You have approved the final building design and agreed on the budget, the construction documents (blueprints) are ready, the building permit has been applied for and the date of groundbreaking is set. Excitement and enthusiasm abound—your new facility is about to be built! But, what about the tax implications?
Depreciation issues will impact your federal and state tax liability. And, sales and use and property tax issues abound. Did the subcontractors and the general contractor impute the tax in their bids? Does the manufacturers’ exemption apply? If so, was it properly applied for? The assessor’s office called because they saw a copy of the building permit. They want to know how much you will spend by the holidays because the project will only be about 40% complete by the lien date.
Many questions need to be answered. Who should you call or talk to first?
The first call should be to Schenck, as early as possible. Yes, even before ground has been broken; even before the site has been selected. The earlier our consultants are involved, the better. In some cases, we can help negotiate non-statutory credits and incentives. Sales and use tax issues can be fully evaluated and all concerns resolved before the first shovel of dirt has been turned and the first invoice received. This ensures both general and subcontractors are only charging and remitting the appropriate sales and use tax.
What about returning that call to the assessor? Let the Schenck property tax team handle the call. If you are a manufacturer, you will want to file an application for the manufacturing classification for property tax purposes. The contractor’s application and certificate for payment documents (AIA G703/704) may contain a combination of real and personal, and taxable and exempt property. Some of the cost shown on these documents may be “non value added” for property tax purposes. The Schenck Real Estate & Construction Team can help sort it all out.
Our analysis of multifaceted tax scenarios can provide you, the project owner, with the best total tax answer. Schenck provides true one stop shopping for projects involving new construction, renovation or remodeling, and for the acquisition of existing facilities. Call our team early in your project to get the best answers to these important questions.
Robert Lange, CMI, ASA, is a property tax manager with Schenck. Bob has over 25 years of experience in property tax compliance and consulting on all aspects of the property assessment cycle. His background also includes performing depreciation and classification studies for cost segregation purposes.