CASE STUDY: PAPER MANUFACTURER
THE CHALLENGE
This paper and pulp manufacturing client operated a newsprint recycling plant. And through a combination of recessionary factors, plus an operation that relied solely upon recovering, recycling and reproducing newsprint in an era where newspaper and magazine circulation had dropped by nearly 50% – creating a shortage of raw materials and lack of demand of a finished product, the company was desperately seeking tax savings solutions.
OUR SOLUTION
This would be a multi-year project; so we developed a litany of property tax strategies to implement over a 2 to 3 year period. The most significant tax savings generated was through a detailed analysis of the company’s previously negotiated tax abatements and a discovery that (1) the county had misinterpreted the language in the tax abatement – which resulted in erroneous overpayments of prior year taxed; and (2) the client also failed to maximize the tax abatements that they had previously negotiated. We also pursued additional tax reductions through real estate valuation consulting, pollution control tax exemptions and personal property valuation issues.
THE RESULT
The result of these efforts was a $353,000 refund that was received as a future tax credit, $880,000 in current year tax savings, and $6.2 million in future tax savings, through maturation of the existing tax abatements, for a total combined tax benefit of $7.4 million.
Creating saving strategies for our clients that they benefit from each and every year.
CASE STUDY: A NEW MANUFACTURING FACILITY
THE CHALLENGE
To get a new manufacturing facility to pay only the fair share of property tax liability that they are supposed to pay. The new construction projected total of real and personal property tax liability prior to our involvement was forecasted at $1,900,000 in combined payments. Our task was to create savings strategies that would reduce the actual property tax liability paid by the facility. This was a facility that was new to the tax roll and we were involved prior to any construction being completed. It was the initial year that this facility was being assessed for both real and personal property tax.
OUR SOLUTION
Developed a strategy that reduced the economic life of the bulk of the manufacturing equipment. We reduced the typical economic life of 12 years to an actual economic life of 7 years by demonstrating that the equipment was high tech in nature and additionally certify all pollution control equipment. We also were able to take actual real estate construction costs in excess of $60 million and reduce that number substantially to an initial assessed value of $37 million.
THE RESULT
After our involvement we were successful in taking a projected $1.9 million liability and reduce it to a taxable paid amount of $1.2 million. In subsequent years we have also been able to save the client an additional $100K in real estate property tax through traditional real estate appeal work. They continue to be a current client and are pleased with our services.
Creating strategies for long term savings.
CASE STUDY: A GLOBAL CONVENIENCE STORE
THE CHALLENGE
A Global Convenience Store Operator with over 10,000 North American units had inquired about a re-engineering review of their property tax department. Subsequent to the review and proposal, the company decided to outsource the real and personal property tax compliance and consulting function.
OUR SOLUTION
Through a forensic fixed asset accounting review, a prototype model was recommended along with a useful life depreciation table based on the turnover of the fixed assets by the company. This model was utilized for the annual filing of the personal property tax returns. In addition, a similar prototype model was designed and utilized to value the real estate improvements.
THE RESULT
The recommended strategy was approved resulting in an annual reduction in tangible personal property tax of $1,800,000. In addition, a real estate review resulted in a reduction of approximately $500,000 in tax.
Employing forensic fixed asset accounting reviews to help our clients control costs.
CASE STUDY: MAJOR STOCK EXCHANGE COMPANY
THE CHALLENGE
During the business personal property tax return review for a major stock exchange company with assets in Connecticut, it was noticed that a large amount of assets on the company fixed asset report and being reported and taxed, did not exist.
OUR SOLUTION
Working with company personnel, a physical inventory was taken of all equipment at the location. We used this inventory listing to adjust the books and records of the company. This allowed us to amend the returns previously filed by the company and request refunds for the current year plus 3 prior years.
THE RESULT
A 40% reduction in reported cost saving the company approximately $300,000 annually.
“We saw a 40% reduction in reported costs, saving our company approximately $300,000 annually.”
CASE STUDY: TIRE MANUFACTURER
THE CHALLENGE
This tire manufacturer pays in excess of $30 million per year in property taxes and had engaged our services as a full outsourcing property tax compliance and consulting firm – providing annual personal property tax filing services, as well as real estate and personal property consulting strategies.
OUR SOLUTION
Because most of the company’s larger manufacturing facilities all are under some type of tax abatement, our primary focus has been a detailed review and analysis of the tax abatement agreements, and verification that the taxpayer is receiving the benefit that had been negotiated. Our experience in 90%+ of the abatements we have reviewed is that our clients have not received the benefits negotiated.
THE RESULT
Although this is a current client with tax minimization strategies ongoing, the highlights thus far include $100,000 in annual tax savings through negotiating a lower assessment ratio for finished goods warehouse square footage at the company’s South Carolina manufacturing plants, approximately $150,000 in annual tax savings through inventory valuation arguments and increased inventory exemption of the company’s Texas distribution center, $350,000 in annual tax savings through asset reclassification from real estate to personal property (greater depreciation) and approximately $1 million in tax savings through review and identification of tax abatement errors and subsequent refunds. All of these strategies not only provided a current/prior year tax benefit, but also provide an ongoing tax benefit into perpetuity.
“We have already realized $1.6 million in tax savings to date, with more to come.”
CASE STUDY: AIRCRAFT MANUFACTURER
THE CHALLENGE
Client pays in excess of $9 million a year in personal property and inventory tax for their corporate campus and U.S. aircraft manufacturing facilities and was seeking some tax minimization strategies that would help provide property tax relief.
OUR SOLUTION
Developed a number of tax minimization strategies, including an inventory exemption play that expanded that amount of inventory subject to the property tax exemption, successfully negotiated a shorter life of all machinery and equipment, and successfully negotiated and reduced the taxable value of the company’s test and operational aircraft.
THE RESULT
The result of these efforts was a $590,000 annual tax savings through inventory exemptions and an additional $640,000 in annual tax savings through asset reclassification and valuation arguments. Additionally, these strategies are permanent in nature. Therefore, the client will continue to receive this $1.2+ million in tax savings in perpetuity.