Cost segregation for your building

Business is a risk . . .

Dave Kinnear1-On Leadership

The great corporate counselors I have encountered gauged the business owner’s or executive team’s tolerance for risk, presented their ideas for balancing the risk with the business goals and then helped the decision makers move the company forward. It’s the same with the the best financial professionals I’ve met. Rather than simply account for transactional history, or be a roadblock to funding projects, they managed to understand the company strategy and advise the decision makers on the BEST way to fund a project along with all the known consequences for the corporation.

I’ve also observed the opposite to be true. Bad financial advice can starve projects and keep the company from growing. Or perhaps the advisor allows the opposite problem of over leveraging a company to the point of collapse. Overly cautious legal advice has kept companies from entering markets or angered customers with complex, legalistic one-sided contracts bordering on or actually achieving purposeful obfuscation.

This topic comes to mind because several opportunities to recoup cash from “Uncle Sam” have more or less been shot down by finance people as being “too risky,” or “inviting an audit.” Yet, from all that I can figure out, there is little or no risk involved either by inviting an audit or by doing something that is illegal.

The first opportunity is to properly take advantage of Cost Segregation for those of us who own commercial buildings. Even if you’ve lost your building in this economic slump but have owned it for two years prior, you may be able to regain some tax money. The professional with whom I spoke about this process has been doing this the right way for his clients for more than 20 years and has yet to have triggered any audits. That’s because they do it right with a formal cost segregation engineering report. Slam dunk if you meet the criteria.

A second opportunity is to make sure you take advantage of every possible R&D Tax Credit that you can. This one is a bit more aggressive, yet even Senator Grassley is suggesting that business leaders should take advantage of these tax breaks. One company with whom I work has a whole department of legal and tax experts to make sure they take advantage of every possible legal tax credit they can get. Now maybe you can’t afford to have a staff of folks to help you out, so you may need to hire an outside firm to work with you. There are several firms that do this kind of work. One that I am familiar with is alliantgroup. You may want to see if you are entitled to some tax credits. If you do any process or product improvements or are in an enterprise zone you may well be eligible for credits. And even if you are posting a loss this year, you may be able to get credits for prior years or set things up for going forward when you will once again earn a profit.

So if you think it would be worth your while to send as little money as possible to the folks in Washington DC, then you might want to get your financial expert (CFO, CPA, Controller, tax accountant, etc.) to look at this – seriously and thoroughly. If they do not have a sound BUSINESS reason why you can’t or shouldn’t take advantage of these tax breaks, then perhaps it is time to reconsider whether your advisors are aligned with your risk tolerance and desire to grow your business. On the other hand, if you and your advisors are “in tune” with each other and they give you solid reasons for not taking advantage, then by all means we should take their sound advice.

So where are you on this concept? Do you believe those advising you understand your risk tolerance and advise you accordingly? Do you feel you are being aggressive enough in your taxes?