Many building owners try to extend the life of a flat roof by continually repairing the surface. This decision may ultimately cost more in the long run due to increased staff attention and damage caused to interior and structural systems.
For many building owners and managers, the roof is the capital asset that offers the greatest potential for savings and return on investment for years to follow. At Guycan Ltd., we believe your roof system investment, like all other important capital assets, should be carefully managed.
Yes. Preventative maintenance is vitally important to the life of your roof. A building is only as good as its roof, and the roof is only as good as the care and maintenance you provide for it. Repairs are inevitable at times, however, a repair that could have been prevented is much more costly than a good regular maintenance plan.
Forecasting roofing costs and potential problems is notoriously difficult. More than 25% of all roofing dollars are spent on unplanned repairs. If you own multiple properties in varying locations and numerous property managers, you understand how difficult this can be and how your costs grow exponentially.
Not always. Be aware that roof warranties do not cover routine maintenance. Building owners and managers often incorrectly assume that their roof systems are protected by manufacturer’s warranties. In fact, this protection is severely limited by a long list of exceptions and exclusions which are carefully spelled out in the fine print of your warranty. Experienced roofing contractors estimate that fewer than 5% of roof system damage claims meet the stringent requirements set in the industry – standard warranties.
Protect your investment by prolonging the life of your roof. Maintenance and repairs managed by Guycan Ltd.’s skilled personnel incorporate the most important aspects of roof management including: preventative maintenance, emergency response, and disaster response. Whether your roof is under warranty or not, your roof needs continuous care. The investments you have made in your roof and your assets beneath your roof need to be protected.
There are so many roofing materials, procedures and concepts offered today that the decision of choices can be quite broad, even when you just have a simple leak. One option is to patch the leak and try to get by, and another is to completely tear off the old roof and replace it with new insulation and roofing materials, not to mention the plethora of options between these two extremes. Some of these options include preventative maintenance procedures designed to restore the old roof to a watertight condition for an extended period of time.
Debates as to the best way to fix a given roof are what give the roofing industry its validity. All too often however, such discussions are limited to roofing technology and the total cost. Little attention is actually given to the total cost after taxes. When the tax ramifications are taken into account, a strong argument arises on behalf of preventative maintenance options. Under the Internal Revenue Code, expenditures for the business property are tax deductible expenses, which may be written off in the current tax year. Conversely, expenditures that constitute capital improvements must be amortized over the life of the property and are recoverable only through annual depreciation deductions. In either case, the amount expended will be recovered through deductions, but the difference is the period of time over which the deductions are spread. Currently for roofing assets are recovered over 39.5 years. Clearly a major tax advantage is available to the building owner if they can treat the cost of fixing the roof as a current expense rather than depreciating the cost over 39.5 years. Not all roofing specifications will receive equal tax treatment. How the work is performed will dictate whether the cost can be written off in the current year or must be capitalized.
If we go back to the Supreme Court guideline, the answer to the question lies in whether such costs increase the value of the property or extend the useful life. In 1967, the Tax Court addressed this issue in the Oberman Manufacturing Co. In that case, Oberman had taken a $20,791 expenditure as a current expense on their roof in Fayetteville, Arkansas. The IRS had taken the position that the cost should be capitalized. In ruling in favor of Oberman, the court found that the company’s only purpose in having the work done to the roof was to prevent the leakage. The court further emphasized that there was no replacement or substitution of the roof and that this was the economical way to repair the leaks and keep the property in an efficient operating condition. As to whether the expenditure increased the value of the property, the court acknowledged that the property is more valuable once the roof is repaired but the proper test is to whether the expenditure materially enhanced the value, use, life, expectancy, strength or capacity as compared with the status of the asset prior to the condition necessitating the expenditures.
Where the owner selects a preventative maintenance process for his roof, it would be proper for him to treat such expenditure as a current expense. His sole purpose is to stop the leakage and return the building to a watertight condition. The life value of the building has not been materially enhanced. The old roof has not been replaced or substituted for new insulation and roofing. Treating preventative roof maintenance as a current expense is an aggressive tax position that might well be questioned by the IRS in the event of an audit. Nonetheless, the position is legally strong and ought to prevail. Once made aware of the tax advantages of preventive maintenance, the building owners attitude will change drastically. Rather than bemoaning the fact he is confronted with a large and unexpected expenditure, they will see that their roof work will serve not only as a rain shelter but as a tax shelter as well.
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