What is the best Engineering Cost Segregation

This article gives you detailed information on Engineering Cost Segregation. With this option, you can get financial benefits by identifying a newly purchased property as personal property and not your business asset. With this process, the firm increases the short term flow of cash. This article consists of a list of eligibility criteria; you can consider the properties that have been purchased, renovated, or remodeled since 1987 for the study under cost segregation. This article also gives you tips for finding the best Engineering Cost Segregation Company. You can look at their experience in the market. You can check whether they employ professionals with a proper degree and ASCSP certification or not. Also, check their reviews and ratings online.

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What every real estate investor should know about cost segregation

Cost segregation is a popular tactic utilized by real-estate investors to enable them to augment the cash flow by reducing the accelerated depreciation, additionally lessening the paid income taxes. A cost segregation study on as of late built offices is being performed to get recognized about the systems other real estate investors are utilizing. Each land speculator should know how cost segregation companies will profit them. Nowadays the investigation of cost segregation depreciation is imperative as it lets the speculators of land discover the benefits in a structure's development with an actual existence than can be devalued to 5, 7, or 15 years. There are a few ways to locate the right cost segregation experts. Once can carry out intensive research, check their engineering qualification, and check for their tax expertise.

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The New Workplace

For decades, the workforce of America has had two standard options: full-time or part- time. However, today, in the new work place some employers are now offering flexible work schedules to accommodate a growing number of employees that do not want to work a traditional 9-5 schedule. According to the United States Department of Labor “A flexible work schedule allows employees to vary their arrival and/or departure times.” At Lindon Engineering Services, employees follow a more personalized work schedule, while the company still performs at peak efficiency.

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PATH

As the 2015 tax season comes to a close it is time to prepare for the new provisions associated with Protecting Americans from Tax Hikes (PATH) Act of 2015. The biggest revisions to the depreciation regulation that will ultimately benefit clients are:

• The extension of bonus depreciation through 2019
• The addition of Qualified Improvements (QIP)
• Modifications to Qualified Leasehold (QLHI), Restaurant (QRP), and Retail (QRIP) Improvements

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CONVEYING SYSTEMS

One of the topics we receive considerable inquiries relates to conveying systems in auto dealerships and other commercial businesses. Conveying systems consist of equipment that move materials or people and include passenger conveying systems, parts lifts, freight elevators, vehicle lifts and material hoists. The function of each conveying system determines its useful, depreciable life.

Passenger conveyor systems such as elevators, escalators, and moving sidewalks are used to transport passengers in horizontal, vertical or inclined directions. These systems and their associated components including handrails and smoke baffles, for example, are designed to remain in place and are considered 39-year real property since they relate to the normal operation of the building.

Parts lifts, belt conveyors, roller conveyors, etc. are used to move supplies or materials, typically to a storage room or mezzanine located on another level. These are similar to elevators except they are usually not equipped to move people and may lack some of the safety equipment found on elevators. Most parts lifts/conveyors are self-supported, requiring no structural modification to the building. Because the primary function of these lifts is moving inventory and other materials used in the business they are typically classified as personal 5-year property.

Freight elevators are designed to carry goods rather than passengers; however, since they are designed to carry passengers as well as materials, they have been associated with elevators and have a useful, depreciable life of 39-years. Freight elevator designs are more durable and less aesthetic and they vary from parts lifts because they travel faster, travel to greater heights, have greater capacities and have automatic operation. Of particular note are the elevators that move automobiles in multi-story dealerships and parking garages. These items have typically been considered to be similar to passenger elevators and assigned a 39-year life despite the fact they serve a unique function related to product handling.

Vehicle lifts and hoists are considered to be tools/equipment in maneuvering automobiles or their components into maintenance positions and are treated as personal property with a 5-year depreciable life. Cranes, overhead hoists and trolley beams will be discussed in a future newsletter because of their unique applications.

Finally, mechanical, electrical and instrumentation utilities supporting the conveying equipment deemed to be personal property should likewise be depreciated as 5-year personal property. Mr. Archer is a Civil Engineer with a Masters degree in Business Administration and a Masters Degree in Engineering Management. He is an Adjunct Professor of Engineering Management at the University of Louisville and is the President of his own engineering company, Lindon Engineering Services, Inc

 

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Cost Segregation: A Review

Following the Tax Court decision regarding Hospital Corporation of America (HCA) in 1997, the application of cost segregation methodology to all commercial, industrial and retail facilities became widespread. Based loosely on the provisions of the Investment Tax Credits of the late 1970s, cost segregation became a popular means for deferring a company’s tax liability and providing a short-term cash flow increase. Recall that the basic premise of cost segregation is to identify the elements and/or systems of a facility that may be reclassified as personal or land improvement property and depreciated at the appropriate accelerated rate. The problem that arose immediately was the absence of a detailed list of acceptable items eligible for accelerated depreciation. This problem also presented obstacles for the Field Auditors of the IRS since some of the segregated components were technical in nature – a fact that was not lost on the Service. 

To combat this deficiency, the IRS prepared several Audit Guideline Directives for their field inspectors to use in audits of specific businesses (i.e. restaurants, automobile dealerships, pharmaceutical companies and casinos/hotels). One of the major points presented by the new guidelines included a requirement for the cost segregation study be performed by an individual with expertise and experience in facility design/construction and the tax law related to depreciation. This provision detailed the qualifications of individuals performing a cost segregation study and a detailed description of the methodology, reconciliation of total costs, and the treatment/identification of indirect costs among other things.

Cost segregation has now evolved through the years as a method to depict a company’s depreciation expense more accurately and to allow a business to recover their investment costs in a more timely manner. Simply put, cost segregation, when applied properly, allows a company to increase its short-term expenses and simultaneously decrease their short-term tax liability. By comparing the straight-line depreciation of a facility versus a segregated depreciation distribution, a company can realize a positive cash flow annually before the straight-line method exceeds the segregated depreciation total on an annual basis. The cash flow is a real cash savings in tax liability. It is helpful to keep in mind that depreciation is not a cash transaction whereas the tax expenditures are, thus creating a real cash flow that is cumulative until the straight-line depreciation exceeds the segregation depreciation annual amounts.

Business owners would be well-advised to investigate the applicability of a cost segregation study for their newly acquired properties (whether constructed or purchased) as soon as is practical. The starting point is to consult the company’s accounting firm to determine whether a study makes sense and is practical in terms of timing.

 

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What is Research and Development? (R & D Series Part I)

What is Research and Development (R&D)? Seems like the answer should be simple… I mean just look at the name! The simple answer is, it’s the investigation of business activities to improve or create products and/or procedures. 

R&D events can be an internal operation or outsourced to specialists. Many small business owners take advantage of outsourcing R&D work because they lack knowledge of design and engineering for their new-found concepts. R&D activities  

vary from industry to industry, but they always contain these three steps:

1.      Basic Research – The exploration to obtain a more complete understanding of fundamental aspects of a concept. 

2.      Applied Research – The investigation of methods to obtain specific objectives regarding product or processes. 

3.      Development Research – The examination of the implementation of research knowledge and designs for production.

There is no guarantee to the outcome of R&D. Many companies spend a large amount of money on research and development activities and never realize a return on their investment. Some companies utilize R&D with the knowledge that they will not immediately profit, but instead focus on the long-term profitability.  How much is spent on R&D isn’t a measure of success, rather, it is the balance between technical risk and market risk, all of which need proper investment and management. Forbes uses this equation to model the success of research and development: innovation =  invention + customer value + business model

There are many factors that contribute to the decision of whether to pursue R&D. The following are the top four:

1.      Proprietariness – Is the nature of the research unique such that it can be protected through patents or non-disclosure agreements? Having that level of protection makes R&D much more valuable. 

2.      Timing – Starting R&D is best when the market for the product is slow or moderate in growth.

3.      Risk – R&D is a high-risk activity. Lowering the risk could mean acquiring the research to produce marketable products or processes. 

4.      Cost – Expenses for R&D activities can be very costly and produce a negative cash flow before returning a profit. In the next article, I will discuss how much and what is spent on Research and Development. 

Whether success or failure, all those expenses don’t have to be a burden of loss. The Research and Development Tax Credit, made permanent through the Protecting American against Tax Hikes (PATH) Act during 2015, allows businesses a credit for qualified research activities and expenses. This will be discussed in a later article. 

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Study Timing

For a Cost Segregation (CS) study, timing is important. The analysis cannot be completed until the construction work is complete and the total cost of the construction work has been finalized. And, ideally, the CS should be done before the tax filing for the year the building is placed in service. This results in a maximized cash flow for the facility owner, by realizing their tax savings as soon as possible. That is not to say that a CS should not be done after the first tax year of the building being operational. Carry-forward costs allow the property owner to realize unclaimed tax deductions that they may have missed in the years since the building was placed in service. However, these savings are slightly lower than they would have been if they had completed a CS at the time the building was placed in service.

A similar situation is true for our Business Solutions Services (BSS) studies. When planning the operations of a facility, the greatest opportunities for cost savings occur during the facility planning stages. This is because the difficulty and cost of altering the layout of a facility or relocating a facility is extremely high. Using detailed information about daily operating procedures to guide the facility design process can help minimize operating costs over the long-term. Even if a business is past the facility planning stage, there are still several other ways that BSS can help reduce costs. Besides the layout of the facility, significant opportunities for savings can lie in material handling, process improvements, inventory and production control policies, workstation design, and more.

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Confessions of an Engineer Co-Op

Co-operative education gives students an opportunity to test skills learned in the classroom, and to expand their knowledge through work related experience. Every co-op student has a differing experience and opinion on the program.  This was not only my first year as a co-op, but my first job as well. In the beginning, I had some anxiety and at times self-doubt. As my first semester of co-op at Lindon Engineering Services is ending, I have been reflecting on my experience.

Once I started, I was surprised how much responsibility I was given. I found myself applying principles learned in class and gaining real world knowledge. Although I had some basic understanding, I still needed guidance. My co-workers were friendly and willing to help, and they were incredibly patient with me while I was learning the job. The answers I received were fully explained with the how’s and why’s something needed to be done. Coming from a fast-paced school environment, the one-on-one interactions I had with co-workers and my supervisor was a breath of fresh air compared to the mentors in the past. Although my co-workers were supportive, there were several instances where I was required to apply critical thinking skills and problem solve on my own.

While working for forty hours a week, I am also taking an online course that I work on when I get home. Being a student while working is at times challenging. Juggling a full work schedule and class work has required me to improve my work ethic and my time management skills. I now say to myself: “You need to dedicate this specific time to work and study, then you can have the rest of the night to relax,”. Sounds easy, but from the perspective of a student who really likes naps, the resolve to dedicate specific times to work on and complete work is more beneficial towards my health as a student and to my grades.

To conclude, being a full-time working student is a milestone in my life. I am thankful for my coworker’s example of patience and guidance. Performing research for my job and school work has become easier because I now have the resolve to research topics thoroughly and use patience to complete projects and reports. My co-op experience has allowed me to see how school work relates to the real world, helped me develop better time management skills, and have more confidence in myself.

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Marketing from a Newbies Perspective

I recently transitioned into a position that required marketing a new service offered by our company. I did not know much about marketing, but I knew my capabilities. I knew I would go above and beyond to accomplish tasks that I was given. I possessed several traits that I thought would be an asset in the marketing world. I am detail oriented, determined and simply enjoy interacting and connecting with people. Although I felt like a fish out of water, I was excited and optimistic to embark on a new journey. 

The first step become in my marketing position was to knowledgeable in the services being promoted. I obtained this by meeting with the project manager, did independent research online, and engaged with other professionals. The second step was the evaluation of previous and current marketing efforts. I needed to know highlights and pitfalls from previously implemented efforts. From that I could develop a plan to improve upon marketing avenues that worked and to ensure past mistakes were not repeated. I then researched who the ideal client would be and the best way to connect to those individuals. After many hours of networking, research, and preparation, a collaborated marketing plan was set. It was my responsibility to implement the steps laid out in the plan, and that is when I faced my biggest challenges.

Once I began contacting potential clients, I was faced with many rejections. I had to realize that if a person or company was not interested, either they felt they could not utilize our services right now or my message did not have the impact it could. I had to press on, reach out to new prospects and continue improving my message. I considered revising the whole marketing plan when I was not meeting the expectations I set at the beginning of the campaign. Instead I worked on being patient. 

What I am learning is that marketing efforts are continuous, tedious and unpredictable. I realized that while it is great to be optimistic, it is equally important to set realistic and achievable goals. I must be flexible in my approach and continue to learn what will work best. This fish out of water grew legs and ran with it.

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