The Company You Keep

Your Study will Only Be as Good as the Company That Performs It

You’d like to offer value-added services but won’t trust your clients with just anyone.

Perhaps you’ve been hesitant to begin the process, unsure how to select the right partner. Perhaps past referral partners weren’t satisfactory, leaving you skeptical.

Whatever your situation, you want the best for your clients. Here’s how to find it.

NO MATTER THE SERVICE, THE FIRM YOU CHOOSE MUST BE:

• Trustworthy
  Do they take care of your clients while respecting the primacy of the CPA- client relationship?  Better yet, do they augment your expertise and strengthen your client relationships?
• Qualified
  Are they skilled subject-matter experts with appropriate experience and certifications? Do they repeatedly provide quality deliverables that meet or exceed IRS-standards?
• Accessible
  Can you get them when you need them?  Do they communicate regularly and transparently, establishing clear timelines for deliverables?
• Adaptable
  Will they tailor their level of engagement to your preferences?  Can they meet your specific needs and integrate into your firm’s culture?
• Consistent
  Does their entire team understand the relationship’s value?  Do you enjoy consistent processes and outcomes, knowing that you are a priority?
• Upstanding
  Do they stand by their work product and act ethically in all business matters?

REAL ESTATE TAX INCENTIVE FIRMS (Cost Segregation, 179D Deductions, ITC/CEIC)

Features to Look For  

• Multidisciplinary team composed of tax and technical professionals.
  • • You want to see engineers, CPAs, accountants, and attorneys on the team.
• Experience with a variety of property types.
  • • Some firms have lots of generalized experience, but aren’t familiar with unusual verticals that differ from the norm.
    • If you need a study done on an equestrian center, a motorsport club, or a luxury treehouse, your provider must be familiar with the associated rules/features that apply.
• Solid working relationships with CPAs.
  • • The best firms respect the primacy of the Client-CPA relationship, working closely with both entities to get the best results.
    • Ideally, a firm will also help proactively identify and integrate additional tax incentives into an existing strategy.
    • You should also look for a firm who will provide education and resources for CPA support.
• Complimentary feasibility analysis.
  • • Good firms offer a no-cost estimate of benefit that lays out short and long-term potential.
    • GREAT firms speak to these estimates candidly – if a study isn’t worth doing, they’ll tell you so.
• Meticulous site visits, with experienced engineers working slowly and methodically to assess all assets.
  • • Even the small items add up – you want a provider that documents everything, down to the smallest outlet.
• Accurate, detailed reports that are in compliance with IRS guidance and case law, including the “13 Principal Elements” listed in the Cost Segregation Audit Technique Guide.
  • • The report should include an itemized accounting of all assets with assigned values and depreciation class lives that ties back to the building’s total spend.
    • Ideally, the firm will rely on RS Means for more comprehensive costing and unit pricing whenever possible. (Marshall and Swift cost data may be used when necessary, but is geared more for appraisals.)
• Efficient and timely report delivery.
• Support in the unlikely event of an audit.

Red Flags to Avoid 

• Firm doesn’t provide an Estimate of Benefit (or they want your client to sign first).
• Firm doesn’t request plans, blueprints, etc. – indicates that they are likely not relying on engineering-based methodologies.
• Firm isn’t concerned about allocating soft costs.
• Firm suggests a percentage-based fee, violating IRS Circular 230.
  • • The IRS states that providers are disallowed from having any interest in the study results — compensation cannot be based on the findings.
• Firm says they don’t really need to do a site visit – they can just “estimate.”
  • • For Cost Segregation Study , a site visit – either in-person or virtual – is crucial for accurate and thorough studies.
    • For 179d Tax Deduction, an in-person inspection is mandatory. Plus, it can’t be done by just anyone – the inspection must be performed by an engineer or contractor licensed in the jurisdiction of the building – many firms don’t comply with this requirement.
• Firm does a site visit – but it seems cursory.
  • • Identifying, quantifying, and documenting all building assets takes time.  Engineers take copious notes and may take hundreds of photographs.
    • Depending on building size and complexity, a thorough site visit may take 3-6 hours or longer.
• Firm delivers a thin report.
  • • A short report means corners were cut. When done right, a cost segregation report with full documentation can be over 100 pages long.
• Firm tries to sell you other, unrelated services – like investing.

R&D TAX CREDIT FIRMS

Features to Look For  

• A multidisciplinary team is in order again – and ideally the team will have Subject Matter Experts in Architecture, Construction, Software Development, Manufacturing, Life Sciences, and all types of Engineering on staff.  You want to see that hands-on technical experience in every common industry.
• Attorneys must be part of the team.  The success of a claim – especially regarding funded research – may be determined by contractual language, and you need a contracts expert on board.
• Efficient, smooth process: Claiming the R&D Credit is complicated, and your clients will have to be involved.  However, you want a team that does their best to take the lift off your clients and make things as easy as possible, ideally working with the documentation your client already has.
• Project-Based Analysis (PBA) Methodology: This is the IRS-preferred approach that ties expenses to specific project activities, to ensure a fully substantiated Credit.  This is even more crucial with the new Form 6765 on the horizon – PBA Methodology is key to meeting the compliance requirements.
• Comprehensive review of all potential costs, including direct interviews with individual employees, not mass surveys.
• Data analysis performed by professionals.
• Extensive final report with full qualitative and quantitative analysis of all data, tables, photos, documents, etc.  Special attention is paid to supporting documentation.
• Reasonable turnaround time, keeping in mind that the industry average is 6-12 months.  (Capstan’s is half that.)
• Transparent flat-fee system based on project scope.

Red Flags to Avoid 

• Firm doesn’t review contracts and documentation up front to make a preliminary determination of claim feasibility​.  These firms are essentially asking your client to sign on before they’ve even established that there is a Credit to claim.
• Firm suggests a percentage-based fee, violating IRS Circular 230.
• Firm offers a one-size fits all approach, regardless of industry and client scope, and doesn’t use projects as the basis for analysis.
• Firm relies on inaccurate mass surveys instead of performing actual interviews.​
• Firm relies on Artificial Intelligence for data analysis​.
• Firm doesn’t obtain, manage, or organize documentation sufficiently.
• No attorneys on board, so firm looks to their client to make legal determinations.   These often don’t stand up under scrutiny and may result in the disallowance of a Credit.