Posts Tagged cost segregation

“What is Datapod?” Series-Part 3

Posted by on May 17, 2012  |  No Comments


We would like to follow up our latest blog “Accounting and Tax Benefits of Modular, Portable Data Center Infrastructure” with the benefits of cost segregation and the Datapod™ System.


Cost segregation is a strategic tax savings tool that allows companies and individuals, who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating deprecation deductions and deferring federal and state income taxes. Because the entire Datapod system (everything in the container and the container itself) is not considered to be a building, you would capitalize the total cost of the system (including the installation costs) and depreciate it over five years for tax purposes.

Attached is a benefit estimate that takes 100% of a $1,000,000 cost and moves it from 39 years to 5 years.  You can see that the Datapod system–compared to a million dollars of traditional new data center costs–will provide you with an improved cash flow of over $65,000 in year 1 and nearly $290,000 in years 1-5, cumulatively.  This analysis assumes a 35% federal income tax rate. Consideration of state income tax will enhance the results.  Note: This is provided purely for illustrative purposes; the fees and yields are merely examples and are not meant to be indications of actual fees or results.

Sample Benefit Estimate and Fee Quote (Click Here To Download Larger View)

Universal Networking Services works closely with a dedicated cost segregation team that includes engineers and tax experts that have performed thousands of tax projects resulting in hundreds of millions of dollars in benefits.   The initial assessment to determine qualification is free.  If you think you may qualify for cost segregation and want to increase your cash flow please feel free to contact us to learn more.

Accounting and Tax Benefits of Modular, Portable Data Center Infrastructure

Posted by on May 11, 2012  |  No Comments

White Paper 115

This white paper is provided to highlight the opportunities and benefits of involving a finance or tax professional who is knowledgeable in the acquisition and deployment of data center physical infrastructure (DCPI) assets. Applying the accounting options available within the framework of what is known as Generally Accepted Accounting Principles (GAAP), DCPI assets may be better aligned with the goals and objectives of a particular business, institution, or organization. This document is not intended to provide or offer advice on tax planning, as only a qualified or certified financial professionals may actually provide tax advice.

Among the difficulties faced by owners of DCPI assets, is the absence of perceptive financial treatment of the individual portions of mission critical systems. Frequently, the UPS, power distribution unit (PDU), and branch circuit panels installed in the construction of a building (or as a major “improvement project“) will be booked as a “building improvement” and depreciated along with the concrete, steel, boilers and pipes of the building. The “building” will likely have a long depreciable life, which may be upwards of 30+ years. However, DCPI equipment typically has a relatively short useful life, even though the UPS, PDU, and related branch circuits may remain on the books long after they are declared obsolete. For many companies, improper booking of high technology DCPI such as UPS systems and PDUs routinely causes substantial problems in the form of overstated “real property” asset value, and the obligation to take a “write-down” in the year that the UPS and related parts are “retired”. A glossary is provided in the appendix of this paper to define various terms used throughout.

Recent improvements in the design and manufacture of DCPI equipment, particularly UPS systems, PDUs, and (to some extent) air conditioning, has opened up the opportunity to treat DCPI as “business equipment”, rather than a part of the building in which the equipment is installed. This achievement is the direct result of scalable, modular, and fully manufactured systems requiring little or no field wiring other than the connection of the input power (which may be accomplished through “cord and plug connected” means).

This improved DCPI works well in a dynamic business climate where technology changes frequently and economic cycles and leaseholds may be substantially shorter than real estate investment periods. The integration of this DCPI into a corporation, institution, or organization’s economic model is not difficult, because nearly all corporations, institution, or organizations have experience with the management of business equipment, including computers, copy machines, production machinery, and company owned vehicles.

“Accounting and Tax Benefits of Modular, Portable Data Center Infrastructure” Full White Paper (Click Here To Download)

Executive Summary:

Well-informed accounting treatment of data center physical infrastructure (DCPI) assets provides significant opportunities to contribute to improving the financial performance of a business, institution, or organization. Design and manufacturing improvements in modular, scalable UPS systems, power distribution units (PDUs), and computer room air conditioners have not only created technological benefits, but provide entirely new DCPI asset management opportunities with direct and measurable financial benefits.

Contents:

  • “Traditional” vs. factory-built solutions
  • Understanding property taxes and related government fees
  • Financial planning for DCPI assets
  • Implementation of an asset management strategy for DCPI (Steps 1-7)
    • Step 7:  Cost segregation

Cost segregation:

By applying different depreciation rates to different components of a building, a business, institution, or organization may lower its corporate income taxes and thereby make available more cash flow. Cost segregation, as practiced by financial professionals with experience in corporate income tax accounting, is largely an exercise in recognizing and separately accounting for the costs of 5, 7, 10, 15, and 20 year property from the 30 or 39 year property classifications. The property in the each of the classifications from 5 to 20 years, in addition to being properly separated from the 30 or 39 year categories, once properly identified, are eligible for accelerated depreciation. Accelerated depreciation allows a business, institution, or organization paying corporate income tax to further increase deductions during the early life of the equipment.

Businesses, institutions, and organizations that own high technology assets can benefit the most from employing cost segregation methodology, so long as each asset can pass the so called function and use test and the inherent permanency test. The function and use test is intended to determine whether an asset serves any purpose in the operation of the building, as carefully differentiated from the business conducted within the building. If the asset is determined not to serve any purpose in the operation of the building, it is then subject to the inherent permanency test, where ease of removal and the complexity of the removal process are evaluated. Modular, scaleable, factory built DCPI performing the work or mission of a business, institution, or organization, routinely pass both tests easily.

Conclusion:

The impact of tax and tax related asset management strategies on the total cost of ownership of DCPI can be significant. These savings are entirely separate to gains in energy efficiency and the cost of maintenance, compared to an old, oversized legacy or traditional UPS system, with high electrical energy consumption, escalating repair, deferred maintenance, and real estate costs. Personal property, real estate, and corporate income tax savings, and tax related savings (such as the tax component of rent) can produce direct financial benefits, in excess of 20% of the installed cost of a properly sized, installed, and “booked”, factory-built UPS and PDU solution.

The key to successful implementation of a tax and tax related asset management strategy is involving a financial professional along with the IT professionals, and facility managers involved in the deployment of DCPI, and:

  • Consider treating all factory-built DCPI solutions as business equipment
  • Consider declaring factory built DCPI as personal rather than real property
  • Create realistic depreciation schedules
  • Avoid life cycle errors creating stranded asset requiring a “write-down” against earnings
  • Reassess permit and inspection requirements for factory built DCPI
  • Plan for asset portability and asset reassignment; and incorporate tax related savings including
  • Plan for reduction in construction costs for a dedicated UPS room
  • Lower monthly or annual rents or allocation cost associated with dedicated UPS rooms, hallways, and common areas required to access the dedicated UPS rooms

Modular, scalable UPS systems, PDUs, and computer room air conditioners have not only created technological benefits, but provide entirely new DCPI tax and asset management opportunities with direct and measurable financial benefits. While this white paper is intended to highlight these opportunities, its primary message is the benefit of involving a tax professional in any team planning improvement to a data center or network room DCPI. The results will be dramatic.

White Paper Written By:

Barry Rimler

Organizations that own high technology assets can benefit the most from exercising cost segregation strategies, so long as each asset can pass the function and use test and the inherent permanency test.  Modular, scaleable factory built Data Center Physical Infrastructure (DCPI) performing the mission of a business routinely pass both tests with ease.

Tax and tax related asset management strategies create a significant impact on the total cost of ownership of DCPI.  These savings are entirely separate to gains in energy efficiency.  Successful implementation of cost segregation strategies involves a financial professional along with the IT professionals and facility managers in the deployment of DCPI.

Universal Networking Services works closely with a dedicated cost segregation team that includes engineers and tax experts that have performed thousands of tax projects resulting in hundreds of millions of dollars in benefits.   The initial assessment to determine qualification is free.  If you think you may qualify for cost segregation and want to increase your cash flow please feel free to contact us to learn more.

Universal Networking Services Releases Website Update

Posted by on January 10, 2012  |  No Comments

Universal Networking Services Releases Website Update

The updated website, www.criticalpowerandcooling.com,  features clearer navigation, more focused content and a cleaner user interface for enhanced usability for all data center professionals.

St. Petersburg, Florida (January 9th, 2011):  Universal Networking Services (UNS), a leading provider of mission-critical power and cooling infrastructure products and services today announced the release of several high-level updates to their popular website:  www.criticalpowerandcooling.com.  Going beyond merely selling products, UNS’s website offers to educate and inform users on the latest in data center power and cooling technologies.

The new streamlined website includes several enhancements that are functional and interactive.  Clearer navigation to the latest industry information in power, cooling, modular, fire and monitoring can be accessed through the updated “Data Center Solutions” portal. The “Data Center Institute” section provides White Papers and tools essential to the data center professional while the “Efficiencies Strategies” section showcases UNS signature Critical Facility Energy Profile (CFEP) service.  UNS is proud to dedicate a page so to the Datapod System, an innovative modular, scalable data center that delivers an optimized IT environment as well as a page regarding cost segregation, a strategic tax savings tool.  Integration of social media tools allows website visitors to access additional data center industry news via RSS news feed from UNS Blog, Twitter and LinkedIn.

Waite Ave, Vice President of Operations, states “Today’s IT departments face complex challenges that demand forward looking IT solutions.  With that in mind, UNS has developed a website that provides educational opportunities and showcases the latest in technologies for data center power and cooling.  Education that will lay the critical foundation to run an efficient data center.  At UNS, our philosophy is to offer the data center professional the tools and resources to lower their Total Cost of Ownership (TCO) and maximize efficiencies offered by the advancements in today’s data center architecture.  We are very excited to share our updated website to empower the data center community to find real-time solutions to their unique challenges.”

About Universal Networking Services:

UNS specializes in mission-critical power and cooling solutions for wiring closets, server rooms, and data centers.  UNS provides product acquisition, design/ engineering, installation management and maintenance services.

To learn more about UNS,  please contact Waite Ave at w.ave@apcdistributors.com or 281-825-9790.

Tax Benefits of Modular, Portable Data Center Physical Infrastructure (DCPI)

Posted by on April 19, 2011  |  No Comments

Tax and tax related asset management strategies create a significant impact on the total cost of ownership of DCPI.  Modular, scalable UPS systems, PDUs, and computer room air conditioners have not only created technological benefits, but provide entirely new DCPI tax and asset management opportunities with direct and measurable financial benefits.

WHAT IS COST SEGREGATION?

Cost Segregation is a strategic tax savings tool that allows companies and individuals, who have constructed, purchased, expanded, or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

WHAT ARE THE BENEFITS OF A COST SEGREGATION STUDY?

  • Generates immediate increase in cash flow through accelerated depreciation deductions.
  • Reduces income taxes and can also reduce real estate property taxes.
  • Provides an easy opportunity to claim ‘catch up’ depreciation on previously misclassified assests.
  • Provides an independent third-party analysis that will withstand IRS review.

Cost segregation, is an exercise in recognizing and separately accounting for the costs of 5, 7, 10, 15, and 20 year property from the 30-39 year property classifications. The property in each of the classes from 5-20 years, once properly identified, are eligible for accelerated depreciation. This allows a business, institution or organization paying corporate income tax to further increase deductions during the early life of the equipment.

Organizations that own high technology assets can benefit the most from exercising cost segregation strategies, so long as each asset can pass the function and use test and the inherent permanency test. Modular, scaleable, factory built Data Center Physical Infrastructure (DCPI) performing the mission of a business routinely pass both tests with ease.

Tax and tax related asset management strategies create a significant impact on the total cost of ownership of DCPI. These savings are entirely separate to gains in energy efficiency. Successful implementation of cost segregation strategies involves a financial professional along with the IT professionals, and facility managers involved in the deployment of DCPI.

UNS, LLC works closely with a dedicated cost segregation team that includes engineers and tax experts that have performed thousands of tax projects resulting in hundreds of millions of dollars in benefits. The initial assessment to determine qualification is free. If you think you may qualify for this deduction and want to increase your cash flow please contact Universal Networking Services (UNS, LLC) for a free cost segregation benefit estimate and fee quote.  Contact, Waite Ave, Managing Partner at w.ave@apcdistributors.com or 281-825-9790.

Cost Segregation For Data Centers

Posted by on September 1, 2010  |  No Comments

Cost Segregation is a strategic tax savings tool that allows companies and individuals, who have constructed, purchased, expanded, or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

WHAT ARE THE BENEFITS OF A COST SEGREGATION STUDY?
Generates immediate increase in cash flow through accelerated depreciation deductions.Reduces income taxes and can also reduce real estate property taxes.Provides an easy opportunity to claim ‘catch up’ depreciation on previously misclassified assets.Provides an independent third-party analysis that will withstand IRS review.

Cost segregation, is an exercise in recognizing and separately accounting for the costs of 5, 7, 10, 15, and 20 year property from the 30-39 year property classifications. The property in each of the classes from 5-20 years, once properly identified, are eligible for accelerated depreciation. This allows a business, institution or organization paying corporate income tax to further increase deductions during the early life of the equipment.

Organizations that own high technology assets can benefit the most from exercising cost segregation strategies, so long as each asset can pass the function and use test and the inherent permanency test. Modular, scaleable, factory built Data Center Physical Infrastructure (DCPI) performing the mission of a business routinely pass both tests with ease.

Tax and tax related asset management strategies create a significant impact on the total cost of ownership of DCPI. These savings are entirely separate to gains in energy efficiency. Successful implementation of cost segregation strategies involves a financial professional along with the IT professionals, and facility managers involved in the deployment of DCPI.

UNS, LLC works closely with a dedicated cost segregation team that includes engineers and tax experts that have performed thousands of tax projects resulting in hundreds of millions of dollars in benefits. The initial assessment to determine qualification is free.

To learn more please contact Waite Ave at w.ave@apcdistributors.com or 1-888-486-7725, ext. 201.