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July 12, 2016

Pharmaceutical Manufacturer Receives $3.6 Million Dose of Present Value Tax Savings

Client Profile

Industry: Pharmaceutical Manufacturing
Annual Revenue: $500 million
Geographic Footprint: International
Ownership Structure: Private

CBIZ provides cost segregation studies.Issue

A pharmaceutical company planned construction of a new lab and office space in one of its properties. It leased the space where the remodeling was taking place, and the project was projected to incur $55 million in leasehold improvements.

Solution

To create the lab required the installation of specialized electrical and ventilation work as well as specially fixtures and finishes. The amount of materials involved and the size of the project made the manufacturer a good fit for a cost segregation study.

Our team examined the building plans, tax filings and depreciation schedules to classify qualifying assets into shorter 5, 7 and 15-year depreciation lives. The pharmaceutical-specific electrical and ventilation components had a shorter depreciation life than standard building components, which allowed unique opportunities for the manufacturer to accelerate the depreciations into earlier periods.

Outcome

The manufacturer noticed its tax benefits immediately. In its first year, the present value basis of its savings was $1.2 million, and the cumulative present value of its savings reached $3.6 million.

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Copyright © 2016, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

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