Cost Segregation

Tax professionals across the country refer their clients to Marshall & Stevens for Cost Segregation of owned real estate, leased real estate, and renewable energy projects. The reason for these referrals is that our approach provides the best opportunity for savings and for support in case the IRS every wants to ask questions about our opinions.

Great Benefits are Available

If you already know about Cost Segregation choose one of our cost segregation questionnaires and you’ll be contacted by one of our experts:

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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.

 

Additional Resources:

IRS MACRS guide: https://www.irs.gov/pub/irs-pdf/p946.pdf

IRS Cost Segregation Audit Technique Guide: 

https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-table-of-contents

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