BUSINESS INTELLIGENCE THAT WILL CHANGE THE WAY YOU MANAGE YOUR REAL ESTATE CONSTRUCTION PORTFOLIO

QUANTITATIVE SAVINGS

By changing the drywall tape on your project to Green Zip®, depreciating the cost of non-load bearing walls can be accelerated by up to 34 years

• Commercial buildings and residential rental property have a depreciable life of 39 years and 27.5 years, respectively.  For tax purposes, this applies to the permanent structural elements of the building
• Nonstructural elements have a much shorter recovery period — either five-year or seven-year depreciable
• The IRS ruled that removable drywall partitions classify as nonstructural building elements (i.e. personal property), qualifying them for shorter life depreciation than conventionally installed drywall — 5 years as opposed to 27.5 years (residential rental property) or 39 years (commercial buildings)
• The IRS guidelines allow not only the classification of the demountable drywall partitions as five-year property but also the cost of the glass, doors, frames and other hardware, wall finishes and certain HVAC and electrical components related to the demountable drywall
• The result can be a near-term reduction in tax liability and a meaningful increase in cash flow for the investor/owner of a commercial building or residential rental property in the design, early-stage construction or renovation phase

Green Zip® technology can reduce investors’ near-term tax liability and increase cash flow

For example, say a residential rental building costs $50 Million to build — and $5 million of that is considered “personal” property (i.e not part of the permanent building structure).  The tax paying investor is able to depreciate that $5 million of expense on the property over five years.  The rest of the building cost — $45 million — depreciates over 27.5 years, providing a much slower tax deduction savings (ie a slower rate of return).

Now take that same example — and using Green Zip® — say an additional $10 million in construction expense can now be reclassified as “personal” property.  The tax paying investor is now able to depreciate $15 million of expenses on the property over five years.  On an after-tax basis (assuming a 39% tax rate), the accelerated depreciation on that additional $10 million in expenses would amount to a savings of $3.9 million over 5 years.  In other words, the investor reduced near-term tax liability — and thus increased cash flow — by $3.9 million over the five-year period.  This highlights the powerful benefit of installing walls with Green Zip® and utilizing a Cost Segregation study to properly classify assets in accordance with IRS guidelines.

There is an additional financial benefit to installing Green Zip® drywall partitions.  When the building is sold, the new owner can claim the total amount of the accelerated depreciation identified in the cost segregation study.  This amount (recalculated on the basis of the property’s new purchase price) still includes the demountable drywall partitions and the elements behind them.  This gives the building additional value and may provide the seller with a competitive advantage.

IRS AFFIRMED

In 2008, the Commissioner of the IRS signed an agreement designating Green Zip® demountable drywall technology as personal property — not real estate, thus qualifying for tax-based monetary incentives.  When part of the Green Zip® Partition System™, IRS Guidelines allow the glass, doors, frames and other hardware, wall finishes and wall-associated specialties (certain HVAC and electrical components) to be classified as personal property, also qualifying for the incentives.

Green Zip® is the only drywall tape that will successfully remove joint compound after it has cured to full hardness.  This was demonstrated for – and captured on video by – the IRS.  It is the only brand that passed IRS testing; other drywall tapes failed to meet the IRS requirements to treat drywalls as 5-year property.^*

In 2014, the IRS published a Private Letter Ruling PLR 110197-13 which concluded that “zip type partitions are tangible personal property for depreciation purposes,” making them eligible for shorter life depreciation.  Drywall partitions installed using Green Zip® technology may be depreciated over five years as opposed to 27.5 years (residential) or 39 years (commercial) for conventional drywall.  The accelerated depreciation achieved with Green Zip® can free up potentially significant cash flow for future investment by tax-paying owners/developers.

* Green-Zip Tape is the only self-adhesive fast-tape licensed to use patent #7197853, #7451577B2 AND other Pending Patents required to assemble and disassemble drywall.  Beware of any company or tax service making current claims that their demountable drywall is personal property.  After a 2008 demonstration before the IRS authorities, they are keenly aware that all other drywall tapes failed to qualify for government incentives after the joint compound had been allowed to dry to near maximum hardness.

ACCOUNTING & LAW FIRMS VALIDATED

In February of 2014, Price Waterhouse Coopers (PWC) highlighted the IRS accelerated depreciation classification ruling (regarding our patented technology) on their website and featured it in their monthly Accounting Methods Spotlight.  That same year, in an article published in Bloomberg BNA Daily Tax Report, David Burton, a tax attorney and partner at the law firm Akin Gump Strauss Hauer & Feld, affirmed the IRS ruling.  After a year long vetting process, the International accounting firm RSM (formerly McGladrey) issued a ringing endorsement in 2015.

EASY / SIMPLE

Use conventional gypsum drywall, removable screws and metal or wood studs.  Install vertical or horizontal drywall panels onto non-load bearing walls (not located at elevators or building cores) using self-adhesive Green Zip® Tape.  Green Zip® won’t add to the construction schedule or budget.

INSTALLATION

1. Attach drywall to metal or wood studs with removable screws
2. Instead of mudding over the screws and drywall joints, the self-adhesive Green Zip® Tape is applied first
3. Float the finish coat of mud compound over the Green Zip Tape

DEMOUNTING

1. Pull tape up through mud and paint to expose the screws beneath
2. Remove the screws with a power drill
3. Remove the drywall panels and stack on cart for reuse