Cost Seg Building

A Blog About Tax Savings for Building Owners

Month: June 2024

Supreme Court Overrules Chevron Deference Dealing Blow to the EPA and the Administrative State – Good News for Real Estate Development

June 28, 2024 / / 0 Comments
FILE- Gulls follow a commercial fishing boat as crewmen haul in their catch in the Gulf of Maine, in this Jan. 17, 2012 file photo. TExecutive branch agencies will likely have more difficulty regulating the environment, public health, workplace safety and other issues under a far-reaching decision by the Supreme Court. The court’s 6-3 ruling on Friday overturned a 1984 decision colloquially known as Chevron that has instructed lower courts to defer to federal agencies when laws passed by Congress are not crystal clear. (AP Photo/Robert F. Bukaty, File)

In what will probably go down as one of the most important Supreme Court decisions in all of U.S. history, The Supreme Court rule today 6-3 against Chevron Deference which we can hope will mean the start to the dismanteling of the adminstrative state that has a choke hold on the U.S. It’s going to depend of course if Congress has the courage to start gutting these agencies. I expect this to be good news for real estate development in general.

Here’s a take from Doug Sheridan on LinkedIn. He does a great job of briefly explaining the impact.

Here’s Laurence Tribe’s tweet about the decision.

Cost Segregation for Retail Strip Centers

June 27, 2024 / / 0 Comments
Southside Corners, Five Forks Simpsonville, SC – 2201 Woodruff Rd., Simpsonville, SC

Dispite Amazon supposedly killing traditional retail as we know it, retail strip centers continue to perform very well for their owners. We study a lot of these kinds of buildings and they tend to do well for their owners in terms of accelerated depreciation.

This one happens to be in Five Forks – Simpsonville, SC. It sits on a terrific corner at Woodruff Road and Highway 14 in the highly sought after area called Five Forks. There had been an old building that was at this corner and was for sale for a long time. It got demolished to make way for this gorgeous new 3 tenant retail strip. The tenants are Summer Moon Coffee, Tazikis Mediterranean Cafe and Tek Replay.

I was in the building last week and all the tenant spaces. It’s beautiful and high quality. The Boardman Group was the General Contractor and design firm that built this building. It is located adjacent to Southside Christian School which has elementary through high school. It seems there’s a built-in customer base right there.

179D Energy Efficient Tax Deduction – Benefits 39 Year Class Life Property

June 11, 2024 / / 0 Comments
New warehouses are great for 179D Energy Efficiency Tax Deduction

179D Energy Efficiency Tax Deduction

There are many nuances and variables with this tax deduction for commercial building owners and it’s not quite that easy to say who and how one qualifies for this. The laws changed recently which do affect buildings placed initially into service in 2023 / 2024. It used to be owners could get up to $1.80/SF for a tax deduction but now it’s been revised upward to $5/SF. Here’s the official IRS web page for the 179D deduction.

It’s really designed for buildings with about 40,000 SF or more given the math between the cost of the study and the tax deduction. It might make sense at 30-35,000.

But let’s say you have a 100,000 SF building. It might qualify for up to $5/SF which would be a $500,000 tax deduction. The interesting thing is this deduction is not subject to the current bonus depreciation schedule so you get 100% of this tax deduction. The other thing that I think is very powerful is this deduction hits your depreciation schedule and reduces the 39 year class life property. Most of us are used to the 5 and 15 year class life deductions with cost segregation and the use of bonus depreciation. This hits the 39 year line…nothing hits the 39 year line unless it’s 179D or a partial asset disposition.

This works if you are the initial owner / developer of the building. If you are the second, third, fourth owner etc., it does not work unless you’ve done some significant improvements including lighting, HVAC, building envelop and/or roof. But I know there are some significant buildings out there where those kinds of renovations are being done. They always should get a cost segregation study done for those improvements but you should also evaluate 179D.
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