A closer look at the numbers

by Marty Kramer   The savings a cost-segregation specialist can uncover is sometimes staggering. Chris Hitselberger, Marshall & Stevens’ national practice leader for cost segregation, based in California, recalls one project for which the fees were about $13,000 on a $30 million building. "Last year, the check they wrote to the IRS was $800,000 less than it would have been," he says. He points out that the more complex the activity in the building, the better the results from cost segregation will be. "Theme and amusement is better than a restaurant, which is better than an office building, which is better than a distribution center, which is better than a warehouse," says Hitselberger. "Typically, warehouses do not offer much benefit from cost segregation."

How much you should expect to spend on an analysis depends on the size and complexity of the building. Hitselberger’s company charges a fixed fee per project, with a minimum of $6,000. Some clients have inquired about whether the company would take a percentage of the realized savings instead. "Without a doubt," Hitselberger says. But he tells clients that would result in paying many multiples more than what the fixed fee would be. So far, no one has pursued it further.

When looking for a cost-segregation specialist, Hitselberger recommends finding someone with a B.S. in engineering or construction management, time in the construction industry, and experience in the cost-segregation field. They should be able to quote the most common MACRS asset classes, a few landmark cases relevant to cost segregation, (like Scott Paper and Hospital Corp. of America, to name a few) and explain how cost segregation can effect GAAP reporting, property tax, fire insurance, and manufacturers’ investment credits.

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