Real estate clients can benefit from a number of specialty tax strategies, from Fixed Asset Services such as a cost segregation or 179D study, to Global Business Services to minimize tax liability, to realizing valuable economic development credits and incentives. The team at McGuire Sponsel has experience handling real estate transactions across all practice lines, giving us unique perspective on the best tax strategies to employ to benefit our clients.
Fixed Asset Services
There are several fixed asset tax strategies that can benefit those in real estate, whether you are buying new property, building on a new piece of land, or renovating an existing property that was recently acquired. No matter the scenario, McGuire Sponsel’s Fixed Asset Services team can identify the most beneficial tax strategy to maximize cash flow for your clients’ business.
Cost segregation studies are used to accelerate depreciation deductions on equipment and renovated or newly built facilities to reduce tax burden and improve cash flow. Interior renovations in excess of $200k or an acquisition or new build in excess of $750k are key indicators that a cost segregation study would be beneficial.
As facilities are renovated or newly built, energy-efficient inclusions and improvements may qualify for tax deduction of up to $1.80 per square foot through the 179D tax deduction. If your client has a new build in excess of 30,000 square feet or is making upgrades to lighting, insulation, or HVAC systems then a 179D study is beneficial.
Our property tax team focuses on identifying opportunities for reducing both real and personal property tax assessments. Developments over 50,000 square feet or with more than 100 units can benefit from a property tax review.
Cost Segregation Success Story:
A CPA firm in Tennessee referred their client to McGuire Sponsel to perform a cost segregation study on a newly constructed resort-style hotel in Nashville. The construction costs totaled over $74 million, and the team at McGuire Sponsel was able to reclassify 26% of the total depreciable property into 5 or 15-year property through detailed site visits and analysis.
The accelerated depreciation deductions resulted in an increased cash flow of $7,025,864 over the first year and a net present value of $4,456,264 over the life of the investment.
Location Advisory Services
Our Location Advisory experts align the right real estate projects with the goals of the community to help real estate development companies maximize tax credits and local incentives. If your clients are purchasing large industrial, mixed-use development, or other property types then they could realize valuable tax incentives.
Location Advisory Success Story: Multi-Family Housing Unit
The Garrett Companies is a multifaceted company focused on multi-family development, construction, and management services. They recognized the significant growth and demand in the Indianapolis market and sought to build a 180 unit Class A multi-family development in Greenwood, IN. While Garrett was passionate about the project, rent projections for Greenwood revealed a substantial financial gap between projected performance and required return on the project. With a total development cost of $24M, Garrett would need community support for the project to go forward.
McGuire Sponsel led discussions with the City of Greenwood regarding the project and negotiated developer-backed TIF bonds with the RDC and City Council in support of the project, bringing $1,721,802 in value over an 8 year period and allowing the project to move forward.
Global Business Services
Our tax advisors and legal counsel determine the most advantageous corporate entity structure, minimize tax liability, and review/draft any necessary legal agreements. If you client or business is a domestic or international corporation considering various land transactions, we should discuss how our Global Business Services team can assist you.
GBS Success Story: Global Student Accommodation Group
Global Student Accommodation Group (“GSA”) is the international leader and pioneer in student accommodation. GSA was presented with the opportunity to acquire 27 properties in the United States. These properties span across 18 state and would add nearly 8,000 beds to GSA’s existing portfolio. Considering this was GSA’s first expansion into the United States, the company assembled a team of advisors to assist with the legal and tax implications of the transaction.
McGuire Sponsel’s international transactions team was engaged to assist with the inbound tax and legal entity structuring portion of the project. Where there is no tax treaty in place between the United States and the location of the Ultimate Beneficial Owner, any dividend distribution or payment of interest from a U.S. entity to non-treaty owner would attract a 30% withholding tax without any ability to lower or mitigate this rate of withholding. The unique and substantive holding company structure created by McGuire Sponsel put GSA in a position to utilize treaty benefits between the U.S. and a partner country. With these treaty benefits, the 30% withholding tax GSA was facing was eliminated.