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Commercial Fire Sprinkler Tax Incentives
Tax Incentives for Business with Commercial Fire Sprinkler Systems
We are happy to have emergency equipment like commercial fire sprinkler systems for commercial and industrial facilities, but generally, they do not occupy our thoughts unless they are needed. Like all mechanical systems, commercial fire sprinkler systems require maintenance and occasional repairs. State and local fire codes include a schedule for proper care of fire sprinklers, with various maintenance plans for sizes and types of systems. Most likely, someone on your team has been tasked with overseeing the maintenance of all fire safety equipment.
Like all mechanical systems, fire sprinklers will need to be upgraded or replaced to keep people and property safe. There is not a “one size fits all” standard for when this should take place, but factors that are a part of the decision include:
- Local water chemistry—both acidic and saline water sprinkler components
- Age—technological advances can make a system obsolete
- Expansion—new and old systems might not network well
Two recent Federal bills have been written to help commercial property owners by providing tax incentives to install, upgrade, or retrofit fire sprinkler systems. There is some time sensitivity to the size of the incentives, so read on.
2017 Tax Cuts and Jobs Act (TCJA): Small Business Section 179
In December 2017, Congress passed a massive tax reform bill and Section 179 of that bill provides tax incentives for small businesses to upgrade fire sprinkler systems. The incentives were designed to stimulate the economy by encouraging small businesses to invest in capital improvements. Key provisions include:
- Allowing small businesses to write off 100% of the cost of upgrading fire sprinkler systems, up to $1.04 million
- Expenses allowed include retrofitting or upgrading sprinkler systems in commercial facilities. It does not cover the cost of sprinkler upgrades in residential structures
- The changes do not appear in sunlight and are not scheduled to phase out over time
Coronavirus Economic Stabilization Act (CESA) 2020; Cost Recovery Section 13201
As part of the Covid-19 stimulus plan, the 2017 bill was corrected and expanded. The desired impact is to stimulate the economy and get people working again. Key provisions of this bill include:
- The incentive was extended to any size business, not just small businesses
- The incentive is for retrofitting or upgrading existing systems
- The improvements can be made to the interior portion of structures that are commercial, non-residential facilities
- The 2020 bill modifies the write off incentive schedule:
- Expenses for installation, retrofit, and upgrades on qualifying structures, completed between September 27, 2017, and December 31, 2022, can be fully expensed, allowing owners to recover 100% of the cost. That is, 100% of the cost can be depreciated in one year, compared to the previous 39-year depreciation horizon.
- After 2022, only a portion of the cost can receive the bonus depreciation
- 80% in 2023
- 60% in 2024
- 40% in 2025
- 20% in 2026
- After 2027, the expenses can be depreciated on a 15-year horizon—a great improvement over the previous 39-year schedule.
Consult a professional tax advisor to determine how the incentives might benefit your business. If you implemented fire sprinkler upgrades between September 2017 and the present, a tax advisor can help with a retroactive claim to cover expenses.1
Sadly, the majority of commercial facilities that experience structure fires are not protected by fire sprinkler systems. Commercial Fire Sprinklers are effective 96% of the time at controlling a fire. If your commercial facility does not have sprinklers or if your facility needs to upgrade its sprinklers, these incentives can help with building upgrades.
Have Questions About Commercial Fire Sprinkler Systems?
Call Fire Safe Protection Services today at 713-722-7800 or visit our online form and we will be in contact as soon as possible about your questions regarding Commercial Fire Sprinkler Systems.
1 https://firesprinklerassoc.org/wp-content/uploads/2020/11/NFSA-Tax-Incentive-Fact-sheet.pdf