sept. 21-23, 2011 • ft. lauderdale - ficpa
TRANSCRIPT
Sept. 21-23, 2011 • Ft. Lauderdale
2010 - 2011 Accounting Shows Committee
Christine Moreno - Chair Lynn H. Clements - Vice Chair
Alan D. Campbell Lenice A. DeLuca Wayne T. DeWitt
Richard M. Dotson Gary A. Fracassi
Lucinda L. Gallagher Paulette M. Holder
Sharon S. Lassar James M. Luffman William L. Maloney
Mario R. Nowogrodzki Cecil Patterson, Jr. Robert M. Rankin
Diane J. Reich Poornima Srinivasan
Denise M. Stubbs Caridad Vasallo
Frank Ward Donna C. Zeitler
26th Annual Accounting Show September 21-23, 2011
Ft. Lauderdale
8:00-8:50am Cost Segregation / 179D ................................................1 Carol Hayward Senior Executive Director / Engineered Tax Services, Inc. 9:40-10:30am Incentives for Manufacturing Companies.....................26 (Section 199) Bob Rankin, CPA Robert M. Rankin, CPA 10:30-11:20am 1031: A CPA’s Tool.........................................................37 Christine M. Moreno, CPA, JD Attorney-CPA / Christine M. Moreno, CPA
Cost Segregation / 179D
Carol Hayward, Esq.
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Carol Hayward Senior Executive Director
Engineered Tax Services
Carol Hayward has been with Engineered Tax Services (ETS) for over five years and lived in the Greater Tampa Bay FL for 30 years before relocating to the corporate office in West Palm Beach, FL. Carol’s background has been in commercial and residential real estate, working nationally with developers & corporations in acquisitions and asset management throughout Florida. Carol has been a speaker at the World Energy Engineering Congress and a joint speaker at the FICPA Orlando conference. For the past two years, Carol has been the host of ETS’s national educational webinar on Section 179D Energy Tax Incentives. She enjoys being a resource to the CPA community as well as architect, and commercial property owners. Carol holds an active Florida Real Estate License among other licenses and qualifications. Carol attended Liberty University in VA.
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ENERGY TAX SECTION 179D & COST SEGREGATION
An Overview On How These Two Tax Strategies Can Maximize Your Clients Tax Savings
Carol HaywardSr. Executive813.394.2900chayward@engineeredtaxservices.comwww.engineeredtaxservices.com
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The Learning Objectives• Learn how your CPA firm can be an Expert in Energy Tax Incentives
• Learn how your CPA firm can Data Mine existing clients to claim serious tax benefits back 3 years and attract many new clients to the firm
• Understand Energy Policy Act (EPAct) 179D to claim substantial benefits for energy efficient design, construction, upgrade and renovation of commercial buildings placed in service between 2006 and 2013.
• Learn how Private Building Owners and Tenants can benefit and why CPAs, management companies, architects and builders should also be aware of this policy.
• Learn how Architects, Engineers and Contractors can claim the tax benefits as the “Designer” of new construction or renovated Public Buildings.
• Turn your knowledge and application of EPAct 179D into a new Competitive Advantage and niche Business Development Strategy.
• Additional tax savings and other niche strategies for your firm and clients like Cost Segregation and “DEIRA” Insurance Replacement Appraisals.
• How to find additional savings through local state, municipal and public utility rebates.
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About Engineered Tax Services
• ETS is Nationally Licensed Engineering Firm with niche tax expertise … regional offices across the United States
• ETS averages ~$50 million in monthly refunds and tax benefits for our real estate clients
• ETS averages ~$10 million in monthly refunds and tax benefits just for architects, engineering firms, contractors involved in Public Building projects
• Clients include top CPA firms and private clients Google, Hilton, Marriott, Boeing, Ford, BMW, Outback
• Partners with AIA, USGBC, Energy Star, DOE, ASHRAE
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Energy Policy Act of 2005
• Congress passed legislation in August of 2005 to encourage property owners to build energy efficient properties to promote reduction in energy consumption. Service dates were from 1/1/06 through 12/31/08.
• The Emergency Economic Stabilization Act of 2008 (HR-1424), approved and signed on October 3, 2008, extends the benefits of the Energy Policy Act of 2005 through December 31, 2013.
• The 179D ruling allows up to a $1.80 per sq. ft. tax deduction for commercial property owners and tenants … Incentives were also allowed for contractors, site home builders and residentialhome owners.
Note: You can go back 3 years and carry forward the unused 179D energy tax benefit (NOL) for 15 years.
Important: Overpayment Refunds For Clients
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Why Is the Energy Tax Benefit Not Used?
• Less than 3% of eligible taxpayers have filed for their energy tax benefits with the IRS.
• Millions of taxpayers are due significant benefits and possible refunds since 2006.
• Why are taxpayers missing significant energy tax benefits and incentives?
Low Awareness – No one was interested in the “good” times.
Requires Qualified Engineer with Qualified DOE Software
Requires Tax Paperwork – 179D Deduction
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Why CPAs Focus on Energy Tax?
Niche Value-Added Services and Additional Firm Revenue$!
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Who Benefits?
Your clients including …
• Owners or Tenants who pay for new or improved energy-efficient commercial buildings since 2006 through 2013
• Designers of energy-efficient properties installed in publicly-owned buildings (Architects, Engineers, Contractors)
• Homeowners
• Real Estate Investors
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Attention: Architects, Engineers & Builders
For energy-efficient commercial building improvements (New Build or Renovations) made by a Public Entity ...
Examples: Schools K-12, Universities, Civil, Municipal, Government, Military Buildings, etc.
… the IRS now allows the deduction to be allocated to the “person primarily” responsible for designing the property and systems in lieu of the public entity.
“Your clients should be hearing this from you. The CPA is the trusted advisor.
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• Person that creates the technical specifications for installation of energy efficient property
• May include architect, engineer, contractor, environmental consultant or energy services provider
• 179D Deduction can be allocated among multiple designers
• Government entity must provide designer with written declaration of the allocation of the deduction – “Allocation Letter”
Depth.Character.Solutions.
Who Qualifies as the Designer?
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Goal: Reduce Energy UseIn the US alone … Buildings Account for:
• 72% of electricity consumption• 39% of energy use• 38% of all carbon dioxide (CO2) emissions• 40% of raw materials• 30% of waste output (136 million tons annually)
• 14% of potable water consumption
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Ideal Candidates
• New Construction – Schools, Office, Retail, Hospitality, Industrial, Multi-Family, Single-Family
• Renovations & Retrofits – Energy Performance Contracting, CRA Redevelopment
• Green Buildings
• LEED CERTIFIED BUILDINGS
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Depth.Character.Solutions.LEED Buildings Are the Easiest Targets ...
Although Most Energy-Efficient Construction Is Eligible
• 10,000+ projected LEED projects for 2010
• 9,000 actual LEED projects in 2009
• 20,000 total registered LEED projects in 2009
“US Green Building Council”, Copyright 2008
2004 2005 2006 2007 2008
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Case Studies: 179D Energy Tax Benefits
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$103,000 179D Energy Tax Benefit
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$1,391,089 Energy Tax Deduction for IKEA
• Cost Segregation Study Five Year Cash Benefit: $16,975,757
$1,183,105.80 Energy Tax Credits CLAIMED for 5 additional IKEA Locations.
• Five year cash benefit from 3 Additional CSS = $8,301,688
• Total Five Year Cash Benefit for 4 buildings = $25,277,445
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$117,666 Tax Benefit Claimed by the Private Building Owner
• Republic Services
• LEED Silver
• 65,370 square feet
• Completed Fall 2008
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• HVAC 179D Benefit 30,320 square feet
Over $18,000 Energy Tax Deduction
CLAIMED by HVAC Contractor
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Qualifying the Whole Building• 179D Applies to improvements or new construction
• Up to $1.80 per square foot - If you meet?
• Building must reduce total annual combined energy use by at least 50% (compared to similar building based on ASHRAE 90.1 2001 energy guidelines vs. energy actually designed into building).
• Deduction is eligible to anyone who funds the investment … property owner or tenant
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Qualifying Partial Building Systems
1. Interior Lighting Systems
2. HVAC (Heating, Cooling, Ventilation & Hot Water)
3. Building Envelope (Roof, Insulation, Windows)
4. New or Existing Building partial deduction of $.40 to $.60 sq ft for upgrades to any one of the three major systems.
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20% 20%10%
Summary of 179D Tax Deductions
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• Lighting accounts for almost 40% of commercial electrical consumption
• 100 Billion square feet of commercial space nationwide. (Nearly all requires lighting … Parking Garages!)
• Less than 3% of eligible facilities have claimed EPAct179D Deductions
• New energy-efficient lighting can save building owners as much as 50% on their electric bills and payback in two years or less
• Any building with a lighting system 10 years or older is using old technology
• In addition to reduction in operating expense, new lighting improves lighting quality, increases the asset value and marketability of the building
The Lighting Opportunity
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New Lighting Case Study
Industry: Packaging Manufacturer
Building Size: 115,000 SF.
Actions: Replace (148) 400W MH and (44) 190W T12 with (180) 220W T5 HO Fixtures
Project Cost: $35,000
Energy Savings: $11,000 per year
Rebates and Incentive: $20,000
Environmental Savings:
Prevents emission of 147 tons
of greenhouse gases
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PAYBACK ANALYSISYear of Study 1 2 3 4 5
Cost of Upgrades $ 130,000.00 $ 3,900.00 $ 3,900.00 $ 3,900.00
P/SF $ 3.25
% of total 1.30%
Cost savings w/ ES* $ 20,300.00
Cost savings w/ CSS $ 185,000.00 $ 216,608.00 $ 132,210.00 $ 86,068.00 $ 80,931.00
Utility Savings (40%) $ 24,000.00 $ 24,720.00 $ 25,461.60 $ 26,225.45 $ 27,012.21
Less Study cost $ 15,000.00
Totals Savings $ (84,300) $ (241,328.00) $ (153,771.60) $(108,393) $ (104,043)
ROI % 158% 4042% 2897% 2767%
Payback Time 0.6 0.0 0.0 0.0 0.0
Note: * Energy Saving of $58,000 @ 35% federal tax rate
Learn how to enhance the ROI (Return on Investment)!
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HVAC
The Department of Energy recommends minimum energy efficiency ratios (EERs) and coefficients of performance (COPs) for certain commercial unitary air conditioners and heat pumps, both split and package systems, respectively, as follows:
Air-Cooled Products Efficiency Standards
>65,000 - <135,000 Btu/h 11.2/11.0 EER for Air Conditioners
11.0/10.8 EER for Heat Pumps
3.3 COP @ 47ºF for Heat Pumps
>135,000 - <240,000 Btu/h 11.0/10.8 EER for Air Conditioners
10.6/10.4 EER for Heat Pumps
3.2 COP @ 47ºF for Heat Pumps
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BUILDING ENVELOPE• Roofs, Walls & Insulation
• Climate Considerations
• Doors, Windows & Openings
• Thermal Efficiency
• Reflectivity
• Moisture Buildup
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1st Step … Feasibility Analysis
• Review basic building info including location, SF, year completed, scope of work, what systems (Lighting / HVAC / Building Envelope)
• Prepare (complementary) Cost Benefit Analysis for each building or portfolio of buildings for client to review
• Average ETS fee is $.05 - $.15 per sf
• Average client benefit is $1.20 per sf
• Agree on Engagement strategy, ETS collects building plans and specs from client
• ETS completes review, energy modeling and benefit calculation
• ETS schedules site visit as required by IRS
• Complete process takes 45-60 days
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CERTIFICATION MUST INCLUDE:
• Statement regarding the energy efficiency of the building (Lighting, HVAC and/or hot water system, Envelope)
• Statement that the reduction has been determined under the Rules of Notice 2006-52
• Address of the building
• Statement that field inspections have been performed verifying the energy-saving assets
• Statement that approved software has used for calculations
• A list of qualifying assets and projected annual energy costs
• Completed by a Qualified, Independent 3rd Party- Properly licensed engineer with accounting and IRS experience- Not a related Individual or Entity - Written statement of qualification to taxpayer- The qualified firm’s (ETS) name, address and phone number
IRS GUIDELINES FOR 179D
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ETS Sample Report
289 pages!
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Identification & Calculations
Identification Calculations
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Certification
Certification
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Amending a Return
When amending an Architect's Partnership return for
179D deduction the following steps should be taken:
On Page 1, line 20, "Other Deductions" add an item "Section 179D Deduction" and the full amount of the deduction.
On Schedule M-1, enter on Line 7(A) as a deduction on tax return not on books, the same amount and title it "Section 179D Deduction“.
The balance sheet on Page 5, Schedule L will not change due to this deduction.
If the capital accounts on the Schedule K-1s for the partners are kept on a Tax Basis then the deduction will flow to each of the partners capital accounts accordingly. If not, than the K-1s should be marked as "GAAP" or "OTHER" basis.
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Amending a Return
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Amending a Return
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Tax Strategy
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Additional Federal Incentives
• Fuel Cells = 30% Credit
• Stationary Micro Turbines
• Power Plants = 10% Credit
• Solar Equipment = 30% Credit
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Additional Incentives and Programs
• Public Utility Rebates
• Insurance Savings
• State and Local Rebates
Visit www.dsireusa.org for a clickable map and listing of all State and Federal incentives for energy improvements
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State Incentives Can Be Equal or Greater Than Federal Incentives
Federal Benefits Not Exclusive …
• Important to know that new energy incentives are coming online everyday.
• In addition to Federal incentives, many States also have matching credits as well.
• Also, utility companies have incentives related to energy assets.
• Important to look at ALL incentives: State, Federal, Local Government and Utility Companies
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Goal of Cost Segregation Studies
• Goal = to identify all construction-related costs that can be more quickly depreciated over 5, 7, 10 and 15 years and reclassified from 39, 31.5 and 27.5 years
• Traditional depreciation for Real Property is 39 years for commercial property and 27.5 years for residential rental property
• Reducing tax lives results in accelerated depreciation deductions, a reduced tax liability, and increased cash flow
Would you Rather Get Your Money Back Today or in 39 Years?
“You must pay taxes. But there's no law that says you gotta leave a tip.”
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So What Is The Big Deal?
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Qualifying Property
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Items To Be Reclassified in a Cost Segregation Study
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Cost Segregation Recent Results
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Insurance Savings Alone May Pay forCost Segregation Study
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Tax Repairs & Maintenance: More Cash Flow
• Favorable Court Cases for taxpayers – FedEx Corp. vs. U.S.
• Allow property owners to expense items that were previously capitalized for 39 years.
• Favorable rule changes allow property owners to catch up on missed expenses and get refunds.
• IRC Section 481(a) adjustment
Reduces taxable income in current tax year.
Carry-back potential of 5 years.
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About Engineered Tax Services
ETS marries the science of engineering with the principles of tax and accounting utilizing innovative financial strategies resulting in increased cash flow, minimized tax payments and increased ROI. These IRS approved services include Cost Segregation Studies, Energy Tax 179D Deductions, Repair & Maintenance & R & D Tax Credits.
Carol Hayward-Sr. Executive
813.394.2900 Direct
www.engineeredtaxservices.com
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Incentives for Manufacturing Companies (Section 199)
Robert M. Rankin, CPA
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Robert Rankin, CPA Robert M. Rankin, CPA
Professional Activities and Presentation Activities
Bob has practiced in the Miami area specializing in taxes for over 40 years. During that time he has conducted several FICPA sponsored courses on various tax related subjects. He has also spoken frequently on tax matters at numerous seminars and professional meetings. Bob’s tax presentations take the form of a Tax Practitioner speaking with fellow Tax Practitioners.
Bob’s present and past professional memberships include: American Institute of AICPAs – Tax Division Florida Institute of CPAs Greater Miami Tax Institute Tax Executives Institute Name Address and Firm Affiliation
Name: Robert Michael Rankin Firm: Robert M. Rankin, CPA
Address: Datran One – Suite 1600
9100 S. Dadeland Boulevard Miami, FL 33156
Telephone: 305-663-8102 Fax: 305-305-598-8523 Email: [email protected]
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1031: A CPA's Tool
Christine M. Moreno, Esq, CPA
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Christine M. Moreno, Attorney- CPA 4450 SE Federal Highway, Stuart, FL 34997
Tel: 772/288-1020; Fax: 772/288-3578
Our presenter, Christine M. Moreno, is both an Attorney and CPA, whose presentation will be on the use of §1031 Exchanges during challenging economic conditions. Since 1985 Christine has been a frequent presenter in the area of §1031 like-kind exchanges, appearing before the Florida Real Estate Exchangors, Northside Brokers, the FICPA and various local FICPA Chapters. Christine is a Past President and current Board Member of the FICPA Gold Coast Chapter, and looks forward to discussing with fellow CPAs new ideas in structuring real estate transactions. A native of Florida, schooled in Florida, and living in Florida, Christine has been a practicing attorney and CPA for over 25 years. Although Christine does not prepare tax returns, she does provide tax consultations, and collaborates with various CPAs in providing services to clients in real estate, corporate, and probate matters. In 1989 Christine was elected and served as Mayor of the City of North Miami. Christine is past president of the Hobe Sound Port Salerno Rotary Club, and Chair of its Literacy Committee. She believes that education is the cornerstone of our profession, and volunteerism is the anchor to our community and our lives.
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Learn more about membership. | [email protected] | www.ficpa.org(800) 342-3197 (in Florida) | (850) 224-2727
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Coral Gables Member since 2007
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Fort Lauderdale Member since 1979
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Tallahassee Member since 2010
FICPA Membership: Connect, Learn and ThriveProud to be a Member
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