I was going through some recent sales and saw that EnerSys Gigafactory LLC just closed on 321 acres in the Upstate. I found this press release and I’m sure there are several other news storage out there regarding this. The press release says between the state and Greenville County, they got $200MM in incentives to come build here. They plan on a state of the art 500,000 square foot facility that will bring about 500 jobs. Here’s another article about the proposed factory.
South Carolina appears to be a key destination for many of these giant batter facilities as we’ve seen with other deals. The South Carolina Department of Commerce are excellent business deal makers and there are lots of excellent economic development groups in South Carolina that also help.
Looking for cost segregation services here in the Upstate of South Carolina? I’m happy to help. While I work all over the U.S. and can work in all 50 states, I happen to live right here in Greenville, SC.
I represent CSSI, LLC and we offer several services to help building owners and tax firms:
cost segregation studies – engineering-based
partial asset disposition studies
179D tax deduction – energy savings
Research & Development Credits
3115s – we can draft as well as sign off on these forms when needed
CSSI, LLC has been in business for more than 20 years and we have completed about 50,000 engineering-based cost segregation studies saving our building owner clients a massive amount of money on their income taxes.
This is a remarkable article about the growth and success of South Carolina as a business powerhouse in the southeast. There has been a lot written about South Carolina and its transition from textiles to advanced manufacturing but this is the most comprehensive piece I have found on the subject.
South Carolina continues to garner attention on the global stage. BMW and Michelin certainly have had a massive impact on that. They are in the Upstate of South Carolina. Boeing in Charleston now also plays that key anchor role in the other part of the state.
There are so many assets here in South Carolina. From a business perspective, it’s a very friendly business climate that starts at the state level. Most counties are friendly as well. The Port of Charleston is a huge driver of commercial success as well as the Inland Port Greer which allows ships to unload in Charleston and run the boxes on rail right to the Upstate where it can then be readily trucked all up and down the east coast.
The quality of life is also quite good across the state. Worldclass beaches and resorts run all along the eastern seaboard of the state from Myrtle Beach down to Charleston and Hilton Head. The Blue Ridge Mountains can be seen and visited through the Upstate just north of Greenville, SC about 45 minutes to an hour.
The cost of living is generally cheaper here in SC than you’ll find in most parts of the country. Property taxes in particular are some of the lowest you’ll find anywhere.
Recently I received a call from someone inquiring as to whether or not Starbucks were good for cost segregation. Yes, they are excellent for cost segregation because they typically have large parking lots (15 year land improvements) and excellent interior finishing which a lot of that ends up being identified as 5 year class life property.
Here’s a good example. Let’s say this Starbucks was purchased for $2.5 million and the land was worth $500,000. Since the land cannot be depreciated, that must be deducted so we come up with a basis of $2,000,000 for the building. Every building is different but for the sake of understanding how cost segregation can help an owner of a Starbucks building let’s look at how this breaks down.
A cost segregation study is going to identify and reclassify all the building components as well as segregate the land improvements. So with this property, let’s stay 17% was identified at 5 year class life property. That would be $340,000. And for the land improvements, let’s say those come in at 20% which would be $400,000. So on a $2 million building, this owner could accelerated $740,000 or 37% of the building cost or basis. Depending upon the year in which this went into service, it could be taken as 100% bonus depreciation (Sept. 27, 2017 – Dec. 31, 2022). If the building went into service in 2023 then it would qualify for 80% bonus depreciation. (Bonus depreciation drops 20% each year until 2027 when it goes to zero or just regular accelerated depreciation).
If the owner is paying federal taxes at say a 35% rate, that would be a tax savings of almost $260,000 in income taxes. These studies would typically cost less than $6,000 which is an expense…so it’s a net of $3,900. That’s an ROI of about 66:1.
If you’d like to have us evaluate your property for cost segregation, please feel free to reach out and I’d be happy to discuss.
Recently we completed a cost segregation study for the owner of this retail strip center. I thought it might be helpful for you to see the kinds of results with this kind of asset. (Please note that every building is different and will see a different result…some will perform better than others depending on items like finishings and land improvements like parking lots and landscaping). The owner acquired the building in April 2022. For cost segregation, we deduct the value of the land to come up with the basis or the cost of the building. The basis was $1,125,000. The owner had also spent $125,000 on tenant improvements (TI) which were all interior improvements. Because he had purchased the building in April 2022, he would have had a depreciation expense of $18,750. That is straight line depreciation at 39 years. He also could have taken the $125,000 as a depreciation expense without our help as those tenant improvements are considered Qualified Improvement Property (QIP) which has a 15 year class life. Remember in 2022, we had 100% bonus depreciation for any class life under 20 years so the TI’s could be take at 100% depreciation expense. So he could have potentially had a total depreciation expense in 2022 of $143,750. But he ended up with a significantly larger depreciation expense since he did a cost segregation study. The results were as follows:
Basis: $1,125,000
5 Year: $62,247.71 / 5.5%
15 Year: $124,021.77 / 11.0%
39 Year: $938,730.52 / 83.5%
In 2022, any class life under 20 years can be taken as 100% bonus depreciation meaning you can depreciate the entire asset in year one rather than waiting 5 or 15 years. (Starting in 2023, bonus depreciation goes to 80% and then drops 20% each of the following years until it’s zeroed out in 2027 unless Congress changes the law). In this owner’s case, he was able to accelerate or fully depreciate $186,269.48 in year one because of the cost segregation. That combined with the QIP provides a depreciation expense of $311,555.14 in year one. At a 32% tax rate this would equate to a potential tax savings of $100,000. A study like this generally costs less than $5,500-$6,000. It takes 6-8 weeks to complete and the owner and his/her CPA get a complete breakdown in an easy to use format to apply to the owner’ taxes.
Below is the cost detail on this retail strip center.
If you’re a building owner or a tax professional, CPA, Enrolled Agent, etc., and you’re looking for a cost segregation specialist here in South Carolina, I’m happy to be of help. I’m based out of Greenville, SC and represent Cost Segregation Services, Inc. The company has been studying buildings for 20 years. During that time we have successfully completed more than 35,000 engineering-based cost segregation studies across all building types and classes in all 50 states. While I’m based in South Carolina, I can study any buildings anywhere in the U.S.
Cost segregation works on all types of buildings where the owner is receiving a lease or rent payment. In other words, it can’t be your personal residence. Typically the basis or cost needs to be north of $200,000 in order for the economics to work for the owner, but we have done some studies on buildings with a basis as low as $150,000. This works on commercial buildings, retail strips, self storage facilities, hotels, apartments, single family rentals, Airbnbs, short term rentals, offices, warehouses, industrial, shopping centers etc.
Call me at 864-276-1448. I can provide a no cost, no obligation quote so you can discuss it with your tax advisor to see if doing cost segregation makes sense for you financially.
“We are excited that NAI Columbia is officially rolling into our business family,” Jon Good, CEO of NAI Earle Furman said in a news release. “This collaboration will mutually benefit both of our firms with more manpower, added support and additional resources. Together we will be able to better serve our clients throughout South Carolina and beyond.”
This sure seems to make a lot of sense especially in the world of commercial real estate where there are some very big players with large networks who serve the Upstate and Midlands area.
John Murphy – Cost Segregation – Spartanburg Office Building
It’s always a good day when I can deliver our engineering-based cost segregation study to a building owner to helpl him/her save money on their taxes. Remember, what we do is reclassify a building from 39 year straight line depreciation in to 5, 15 and 39 year class lives. This allows the owner to take a bigger depreciation expense earlier in the life of his/her ownership of the building. That translates in to paying lower income taxes…and in some cases, it eliminates your income tax liability for a while.
This was a gorgeous older building in Spartanburg. It goes by the name Warrior Duck. It’s a 3 floor office building. As you can see by the image above, we saved this owner nearly $90,000 in income taxes.
As with all of my articles, I am not given tax advise. Everyone’s tax situation is different and each building performs differently. Please consult with your own tax counsel when considering cost segregation.
