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Cost Segregation for Manufacturing & Production Facilities
In a manufacturing plant the line between building and process is where the value is. Systems installed to serve production equipment rather than the building are personal property, and for new production space, qualified production property under §168(n) can change what happens to the building itself.
Where the value is in production facilities
Manufacturing plants are among the asset types where our engineering team has deep experience.
- Manufacturing plants
- Production facilities
- Lumber mills
Process systems follow the process
Process piping, dedicated process electrical and bus duct, compressed air, dust and fume collection, process exhaust and specialty ventilation exist to run the line, not to make the building habitable. That is §1245 property, documented system by system.
Qualified production property for new space
Under §168(n), nonresidential real property used as an integral part of manufacturing, agricultural or chemical production, or refining can qualify for a 100% deduction when construction begins after January 19, 2025 and before January 1, 2029, and the property is placed in service after July 4, 2025 and before January 1, 2031. Seneca is one of the only firms in the USA that can do a Production Property Study.
From hotels to lumber mills
Engineering has completed studies for every commercial property type, from hotels to lumber mills. Mills and heavy plants carry equipment foundations, conveyors, material yards and process utilities that a building-only depreciation schedule routinely misclassifies.
Commonly reclassified components
Representative of what an engineered study identifies in this asset class. Actual components and recovery periods depend on the property and are documented individually in your report.
What would a study find on your property?
Send the property details. Engineering prepares the estimate, and you receive a written, fixed-fee proposal within 24 to 48 hours.
Manufacturing and Production cost segregation questions
Still have a question? Ask Engineering.
How do you decide whether a system is building or process?
By use and by design. A system whose capacity, routing and specification are driven by production equipment, and which would not exist in a general-purpose building of the same size, is process related. We record the specification, photograph the installation and state the reasoning in the report.
What recovery period does process-related property get?
Process-related property generally takes the recovery period of the production activity it serves under the IRS asset class tables. For many manufacturing activities that is 7-year, and for some it is 5-year. The study identifies the activity and applies the class rather than assuming one.
Does our plant qualify as qualified production property?
It may, if your business uses the building as an integral part of a qualified production activity and it meets the construction, placed-in-service and original use requirements. Offices, administrative space, parking, sales, research and engineering areas are excluded, and a lessor generally cannot claim QPP on property a tenant uses. The IRS identifies cost segregation data and engineering plans as reasonable ways to allocate basis between qualifying and excluded portions. See qualified production property studies.
Our equipment was already expensed. Is there anything left?
Often, yes. Equipment on the fixed asset ledger is one thing; the building-coded costs of installing, powering, venting and supporting that equipment are another, and those are frequently sitting in a 39-year life.
Get a Commercial Savings Estimate
Fixed-fee proposal in 24 to 48 hours.
- Prepared by Engineering
- Lifetime audit defense
- NDAs available
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Engineering will review the property and send your written estimate and proposal within 24 to 48 hours.
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