Opportunity - Engineering Increased Cash Flow
BDO's engineering-based Cost Segregation Services team can help owners of business real estate assets increase cash flow by accelerating federal tax depreciation of construction-related costs. Opportunities exist not only for newly constructed buildings but also for buildings constructed or acquired in prior years and for acquisitions of existing buildings as well. Depending on the type of building and cost, current cash-flow and time-value benefits may be significant. In addition, benefits for green or alternative energy investments may be available.
Cost Segregation Opportunities
We perform detailed engineering cost analyses to help clients secure these cash-flow benefits, helping:
- Identify construction assets related to newly constructed projects that qualify for accelerated depreciation deductions, including bonus depreciation where applicable
- Identify construction assets related to existing facilities acquired in the current year that qualify for accelerated depreciation
- Perform retroactive cost segregation analyses of facilities that were either constructed or acquired in prior years. As part of the analysis, BDO will prepare Form 3115 to implement the accounting method change. In most instances, the method change is permitted on an automatic basis, and the “catch-up” depreciation adjustment, which may include bonus depreciation, can be fully recognized in the current tax year without amending any tax returns.
- Identify green energy tax incentives for taxpayers that utilize energy-efficient building technologies to construct new buildings or renovate existing buildings. These incentives may include the Sec. 48 Business Energy Investment Tax Credit and the Sec. 179D Energy-Efficient Commercial Buildings Deduction.
- Determine allowable Rehabilitation Tax Credits under IRC Sec. 47 for qualifying rehabilitation projects
Our Cost Segregation services often lead us to identify other opportunities to increase cash flow, including:
- Immediate or accelerated deductions for other fixed assets
- Property tax reductions and/or state sales and use tax exemptions for certain real estate assets
- Other tax accounting method changes that provide immediate deductions
- Research and development tax credits for attempts to develop or improve products, manufacturing processes or software
BDO's Competitive Advantage
BDO's Cost Segregation Services team provides a distinct level of experience and expertise to our clients:
- 60+ years of experience in cost segregation
- In-house engineers and contractors. The IRS has said that cost segregation services should be performed by “personnel competent in design, construction and estimating;” our engineering team delivers this critical area of knowledge. All our engineers have significant experience in cost segregation, building design and construction management.
- Cost segregation is a tax-related service, and BDO's Cost Segregation team is an integral part of our Tax Department in general and our Tax Accounting Methods practice in particular. We also work closely with BDO real estate tax professionals, CPAs, and lawyers.
- Our experience includes cost segregation studies of nearly every type of commercial property. In addition to manufacturing facilities, hotels and resorts, retail centers and commercial office buildings, we have extensive experience analyzing highly specialized facilities and structures including sports stadiums, power-generating facilities, ethanol plants, mining facilities and uranium enrichment facilities, among others.
Simply stated, BDO's in-house engineering and real estate tax experience enables us to provide a full-service approach to cost segregation and to take into account constantly changing tax laws and IRS regulations and case law to identify and deliver results.
For more information, please contact:
Northwest and Northeast
Southeast and Mid-Atlantic