The Hotel Industry is unique in that like a commercial product, a Hotel follows a definite life cycle. If a Hotel Owner does not keep this in mind, their facility can quickly become worn out and dated in comparison to their competition. To stay competitive, Owners must acknowledge that there will be constant new brand competition. A newer, swankier hotel that offers the latest amenities to its guests will quickly put an outdated hotel out of business. This fact leaves few options of staying competitive for a Hotel Owner. The most prominent option would be to rebrand. What does “rebranding” entail?

Rebranding can be a broad term ranging from a simple revamping of a logo but more often is a much larger undertaking with the ultimate goal of retaining guest loyalty and awareness. Rebranding is especially important today because of major social, environmental and technological changes that have taken place over the past five to ten years. For example, just a few years ago wifi throughout a hotel was rare, flat screen televisions were a novelty, the expectation of a hot breakfast almost unheard of, and eco-friendly was a word most people were unfamiliar with. All of those ideals have changed, and are now an expectation for most travelers. This new expectation has forced hotel brands to insist their franchises undertake multi-million dollar rebranding to live up to their flag.

What does this mean for Hotel Owners?

There is a little known opportunity for Hotel Owners that would directly affect the rebranding of their organization. The opportunity is Specialized Tax Incentives, specifically Engineering-based Property Cost Allocation, aka Cost Segregation; Property Tax Reductions; Bonus Depreciation; as well as various Energy-based Tax Credits.
Specialized tax credits are an essential fiduciary component when building, purchasing or renovating a hotel or motel. These credits affect rebranding and the constant renovation of non-structural components of their building such as:
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• Carpeting and flooring
• Wifi and Internet cabling
• Decorative lighting
• Parking lots
• Cabinetry
• Curbs and sidewalks
• Electrical and plumbing systems
• Landscaping
• Power generators
• Fountains
• Security systems
• And many more....

A Cost Segregation Study is an engineering-based tax analysis in which these types of components are broken out and allocated to a shorter life class, depreciating them at an accelerated rate. This means a building purchased, constructed or renovated since January 1, 1987 and costing in excess of $500,000 should have all improvements and renovations qualifying based on their individual completion dates. So, every Hotel having performed renovations through rebranding within that time frame have a potential benefit sitting on the take just waiting to be captured.

To determine if your facility could capture a benefit, simply contact David Ross & Associates at 678-654-9500 and ask for a basic calculation, performed at no charge.

David Ross & Associates, Business Advisors
Phone 678-654-9500 • Web davidrossandassociates.com • Email david@davidrossandassociates.com

This article is available as a printable PDF here.

I'm posting this local article about property taxes in Lilburn, GA because Lilburn is where we are based. The original headline for this article in the Atlanta Journal-Constitution is misleading, saying that the millage rate is staying the same. Buried in the story is the fact that actual revenues are expected to be nearly six percent higher than last year.

Lilburn is not alone in increasing its property taxes. This happens every year across the country.

Stryde can help mitigate and reduce these property taxes for commercial property owners. Let us show you how much we can save you in commercial property taxes.
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LILBURN GA, June 26, 2017 -- Lilburn is scheduled to adopt the 2017 property tax rate at 7:30 p.m. July 10 in council chambers at Lilburn City Hall, 340 Main St. The city is proposing to keep the property tax rate the same at 4.43 mills. At this rate, the city anticipates collecting $1,829,589, which is 5.68 percent more than last year. This estimate includes changes in the assessed value of properties, pending appeals, as well as new growth in the city. For homeowners with increased assessed property values, this could mean slightly higher property tax bills in 2017.

Property taxes make up 28 percent of the city’s annual operating budget of $7,657,971 and 16 percent of the overall budget of $11,242,305.

Read more at the AJC....

Many automobile dealerships implement significant renovations as the industry morphs due to technology changes and as manufacturers rebrand.  The goal of the renovations are, of course, to improve top line performance (sales).

Top line goals can effectively be achieved more quickly by capitalizing on the tax benefits associated with the renovations; for instance, it’s not uncommon for $1MM in renovations to conservatively equate to a $60,000 tax related improvement in the bottom line. Given a 10% profit margin, that equates to a $600,000 increase in top line results.
What Tax Benefits?

Tax benefits associated with construction costs can be procured through an Engineering Based Cost Segregation Study. This Study applies tax compliant depreciation time-lines to certain non-structural components. For instance, instead of depreciating carpeting over 39 years as if it were a structural item, it would be depreciated in five years. Many other non-structural building components can be depreciated in 5, 7 and 15 years versus 39 years.

Furthermore, the tax benefits of properly depreciating current renovations can apply to the entire existing facility, including past renovations.

So, here are the benefits of reducing Federal and State taxable income by safely ‘accelerating’  depreciation on certain building components with a rigorous Study:

• New renovation, purchase or construction will result in increased cash flow in the first 6 years.
• Owned for 5 or more years qualifies for all unrealized depreciation carried forward into the current tax year.

From our experience, its not uncommon to document as much as $200,000 in accelerated depreciation per $1MM worth of building; assuming a 35% tax rate, the resultant reduction in taxable income would translate to a $70,000 bottom line improvement.

A project fee for a Study is typically between $10,000 and $20,000 per building, and can depend on property size, construction quality, location, availability of accurate construction documents, other.

So, a $2MM building could provide a $140,000 bottom line improvement; that’s about a 10:1 benefit-to-cost ratio for performing the Study (…and that’s not considering the net cost basis of the Study after writing it off as a business expense!).
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In summary, cost segregation analysis is a logical tax strategy dating back to 1959 when the Tax Court first allowed component-based depreciation of buildings (though greatly clarified over the past decade with the IRS’s Audit And Technique Guidelines). Even properties purchased years ago can capture benefit with a very attractive cost-to-benefit ratio for performing an Engineering Based Cost Segregation Study. Any auto dealership whether purchased, constructed or renovated for costs in excess of $500,000 should consider this service.

This article originally appeared on the GMG Savings website.

Restaurants have two major tax incentives available to them, yet most are not taking advantage and consequently losing money. The main programs that most in this industry are missing out on are:

1. Engineering-based Property Cost Allocation
2. Property Tax Reduction

Engineering-based Cost Allocation
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Engineering-based cost allocation identifies opportunities for federal, and in some cases, state tax advantages to owners of commercial industrial real estate by accelerating the depreciation on their property.

Taxpayers are typically correct in depreciating personal property such as equipment and furniture over five or seven years, but they often neglect available federal and state tax benefits by erroneously depreciating their entire investment in constructing or acquiring a building over 39 years. To do this correctly, one must hire an experienced engineer with a thorough understanding of construction finance.  The engineer will review all blueprints, architectural drawings, and electrical plans to isolate structural and mechanical components from those that are considered personal property in addition to identifying architectural and engineering fees that can be segregated.  The resulting cost allocation report will allow a taxpayer to:

• Adjust the timing of deductions thus maximizing tax savings
• Create a complete audit trail to resolve any IRS inquiries
• Capture immediate retroactive savings on qualifying properties
• Reduce real estate tax liabilities significantly

Property Tax Reduction

Probably the most frustrating bill that comes each year (or in some cases, twice each year) is the property tax bill. As of this writing, our studies indicate the average Restaurant in the United States is being overcharged by 10% on their property taxes. There are many reasons Restaurants are overcharged but mainly it is the result of improper assessments by the municipality. If you own a Restaurant and are paying property taxes over $50,000 per year, you should have a review completed on your facility. Reductions in this area are direct to your bottom line!

If you have not had a thorough review on your facility, especially as it relates to the areas of Property Cost Allocation, and Property Tax Reduction, you are likely losing money that should remain in your pocket.

This article originally appeared on the GMG Savings website, and is reprinted with permission.