mr. Craig has over 30 years of experience in the real estate business involving valuation of single assets or portfolios, serving clients in the financial services, banking, REIT, insurance, legal, accounting, audit, corporate, development, pension and asset management sectors. His experience includes valuation and consulting for proposed and existing real estate projects and real estate portfolios including office, industrial, apartment, retail, hotel, mixed-use, self-storage, and community facility uses. He has also worked on matters of dispute including serving as a valuation expert in litigation.
Mr. Craig entered the real estate business in 1986. Prior to joining Marshall & Stevens, he led the Northeast valuation practice for Colliers International, while running the firm’s Portfolio Valuation Group and Business Innovation Committee and serving on the firm’s Global Leadership Team. Prior to Colliers International, he spent almost two decades with Cushman & Wakefield serving in numerous leadership roles including co-leader of its Portfolio Valuation Group, as Chairman of the firm’s Business Innovation Committee, and as a member of the Global Business Initiatives Council. Prior to Cushman & Wakefield, he held real estate appraisal positions at Dorman & Wilson and European American Bank.
He has served on the Board of Directors for the NY Chapter of the Appraisal Institute. He is an affiliate member of ADISA, a member of the Real Estate Board of New York, NCREIF, and the International Council of Shopping Centers. He is licensed as a Certified General Real Estate Appraiser in: New York, New Jersey, Connecticut, Pennsylvania, Georgia, Florida, Michigan, Virginia, Iowa and Illinois.
Professional Highlights
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- Board of Directors, New York Chapter, former
- Affiliate Member, Alternative & Direct Investment Securities Association (ADISA)
- Member, Real Estate Board of New York
- Member, National Council of Real Estate Investment Fiduciaries (NCREIF)
- Member, International Council of Shopping Centers
- Marshall & Stevens, Inc.
Executive Managing Director, 2013-present - ARGUS Software
Senior Vice President, Client Management, 2012-2013 - Colliers International
Regional Managing Director - Northeastern US, 2010-2012 - Cushman & Wakefield
Senior Managing Director, 1991-2010 - EAB Bank
Vice President, 1990-1991 - Dorman & Wilson
Associate, 1986-1990
Background
Greg Feldman is a Managing Director with Marshall & Stevens Incorporated and MS Capital. He is responsible for business development and client management.
Mr. Feldman joined Marshall & Stevens in 2010. He works with public and private companies and their trusted advisors to provide valuations of businesses, equity and debt instruments, intangible assets, machinery & equipment, and commercial real estate including cost segregation studies. Analyses are provided for buy/sell consideration, financial reporting, financing and recapitalization, tax planning and reporting, insurance placement and dispute resolution.
Prior to Marshall & Stevens, Mr. Feldman successfully served in business development and operational roles within a diverse group of industries including Big 4 and other international accounting firms, retail, consumer products, and printing.
Mr. Feldman has received extensive training in Sales, Sales Management, Negotiation, Project Management and overall Business Development.
He is active on several boards including Bloomingdale Youth Sports Association and the Tampa Chapter of Association of Corporate Growth (“ACG”) serving as the Membership Committee Chair.
Professional Highlights
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- Membership Committee Chair, Association of Corporate Growth, Tampa Chapter
- Marshall & Stevens, Inc.
Managing Director, Business Development, 2010-present - Grant Thornton LLP
Business Development Executive, 2010 - Ernst & Young
Business Development Executive, 2007-2010 - RR Donnelley (formerly Wallace Computer Services)
Regional Sales Manager, 1992-2007
Background
Robert Owens is a Director for the Machinery and Equipment and Cost Segregation practices at Marshall & Stevens Incorporated. He specializes in the valuation of machinery, equipment, buildings and improvements.
Active in the appraisal profession since his association with Marshall & Stevens in 1985, Mr. Owens prepares and supervises appraisals for the purpose of financial reporting (purchase price allocation and impairment), financing, tax planning and reporting including cost segregation, insurance placement, ad valorem, bankruptcy, litigation support, eminent domain.
Mr. Owens has experience preparing valuations for public and private companies in various industries, including, but not limited to agriculture, automotive, educational and religious institutions, electronics, semiconductor and related technology industries, energy production and distribution, food and kindred products, hospitality and gaming, manufacturing, medical, pharmaceutical, research and development, water distribution and waste treatment. His assignments often require international travel for property inspections.
Mr. Owens attended Hillsborough Community College and Oglier Heavener School of Real Estate. He is an Accredited Senior Appraiser (“ASA”) of the American Society of Appraisers, machinery and equipment discipline. He has served in numerous leadership positions for the Tampa Chapter of ASA including Chapter President.
Mr. Owens has testified as an expert witness before the United States Bankruptcy Court.
Professional Highlights
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- Marshall & Stevens, Inc.
Director, 1985-present
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