Learn the latest tax strategies as well as happenings at ICS Tax, LLC

tax-alert

With the signing into law of the Tax Cuts and Jobs Act (the “Act”), Congress has enacted the biggest tax reform law in thirty years, one that will make fundamental changes in the taxation of businesses, particularly those who own real estate.

LOWER TAX RATES

For tax years that begin after Dec. 31, 2017, the corporate tax rate, which had been at graduated rates as high as 35%, is reduced to a flat 21% rate. Similarly, pass-through businesses (e.g., sole proprietorships, partnerships, LLCs and S-corps) may be able enjoy lowered tax rates through a deduction of up to 20% of their business income. However the pass-through provisions are complicated and the rate reductions are limited for “specified service trades or businesses” (e.g., businesses that involve performance of services in the fields of health, law, consulting, athletics, financial services and brokerage services).

For most real estate investors, the typical tax planning strategies to push income into future tax years and pull deductions into the current year have added value beyond the time value of money. With lower tax rates for 2018 and onward, shifting deductions into 2017 generates permanent tax savings due to the tax rate arbitrage.

ICS Tax Note: For real estate owners, there are numerous planning techniques to accelerate deductions into 2017, which include cost segregation, the §179D energy efficient commercial building deduction, capital to expense studies, retirement studies, and many more. By making a change in accounting method, taxpayers can retroactively take advantage of these planning ideas without amending. ICS Tax can perform a free analysis to determine what opportunities are available for you.

BONUS DEPRECIATION

In general, taxpayers will want to accelerate the purchase of depreciable assets to take advantage of the 100% bonus depreciation provision included in the Act for property placed in service after Sept. 27, 2017. The bonus rates begin to phase out after 2022 and are fully phased out by 2027. Also note that, under the Act, used property qualifies for bonus depreciation. Accelerating the purchase of qualifying property will offset income taxable at the 2017 higher tax rates.

ICS Tax Note: While most Tax Reform provisions apply to tax years beginning in 2018, the bonus depreciation provision is unique in that it applies after Sept. 27, 2017.

ICS Tax Note: With 100% bonus depreciation and its application to used property, Cost Segregation studies have added importance for used buildings purchased in 2018 and beyond.

§179 EXPENSE ELECTION

The act increased the maximum amount a taxpayer may expense under §179 to $1 million and increased the phase-out threshold to $2.5 million. These amounts will be indexed for inflation after 2018.

The act also expanded the definition of §179 property to include certain depreciable tangible personal property used predominantly to furnish lodging or in connection with furnishing lodging. It also expanded the definition of qualified real property eligible for §179 expensing to include any of the following improvements to nonresidential real property: roofs, HVAC property, fire protection and alarm systems, and security systems.

ICS Tax Note: For significant renovation projects, many taxpayers will benefit from Cost Segregation to maximize the benefits of the increased §179 Expense Election.

QUALIFIED IMPROVEMENT PROPERTY

Prior to the Act, three types of building improvements—qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property—had a 15-year recovery period and were depreciated using the straight-line method. For years after Dec. 31, 2017, the Act replaces these categories with a revamped qualified improvement property classification. The legislative intent was to depreciate these over 15 years using the straight-line method and be eligible for bonus depreciation. However, the necessary language was not included in the final tax reform and, absent a technical correction, qualified improvement property is depreciated over 39 years and is ineligible for bonus depreciation.

“Qualified improvement property” is any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service except for any improvement for which the expenditure is attributable to (1) enlargement of the building, (2) any elevator or escalator, or (3) the internal structural framework of the building.

ICS Tax Note: Presuming a technical correction is made, most taxpayers benefit from the expanded definition of qualified improvement property. However, it is more restrictive in its exclusion of restaurant buildings and some restaurant improvements. For example, the definition of qualified restaurant property prior to the Act did not exclude building enlargements.

§1031 LIKE-KIND EXCHANGES

Generally effective for transfers after Dec. 31, 2017, §1031 like-kind exchanges are limited to transfers of real property not held primarily for sale. However, under a transition rule, the crackdown does not apply to exchanges of personal property if the taxpayer either disposed of the relinquished property or acquired the replacement property on or before Dec. 31, 2017.

HISTORIC TAX CREDIT

The Act modifies the Historic Tax Credit for years after Dec. 31, 2017. A 20% credit still applies with respect to a certified historic structure (i.e., any building that is listed in the National Register), but it must be taken ratably over 5 years. The 10% credit for qualified rehabilitation expenditures with respect to a pre-1936 building is repealed.

OTHER PROVISIONS

The Act has provisions that limit the deductibility of interest expense, changes to ADS lives, and many others. Please consult the full text of the Act for further detail.

HOW WE CAN HELP

ICS provides numerous strategies that can maximize the savings with tax reform. For a free evaluation, please contact an ICS Tax representative.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Cleveland, Los Angeles, New York, Boston, Columbus, and Sioux Falls.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

Updated: 1/3/2018

tax-alert

This week, the “Tax Extender Act of 2017” was filed in Senate, which extended several expired tax deductions including §179D Energy Efficient Commercial Building Deduction (§179D Deduction).

CURRENT LAW

The §179D Deduction is a Federal tax incentive promoting energy efficient buildings for both new and existing structures. Further, architects, engineers, contractors, environmental consultants or energy services providers may also be eligible for the incentive on public projects. This incentive is often referred to as the EPAct Deduction after the Energy Policy Act of 2005 that created it, or as the §179D Deduction, which relates to its tax code section. Commercial building owners can take a Federal tax deduction of up to $1.80 per square foot of the building’s floor area if they install certain property (e.g., efficient lights or HVAC systems, added wall or roof insulation, etc.) that reduces energy and power costs. The §179D Deduction is allowed for both new construction and renovations completed between 2006 through 2016.

PROPOSED LAW

The proposed legislation extends the §179D Deduction beyond 2016 and allows taxpayers to take it for projects completed in 2017 and 2018.

ECONOMIC IMPACT

A recent study published by a leading regional economic modeling and policy analysis firm published a report on of the economic effects of extending the §179D Deduction and the results were astounding. The analysis shows that in addition to advancing the goal of energy independence, the §179D Deduction is an engine of economic and employment growth.

HOW WE CAN HELP

Out of all the buildings that qualify, very few taxpayers are taking the steps necessary to claim this valuable incentive. While currently expired, the §179D Deduction often provides current benefit on projects from 2016 and prior. ICS can provide a free analysis to determine if this incentive is feasible, and if so, provide the necessary third-party certifications and other assistance to benefit from it. For a free consultation, please contact an ICS Tax representative.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

Alex Bagne, the President of ICS Tax as well as the President of the American Society of Cost Segregation Professionals (ASCSP), represented this vibrant trade organization at the American Institute of Certified Public Accountants (AICPA) at their annual Real Estate and Construction Conference in Las Vegas, NV.

The ASCSP represents the best cost segregation professionals and offers quality standards, a code of ethics, certification, and education. Perhaps most importantly, the ASCSP provides its members a forum to discuss new tax rules affecting the cost segregation profession as well as share ideas and vet issues.

Society President Alex Bagne CCSP (center) is joined by several fellow ASCSP members Chris Hitselberger, Greg Bell,  Will McCadden, Bruce Johnson and his associate.

Alex Bagne, the President of ICS Tax, presented on “Must Know Tax Planning Strategies for the Construction Industry.” ICS sponsored a booth and gave away a drone to one lucky attendee on November 10th. This conference was provided by the Ohio Society of CPAs.

 

tax-alert

The House Ways and Means Committee released draft tax reform legislation on November 3, 2017. The Tax Cuts and Jobs Act provides new detail on Republicans’ tax reform framework. It slashes the top corporate tax rate from 35% to 20% as well as significantly reduces tax for most individuals. Under the draft legislation, the tax rates do not go into effect until the 2018 tax year.

Click to view Draft Legislation

Click to view Communications and Policy Details

 

 

 

 

 

 

When tax rates are expected to decline, the smart strategy for most taxpayers is to defer income and to accelerate deductions. For example, $1,000,000 of deductions are worth $350,000 using 2017’s 35% corporate rate but only $200,000 using the proposed 20% rate. Below are several strategies to accelerate deductions into 2017:

  • Cost Segregation – Commercial buildings are depreciated slowly over 39 years. A cost segregation study carves out components from buildings that qualify for more rapid depreciation, such as land improvements and personal property.
  • 179D Energy Efficient Commercial Building Deduction – Taxpayers who constructed new buildings or made improvements to existing ones between 2006 and 2016 can take an immediate deduction of up to $1.80/SF for investments in efficient lighting systems, HVAC and hot water systems, and the building envelope.
  • Individual Asset Review – Individual assets are often inappropriately depreciated as part of a building, such as process-related plumbing, electrical, and ventilation systems. This study identifies assets qualifying for more rapid depreciation.
  • Capital to Expense Studies – Recent tax regulations allow taxpayers to retroactively review expenditures that were capitalized but qualify as repair and maintenance expenses, such as replacing roof membranes, resealing parking lots, and replacing of HVAC components.
  • Retirement Studies – Taxpayers often have ‘ghost assets’ in their fixed asset systems, such removed roofs and HVAC components. A retirement study identifies these assets, allowing taxpayers immediately deduct the remaining undepreciated basis.
  • Partial Dispositions – Taxpayers who make improvements to their facilities can immediately deduct the cost of removed building components and to instantly write-off undepreciated basis amounts.
  • Demolition Costs – Demolition costs for building improvements are often capitalized with the cost of a new asset but can now be immediately deducted.
  • Bonus Depreciation – Bonus depreciation allows taxpayers to immediately write off from 30% to 100% of the purchase price of a new asset, but is often missed. This study identifies missed bonus opportunities.

HOW WE CAN HELP

Our team of specialists is highly experienced in performing Comprehensive Fixed Asset Reviews and have done so for both small businesses as well as Fortune 500 companies. Using our proprietary software, ICS Tax can upload assets from any depreciation system and quickly identify potential opportunities. We do this preliminary analysis for free. For more information, please contact an ICS Tax representative.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP; Lacey Robb, JD, LLM; and Kevin Johnson, LEED AP

tax-alert

On September 27, 2017, Donald Trump and the Republican Party released an outline of their tax overhaul plan. While this framework is not law, it shows their vision for both individuals and businesses. Below is a summary of major changes.

Tax Reform

INDIVIDUALS

  • Doubles the Standard Deduction (i.e., expands the 0% tax bracket) whereby the first $24,000 of income is excluded for married couples and $12,000 for individuals.
  • The number of tax brackets is reduced from seven to the following three: 12%, 25%, and 35%. Currently, the lowest is 10% and the highest is 39.6%.
  • Increase the child tax credit and provide a $500 credit for care of non-child dependents.
  • Repeal of the Alternative Minimum Tax (AMT).
  • Repeal of the estate tax and the generation-skipping transfer tax.
  • Taxation of pass-through income at a maximum rate of 25%.
  • Eliminate most itemized deductions but preserving the mortgage interest deduction and charitable contributions.

BUSINESSES

  • 20% tax rate for corporations and elimination of AMT
  • Expensing of capital investments except for structures
  • Elimination of the §199/DPAD
  • Continuation of the R&D Tax Credit

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its seven offices throughout the United States.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP; Lacey Robb, JD, LLM; and Kevin Johnson, LEED AP

Alex Bagne, the President of ICS Tax, presented on Accounting Methods at the Ohio Institute of Certified Public Accountants in Cincinnati, Ohio. Taxpayers and tax professionals use Accounting Method changes as a powerful mechanism to implement valuable tax strategies as well as to maintain compliance or remove IRS audit exposure. The goal of the course is for attendees to:

  • Understand several popular accounting method changes
  • Discuss recent tax rule changes
  • Complete and file Form 3115 – Application for Change in Accounting Method

If interested in having this CPE session in person or via webinar, please contact Alex Bagne.

Kevin Thomas, our Midwest Practice Leader, and Thomas Fellure, a Senior Engineer exhibited at the show and gave away a drone to one lucky attendee.

Accounting Methods, CPE

ICS Tax, LLC (ICS) and the Boston Family Office Association present R&D Tax Credits: Are You Reaping All of the Benefits from Your Hard Work? Lacey Robb, who leads the ICS Research Tax Credit practice, will discuss this very valuable but often overlooked and underutilized tax credit.

The event will be on September 12 from 12:00 PM to 2:00 at The Palm Boston located at 100 Oliver Street, Lobby Level in Boston, Massachusetts. For more information or to register, please contact Peter Apostol at PETER@MIAMIFOA.ORG.

ICS Tax, LLC (ICS) and the Miami Family Office Association will be presenting on how to find money left on the table through a Comprehensive Fixed Asset Review. Come join the ICS tax experts as they lead a discussion focused on the tax dollars you should be saving based on what you already own.

The event will be on September 28 from 12:00 PM to 2:oo PM at Grille 401 located at 401 East Las Olas Boulevard in Fort Lauderdale, Florida. For more information or to register, please contact Peter Apostol at PETER@MIAMIFOA.ORG.

ICS Tax, LLC (ICS) is pleased to welcome Thomas Fellure as a Senior Engineer, who will be operating out of the new ICS Tax office in Columbus, Ohio.

Thomas is highly experienced in specialized tax consulting services, having performed hundreds of cost segregation studies for taxpayers in a variety of industries, which include manufacturing, hospitality, food and beverage, telecommunications, and commercial and residential real estate. Thomas has also performed Comprehensive Fixed Asset Reviews, is highly knowledgeable on the Tangible Property Regulations, and drafted numerous Form 3115, Application for Change in Accounting Method. He graduated from The Ohio State University with a B.S. Civil Engineering and is an associate member of the American Society of Cost Segregation Professionals (ASCSP).

In his free time, Thomas has traveled extensively to perform missionary work and is an avid aficionado of sampling craft beers.

tax-alert

On July 27, 2017, House Representatives Dave Reichert (R-WA), Earl Blumenauer (D-OR), and Tom Reed (R-NY) introduced new legislation to permanently extend and modify the §179D Energy Efficient Commercial Building Deduction (§179D Deduction). While there has been previous legislation to extend the §179D Deduction beyond 2016, this is the first to receive bipartisan support.

CURRENT LAW

The §179D Deduction is a Federal tax incentive promoting energy efficient buildings for both new and existing structures. Further, architects, engineers, contractors, environmental consultants or energy services providers may also be eligible for the incentive on public projects. This incentive is often referred to as the EPAct Deduction after the Energy Policy Act of 2005 that created it, or as the §179D Deduction, which relates to its tax code section. Commercial building owners can take a Federal tax deduction of up to $1.80 per square foot of the building’s floor area if they install certain property (e.g., efficient lights or HVAC systems, added wall or roof insulation, etc.) that reduces energy and power costs. The §179D Deduction is allowed for both new construction and renovations completed between 2006 through 2016.

PROPOSED LAW

The proposed legislation makes §179D Deduction permanent. Further, while only public agencies are able to allocate the deduction under current law, the new law provides that non-profit organizations would be able to allocate the §179D Deduction as well.

ECONOMIC IMPACT

A recent study published by a leading regional economic modeling and policy analysis firm published a report on of the economic effects of extending the §179D Deduction and the results were astounding. The analysis shows that in addition to advancing the goal of energy independence, the §179D Deduction is an engine of economic and employment growth.

HOW WE CAN HELP

Out of all the buildings that qualify, very few taxpayers are taking the steps necessary to claim this valuable incentive. While currently expired, the §179D Deduction often provides current benefit on projects from 2016 and prior. ICS can provide a free analysis to determine if this incentive is feasible, and if so, provide the necessary third-party certifications and other assistance to benefit from it. For a free consultation, please contact an ICS Tax representative.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

tax-alert

ICS Tax, LLC (ICS) is excited to announce that its president, Alex Bagne, was elected as the President of the American Society of Cost Segregation Professionals (ASCSP). The ASCSP was founded in 2006 as the preeminent professional society for all members of the cost segregation industry. Headquartered in Washington, DC, ASCSP was created to address the growing need for credentials, technical standards, education, and a Code of Ethics within the cost segregation industry.

Alex Bagne is a certified member of ASCSP and has been actively involved in providing education to its members and promoting the organization. Alex said “Prior to my involvement with ASCSP, I questioned how much I would get out of the organization. I am certainly glad that I joined, as the knowledge sharing has been invaluable. Being able to bounce ideas and issues as well as discuss tax law changes and new case law such talented and knowledgeable individuals is vital for anyone within this profession.”

ABOUT ICS TAX, LLC

ICS is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to perform highly specialized tax planning, such as cost segregation and fixed asset reviews, the R&D tax credit, energy efficiency incentives, and the IC-DISC export incentive. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

ICS Tax, LLC (ICS) is pleased to welcome Kevin Johnson as its Midwest Practice Leader. Kevin has over 18 years of experience providing tax consulting services. With vast Big Four accounting experience as well as being the former national practice leader for McGladrey’s Tangible Property Services group, Kevin has extensive knowledge of cost segregation, tangible property regulations, energy credits and incentives, and fixed asset depreciation. He has provided education and thought leadership for tax professionals and their clients nationwide.

Kevin has completed cost segregation studies on thousands of properties throughout the country for a diverse client base. He has also performed energy credit and incentive projects for various green construction and renovation projects.

Kevin has a BS in Environmental Engineering from the University of Dayton, is a LEED AP, and is a member of the American Society of Cost Segregation Professionals. He is married to his wife Caroline and they have two children. He enjoys coaching little league baseball and shuttling his son to various hockey events.

tax-alert

A new study published by a leading regional economic modeling and policy analysis firm published a report on of the economic effects of extending the §179D Energy Efficient Commercial Buildings Tax Deduction. The results are astounding. The analysis shows that in addition to advancing the goal of energy independence, the §179D Deduction is an engine of economic and employment growth. Specifically, the study finds that:

  • Strengthening and extending the §179D Energy-Efficiency Commercial Buildings Deduction will create jobs and expand the nation’s economy. These benefits would be compounded by increasing the dollar value of the deduction in accordance with several Congressional and administration proposals.
  • These enhancements to §179D would support up to 76,529 jobs annually and contribute annually almost $7.4 billion to national gross domestic product (“GDP”), as well as over $5.7 billion towards national personal income.
  • Expanding the availability of the deduction to nonprofit organizations and tribal governments, while increasing the applicable energy efficiency standards, also provide clear positive impacts to the economy.

A background on this incentive as well as recent legislation to extend §179D beyond 2016 can be viewed in the ICS Tax Alert titled “Promising Future for the §179D Energy Efficient Commercial Building Deduction and the §45L Energy Efficient Home Credit”.

ICS Tax, LLC is a leader in providing energy modeling and certifications for the §179D Energy Efficient Commercial Buildings Tax Deduction. For more information on this valuable tax incentive or other related tax planning strategies, please contact an ICS Tax representative.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

ICS Tax, LLC is pleased to announce a strategic partnership with the Construction Industry CPAs/Consultants Association (CICPAC); a national association of accounting firms serving over 11,000 construction companies. Founded in 1989, CICPAC has grown from an alliance of six firms into a nation-wide organization with over 70 member firms. This strategic partnership allows various training and networking opportunities for ICS Tax with the goal of increasing the firm’s presence within the industry.

Our sister company, ICS Consulting, Inc., has vast experience and knowledge within the construction industry, providing customized planning and project-related consulting, management and owner representation services. ICS Consulting’s team, with over 100 years of combined experience, provides our ICS Tax team members with a current perspective on issues that construction professionals face.

ICS Tax serves clients nationwide with multiple tax planning strategies including Energy Efficiency Incentives (§179D, §45L), Comprehensive Fixed Asset Reviews, Research & Development Tax Credits, Cost Segregation Studies, IC-DISC Export Incentives, Like-Kind Exchanges (1031), Accounting Methods and Utility Rebates. Our experienced and knowledgeable tax team brings decades of experience within the industry and has previously worked with all Big Four accounting firms including Deloitte, PricewaterhouseCoopers, Ernst & Young and KPMG. With corporate clients including Mead Johnson Nutrition, Lifetime Fitness and LED Supply Co., ICS is committed to advocating for our clients in identifying all potential saving opportunities through strategic tax planning.

ICS Tax President Alex Bagne stated that “having current experience in the construction industry best positions our firm to provide strategic tax planning to taxpayers and their CPAs within the industry. Our strategic partnership with CICPAC elevates our ability to promote this expertise to a greater audience.” Alex, with over 17 years of consulting experience, has saved his clients millions in tax dollars through specializing in various tax planning strategies. The unique collaboration between ICS Consulting and ICS Tax proves to be a key differentiator within the market and will prove to be a valuable asset for this partnership with CICPAC.

ICS Tax is looking forward to being a part of this established and reputable organization, leveraging our existing clients and CICPAC’s training and networking opportunities to further our presence and relationships within the construction industry. Find more about CICPAC here.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS, based in Minneapolis, Minnesota, provides nationwide service with offices in Los Angeles, New York, Ohio and the Dakotas.

tax-alert

On May 4, 2017, Senator Ron Wyden along with 21 other Senators introduced The Clean Energy for America Act in the Senate. The bill contains several tax incentives that foster both energy efficiency as well as renewable energy, including modifications and extensions for the §179D Energy Efficient Commercial Building Deduction and the §45L Energy Efficient Home Credit.

CURRENT LAW

The §179D Energy Efficient Commercial Building Deduction is a Federal tax incentive promoting energy efficient buildings for both new and existing structures. Further, architects, engineers, contractors, environmental consultants or energy services providers may also be eligible for the incentive on public projects. This incentive is often referred to as the EPAct Deduction after the Energy Policy Act of 2005 that created it, or as the §179D Deduction, which relates to its tax code section. Commercial building owners can take a Federal tax deduction of up to $1.80 per square foot of the building’s floor area if they install certain property (e.g., efficient lights or HVAC systems, added wall or roof insulation, etc.) that reduces energy and power costs. The §179D Deduction is allowed for both new construction and renovations completed between 2006 through 2016.

The §45L Energy Efficient Home Credit, a companion tax incentive to §179D, allows eligible residential developers to claim a $2,000 tax credit for each newly constructed or substantially reconstructed qualifying residence. Examples of housing for which this credit applies include single family homes, apartments, condominiums, assisted living homes, and student housing. The residence or building must be three stories or less in height. This incentive applies to residences sold or leased before December 31, 2016.

SUMMARY OF CHANGES

Currently, §179D covers both new construction as well as renovations of existing buildings. Under the proposed legislation §179D would apply to ground-up construction whereas new §179F would apply to retrofitted commercial buildings. Section 179D under the proposed bill creates a performance-based incentive for increased energy conservation. New commercial buildings that are at least 25 percent more efficient than ASHRAE 90.1-2016 standards can receive a $1.00 per square foot tax deduction, which escalates with larger efficiency gains up to a maximum of $4.75 per square foot.

Under §179F, retrofitted commercial buildings can qualify for a $1.25 per square foot deduction for a 20 percent reduction in energy use with greater energy reductions qualifying for larger incentives of up to a maximum of $9.25 per square foot. The energy reduction from retrofits is verified by third-party modelers who are certified by the Treasury Department and the Department of Energy. The reduction is based on energy use prior to the retrofits as compared to energy use modeled after the retrofits are placed in service. Both §179D and §179F would be available through the end of 2018.

Currently, the EPAct Deduction can be allocated to architects, engineers, contractors, environmental consultants or energy services providers for public projects only, as public agencies pay no Federal income tax. The proposed rule expands upon those who can allocated the §179D Deduction to include §501(c) organizations, such as non-profit hospitals and educational facilities.

For §45L, the bill creates performance-based incentives for new and existing homes. The credits are based on the level of whole-home energy reduction. For new residences, buildings that are at least 25 percent more efficient than the 2015 International Energy Conservation Code baseline receive a $1,500 tax credit. More efficient homes receive a larger credit up to of $3,000 per unit. The credit is available for the contractor who builds and sells or leases the residence.

If these changes are not accepted, The Clean Energy for America Act also has provisions for extending §179D and §45L through December 31, 2018 without further modification. For the full text of the bill, please click below.

HOW WE CAN HELP

Out of all the buildings and residences that qualify, few taxpayers are taking the steps necessary to claim the available incentives for them. While currently expired, these incentives often provide current benefit on projects from 2016 and prior. ICS can provide a free analysis to determine if these tax strategies are feasible, and if so, provide the necessary third-party certifications and other assistance to benefit from these valuable incentives. For a free consultation, please contact an ICS Tax representative.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP

ICS Tax is proud to be an exhibitor at the 34th Annual President’s Seminar for the Tax Executives Institute. Come visit with the ICS Tax team and learn about specific tax-planning strategies at the MPLS Convention Center today and tomorrow. See the full seminar schedule here.

ICS Tax, LLC will be at Groundbreak in Austin, Texas from March 29-31. Stop by kiosk #8 and visit with ICS Tax team members. Our own Lacey Robb and Alex Bagne will be presenting on tax planning strategies within the construction industry. Additional conference information can be found here.

ICS Tax, LLC (ICS) welcomes Steve Ruda as Project Manager and Business Development Specialists. Steve earned a BSBA in Accounting from the University of Sioux Falls. Steve will assist on every facet of providing specializing tax consulting services, from the initial sale through project completion. Prior to joining ICS Tax, Steve spent six years working for McGladrey, LLP as a tax supervisor as well as the local market cost segregation lead. By possessing an extensive knowledge of both tax compliance and specialized planning ideas, Steve has a unique ability to quickly identify suitable candidates for a tax strategy, implement the idea, and deliver final results. Steve’s passion for serving his clients and fostering relationships allows him to provide outstanding service while exceeding expectations.

Steve resides in Sioux falls with his two kids, Mathew and Gracie. He is engaged to Lindsay Hup with a fall wedding date. He enjoys officiating sports and is both an avid hunter and fisherman. Steve will primarily be servicing both the Midwest and Rocky Mountain regions.