$how Me the Money!

$how Me the Money!Hosted by:

The Atlanta Chapter of the

International Facility Management Association

Presented by:

William B. Hood, CPA

Presenter’s BackgroundWilliam B. Hood is the Business Development Executive for the Atlanta office of public accounting and advisory firm Carr, Riggs & Ingram, LLC (CRI), one of the Southeast’s ‘Top Four’ accounting and advisory firms and national top 40 firms.

Bill holds a B.S. degree in Accounting from Seton Hall University and is a Certified Public Accountant. Bill is a member of the American Institute of Certified Public Accountants, Georgia Society of Certified Public Accountants, the Atlanta Commercial Board of Realtors and CREW.

Agenda

• Doing more with less

• Construction costs

• Tax incentives (Federal/State)

• Rental income sustainability

• Alternative energy sources

• Pay back on capital

Doing More With Less

Facility owners’ demands

Competition

Tenant issues

Cost reductions

Service levels

Construction Costs

• Conventional vs. “Green” building costs

Leggett McCall Properties Headquarters15 day “LEED” construction program Tax and operating cost savings

Atlanta leads the southeast in LEED certification seeking buildings

(140 + per U.S. Green Building Council)

e.g. Atlantic Station, One Overton Park, Southface ECO Office

Tax and Other Incentives (Federal/State)

• Work Opportunity Tax Credits (IRC § 51(d))• Targeted Groups for 2009-10 Only (e.g. Veterans)• 25-40% of the employee’s wages

• Cost Segregation • Business energy reduction tax credits • Energy-efficient commercial buildings tax deductions• Various tax credits and grants for renewable energy (including rural energy programs)• Loans, loan guarantee, subsidies and bond programs• Georgia also offers certain tax credits and sales tax exemptions

Cost SegregationCreates higher after-tax cash flow

39 or 27.5 year depreciation write off vs. 15, 7, 5 year property

Current FacilitiesEntire FacilityBuild Outs

New Construction

Business Energy Reduction Tax Credits

Energy efficient appliance credits for manufacturers (dishwashers, refrigerators, clothes washers) (IRC § 45M)

Qualified fuel cell property, Solar energy to generate electricity for cooling or heating, geothermal systems etc. (IRC § 48)

Energy-Efficient Improvements-Commercial Buildings Tax Deductions

Deductions under IRC Code Section 179D

1) Installed interior lighting systems2) Heating, cooling, ventilation and hot water systems or3) Envelope as part of a certified plan to reduce total annual energy and power costs of these systems by at least 50% in comparison to a reference building that meets specified minimum standards.

The deduction is the product of $1.80 and the total square footage of the building e.g. $1.80 X 50,000 square feet = $90,000 deduction (reduced by section 179 deductions taken in previous years) for the building owner.

In the case of a public building, the person(s) primarily responsible for the designing the property may claim the deduction.

Energy-Efficient Commercial Buildings Tax DeductionsDeduction under IRC Code Section 179D

A partial deduction may be claimed by the taxpayer for the costs of the property that meet energy saving targets set by the IRS. The deduction is determined by substituting $.60 for $1.80 e.g. $.60 X 50,000 square feet = $30,000 deduction (reduced by section 179 deductions taken in previous years) for the building owner.

In the case of a public building, the person(s) primarily responsible for the designing the property may claim the deduction.

Energy-Efficient Commercial Buildings Tax Deductions

Deduction under IRC Code Section 179D

DOE maintains a list of the software that must be used to calculate power consumption and energy costs for the purpose of certifying the required

energy savings necessary to claim the deduction.

EnergyGauge, EnergyPlus, Green Building Studio, Hourly Analysis Program (HAP) etc.

http://www1.eere.energy.gov/buildings/qualified_software.html

Rental Income Sustainability

Premium lease rates (varies)

Tenants that pay rent obligations on time

Appealing to federal, state and local (GSE) and major companies e.g. Coca-Cola, IBM, Dell, UPS, Delta Airlines, GE, Home Depot, etc.

Alternative Energy Sources

Receive tax credits (IRC § 48) and reduction of utility costs can offer an excellent ROI:

Wind Solar Geothermal, etc.

And research (e.g. Siemens) has many other alternative energy sources in the pipeline

PAY BACK on CAPITALInvestment (less tax incentives) divided by annual energy cost

savings = payback (years).

Solar water heaters in Israel will save the country an estimated two million barrels of oil per year.

The typical 50 gallon electric water heater uses 11.1 barrels of oil per year.

Walgreens’, McDonalds’ initiatives

A wind appliance produces energy at an approximate cost of ($.09/kwh) that is lower then the rate of many utilities. Depending on the tower, installation costs, wind speed average, rebates, local electricity costs and tax incentives the wind appliance could pay for itself in 5-6 years.

The Lovett School, Six Feet Under, Atlanta Chamber of Commerce

PAY BACK on CAPITAL

Don Quixote: Dost not see? A monstrous giant of infamous repute whom I intend to encounter.

Sancho Panza: It's a windmill.

Don Quixote: A giant. Canst thou not see the four great arms whirling at his back? Sancho Panza: A giant?

Don Quixote: Exactly.

For More Information, Contact:

William B. Hood, CPABusiness Development Executive

770-457-6606 - Office678-428-9645 - Cell

770-255-6096 - Faxbhood@cricpa.com