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Guest Article:

 

When Green Isn’t What It Seems

When Green isn't Green - GreenwashingDr. Diana Driscoll, LEED AP, founder, Hotel Rescue™ and president of Ridgeline Hospitality
As published in Scotsman Guide's Commercial Edition, December 2009.

As people become more environmentally conscious and make buying choices based on products' environmental benefits, more companies are trying to capitalize on the green movement. One method some companies are using when promoting their products or services is "greenwashing."

Greenwashing occurs when a company attempts to mislead consumers about its environmental practices or about its products' or services' environmental benefits. This can apply to commercial buildings, as well; although greenwashing generally refers to green products, building-owners or developers also can be guilty of this practice.  Read the complete article When Green isn't What it Seems via PDF or online at Scotsman Guide.

Dr. Diana Driscoll, Ridgeline Hospitality, LLCDr. Diana Driscoll, LEED AP, founder of Hotel Rescue™ and president of Ridgeline Hospitality, a hotel-development company focusing on unique hotels in the southern states. Driscoll is heavily involved in the green movement and social media, frequently writing and speaking on these topics. Hotel Rescue™ brings much-needed assistance and analysis of financial and green options to struggling hoteliers. Reach Dr. Driscoll at (817) 723-6281,  or via email.

This month's tip:

     A question that comes up much more frequently now with hoteliers (and all CRE owners, actually) What is the potential benefit of cost segregation.  Are they candidates for a tax refund, increase in depreciation, and do they need to worry about tax recapture? 

In a nutshell, cost segregation is the IRS-approved method of accelerating depreciation.  This is not something that your accountant acting alone can do (the IRS insists that it is an engineered-based study).  Traditionally, commercial property was depreciated over a 39 year straight-line method.  In 1997, laws changed, allowing commercial real estate owners to separate out (or “segregate”) personal property from real property and take the accelerated depreciation on the personal property. 

     The potential savings are immense.  You are usually looking at 7-10% of the purchase price of the property (exclusive of land) in the first five years. 

     Do you qualify?  If your hotel is operating at a loss this year (“NOL” – net operating loss), but you paid taxes in the last 5 years, you can take a credit either as cash back or a credit to carry forward.  This involves a tax refile.  The IRS allows for a “catch up” period to be taken all in the first year and you can carry forward any extra deductions for 20 years. 

     Tax recapture only comes into play if you sell your hotel for a profit, and the recapture will come out of the sale proceeds.  Because this is not a tax reduction strategy, it is a tax deferral strategy, much of its value is in the “present value of money”.  Only the owner can decide if taking the tax advantage today is more important than taking it later.

 

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