Specialized tax strategies that may allow for substantial benefits for architects, engineers, material suppliers, and their clients. Using engineering, design and costing to seize tax savings through 179D, Cost Segregation, and Tangible Property. Without an engineering-based studies, taxpayers are unable to take full advantage of the tax law; therefore, they surrender significant cash flow to the IRS for commercial buildings.

1. SPECIALIZED TAX STRATEGIES
SUBSTANTIAL BENEFITS FOR
ARCHITECTS, ENGINEERS, MATERIAL
SUPPLIERS AND THEIR CLIENTS
Using engineering, design and
costing to seize tax savings

2. Cost Segregation
Tangible Property Regulations
Energy Policy Act 2005 IRC
Section 179D
The Opportunities

3. Cost Segregation-What is it?
• A Cost Segregation Study has been a strategic tax savings tool
since 2004 (originally 987) for those who have constructed,
purchased, expanded, or remodeled any commercial real
estate both in the current tax year or prior tax years.
• A significant increase in cash flow may be realized by deferring
federal and possibly state income tax by reclassifying assets
resulting in accelerating depreciation deductions.
• A CRG Cost Segregation Study will reclassify the costs of
building components that are usually depreciated over 27 ½
years (Commercial Apartments) or 39 years (Commercial
Buildings) to depreciable lives of 5, 7 or 15 years.

4. QUALIFYING PROPERTY
Airports
Apartment buildings
Assisted Living Facilities
Automobile Dealerships
Automotive Service Centers
Banks
Casinos
Cinemas
Day Care Centers
Department Stores
Distribution Centers
Fitness Centers
Funeral Homes
Gas Stations
Golf Resorts
Grocery Stores
Hospitals
Hotels
Industrial Facilities
Laboratories
Manufacturing Facilities
Marinas
Medical Facilities
Mixed-Use Facilities
Nursing Homes
Office Buildings
Research Facilities
Retail Centers
Resorts
Restaurants
Service stations
Shopping Centers
Sports Facilities
Storage Facilities
Warehouses
Qualifying Properties

5. WHY IS ENGINEERING EXPERTISE NEEDED FOR THESE
REPORTS?
• IRS’ Guides elevate the Detailed Engineering Approach From Actual Cost
Records as “the most methodical and accurate approach”
– This approach consists of carefully examining all contemporaneous
construction and accounting records
– Estimates or “take-offs” are used to supplement the actual cost detail
when the existing detail is not sufficient for the purposes of the study
– A professional firm comprised of accountants, and engineers, with prior
cost segregation experience, is required to perform this kind of cost
segregation study
• Without the contractor/engineering expertise coupled with the tax law
guidance, there will likely be valuable tax benefits left on the table
• Determining 1245 property value on existing properties must be properly
documented and appraised and indicated according to the IRS Audit
Technique Guidelines

6. Tangible Property Regulations
• The recent release of the Tangible Property Regulations incorporates these
additional tax benefits to a CRG Cost Segregation Study
 Allows a look back at building components that may have been retired in prior
years or may be retired in future years.
 Determines whether future expenditures should be expensed in the year they
are incurred or capitalized over a longer term.
 Allows current or prior year building related costs to be expensed as a repair
and/or as maintenance cost if certain criteria is met.
 Allows commercial property owners to expense remaining depreciation on
structural components that have been remodeled or replaced or are no longer in
service. Structural or long life assets include:
• Windows, HVAC systems, Lighting/Electrical, Walls, Plumbing, Roofs,
• Parking lots, and Landscape Features.

7. Energy Policy Act - Section 179D
WHAT IS IT?
• An IRS Code section that allows for a federal deduction
for the installation of energy efficiencies in real property.
Effective dates from 1.1.2006 through 12.31.2013.
• Energy efficiencies are considered to be:
Lighting, HVAC and Water Heater, Envelope or all of
these as “Whole Building”.
• The deduction for each is $.60/square foot for:
Lighting, HVAC and Envelope or $1.80/square for Whole
Building.

8. • The opportunity under EPACT 2005 Chapter
13/ 3331 is for a deduction – not a credit.
• Credits are addressed and are allowed for
Renewables:
– Solar Investment
– Qualified Fuel Cells
– Microturbine Power Plants
Deductions…Not Credits

9. The Expired Energy Efficiency Incentives:
• The deduction for commercial building owners who improve
their building’s efficiency by 50 percent compared to a code
baseline (Section 179D);
• The credit to builders who reduce energy use in new homes by
roughly 30 percent compared to a 2006 code-built home
(Section 45L);
• The credit to manufacturers of super high efficiency
dishwashers, refrigerators, and clothes washers (Section 45M);
and
• The credit to homeowners who invest in energy efficiency
improvements that meet certain efficiency criteria, such as a
new high efficiency air conditioner or new windows
(Section25c).

10. Without an engineering-based
studies, taxpayers are unable
to take full advantage of the
tax law; therefore, they
surrender significant cash flow
to the IRS
Engineering Is Necessary

11. Car Dealership Case Study
Before Improvements-2007 After Improvements-2013

12. Car Dealership Case Study Details
This building that was built in 2001 for a cost of $2,360,100. In 2007 a Cost Segregation Study reclassified
$750,707 of 5 year property and $691,384 of 15 year property
• In 2013 General Motors required a $947,486 building improvement.
• The Façade, showroom, administrative offices, sales offices, service greeting area and client lounge
were redesigned or built and some of the existing 39 year components were demolished
• In 2013 CRG prepared a Tangible Property Service® Report and a cost segregation study with the
following results:
• $915,153 in new construction costs were classified into 5, 15 and 39 assets as a result of
• the Cost Segregation Study.
• Client received $533,334 in tax deductions by expensing the remaining depreciation on
• the abandoned components during 2013 as a result of the Tangible Property Study

13. Place: Riverside County, California
Facility: Warehouse and distribution
Replacement: Flat EPDM Roof in 2006
Square Foot: 205,000
Tangible Property Possible Recoverable
Depreciation: $236,550
Case Study - Warehouse

14. Office Building –24 stories 240,000 sf
Purchased 2005 for $11.5/M
2010 –New windows $2.6/M replacement
Original 2005 windows –depreciable at 39 years
established original cost of $730,000.
29 years of depreciation remaining totaling
$542,822.00
Additionally the ENVELOPE qualifies under §179D –
energy deductions for $144,000.00
Total deduction expense = $686,822.00
Case Study – Office Building

15. Middle School High School
§179D Case Study-Middle/High
School

16. A §179d Case Study-Middle/High School Results
This project was an upgrade and addition to an
existing building. Details:
• 277,050 sq/ft of renovated and newly constructed
space
• Construction Cost $86,201,449
• Placed in service on September 4, 2012
• Whole Building qualified for §179D certification
• Architect received $498,690 in federal tax
deductions

17. What Does This mean For You?What Does This Mean for You?
Increased Sales
Repeat Business
Increased Profits
More Referrals
Reduced Taxes
More Pasta and Meatballs

18. Capital Review Group Credentials
• At Capital Review Group our only business is
discovering, studying and applying the rules of play
that can be applied with advantage to reduce costs
and increase profits. CRG Capital Discovery Program
• We are a national company with presence in most
major cities where we work with professionals and
their clients
• CRG is fully qualified to provide the approved
certification for Cost Segregation Studies, Tangible
Property Services, and EPAct §179D Certifications

19. Thank You!
For additional information contact:
Rich Maiolo
Director of Business Development
860.485.8589
richm@capitalreviewgroup.com
www.capitalreviewgroup.com