Maximizing Retailers' Cash Flow with Tax Savings

Furniture World News Desk on 10/5/2015

By Capital Review Group

Between juggling concerns about merchandise, boosting sales, and satisfying customers’ expectations, searching for opportunities to save on taxes typically falls low on the list of priorities for retailers. However, for those in the furniture industry who own their commercial buildings, the tax code presents certain incentives that are often overlooked, but represent significant savings.

The first step in optimizing cash flow through a reduced tax burden is to learn about the available incentives and what they require. When it comes to implementing money-saving strategies, time is of the essence. Has your business investigated the following opportunities available to owners of commercial buildings?

Section 179D
Installing fixtures that conserve energy can yield numerous benefits for building owners, such as enhanced comfort for employees and customers, greater aesthetic appeal, and lower utility costs. Section 179D of the tax code offers the added benefit of a potentially generous deduction. With the goal of rewarding building owners and designers for installing energy-efficient upgrades, §179D may total a deduction of up to $1.80 per square foot. This amount is divided between three building subsystems, with a maximum deduction of $.60 per square foot possible for each: lighting, HVAC (including water heaters), and the building envelope. While many upgrades may qualify for §179D, including LED lights, they must satisfy certain standards found in ASHRAE 90.1-2001. ASHRAE is a society committed to the sustainability and energy efficiency of buildings, and one of the ways in which it advances its goals is by publishing detailed guidelines, which may be found on its website at www.ashrae.org.

In order to claim the §179D deduction, taxpayers must have their projects certified by a qualified third party. The deduction applies to both new and existing buildings, as long as the qualifying projects were completed between January 1, 2006 and December 31, 2014. The deduction expired at the end of 2014, but historically, it has nearly always been retroactively renewed at the end of each year after lapsing. At the time of this writing, the Senate Finance Committee had passed a bill in a 23-3 vote to extend §179D through the end of 2016 and update the requirements to reflect a more recent ASHRAE standard. Although Congress is not expected to take further action on the bill until later in the year, there is reason to be optimistic that it will become law and the §179D deduction will continue to be available for certain energy efficiency projects in commercial buildings. Therefore, building owners should continue to consider this lucrative incentive as a possible option for lowering their tax burdens.

Tangible Property Review
All taxpayers who acquire, produce, or improve tangible property, such as buildings, machinery, or equipment, are subject to a set of regulations found in §263(a) of the tax code. Effective as of January 1, 2014, these tangible property regulations help taxpayers distinguish between costs that must be presently deducted as business expenses and non-deductible capital expenditures. They also enable certain taxpayers to claim additional deductions and capture losses for assets of which they disposed in previous years. Since commercial buildings are full of assets that frequently need to be improved, repaired, or discarded, taxpayers who own buildings may harness tax savings by understanding and applying the tangible property regulations.

Cost Segregation
As pieces of real property, commercial buildings are typically depreciated over 39 years as stipulated by the tax code. What if buildings were divided into component parts with shorter depreciation lives, allowing the taxpayer to claim greater depreciation deductions in a shorter amount of time? This is the goal of a cost segregation study, which uses engineering principles to identify tangible personal property assets within a building. Since tangible personal property is generally depreciated over five, seven, or fifteen years, cost segregation studies help building owners unlock tax savings through accelerated depreciation deductions.
In business, seizing opportunities to save money is almost as important as generating revenue. Although the tax code contains only a few provisions that specifically benefit building owners, those that do exist carry the potential for substantial savings. Capturing incentives like the §179D deduction, cost segregation, and tangible property review requires the assistance of tax professionals, but the return on investment for building owners is likely to be significant.

About Capital Review Group: Based in Phoenix, Arizona, Capital Review Group is a national full-service specialized tax consulting firm committed to helping business owners maximize tax savings opportunities. Highly respected for our strategies combining facility engineering with tax accounting to maximize depreciation and paybacks on capital investments for our clients, our experts also apply the intricacies of tax law to optimize incentives for your business operations. We make it our business to stay current on federal tax incentives such as §179D Tax Deductions, Cost Segregation, Tangible Property, Research & Experimentation Tax Credit or R&D Tax Credit, and other IRS compliance regulations, creating lasting financial value and benefit for businesses across the US. For more information visit  http://www.capitalreviewgroup.com or contact 877-666-5539  crginfo@capitalreviewgroup.com