Tax Considerations for Modular Equipment Center Systems

Envirosep recently released an informative white paper examining depreciation and tax considerations for those considering the equipment center concept as an alternative to traditional buildings.

Envirosep Equipment Centers

Custom-designed and manufactured, Envirosep equipment centers are complete, outdoor enclosed modular buildings that may be used in applications such as industrial, commercial, chemical processes, mining, or wastewater. Typical enclosed electrical structures, these modular centers are used for telecommunications equipment, IT equipment, and motor control centers.

Favorable Tax Depreciation

Envirosep equipment centers benefit from favorable tax depreciation laws due to their classification as portable insulated enclosures. While conventional construction depreciates over 39 years as real property, EnviroSep centers fall under Asset Class 34.0 or 35.0, allowing for a shorter 7-year depreciation period. This results in accelerated depreciation and faster recovery of costs.

For instance, a $1,000,000 electrical shelter depreciates fully in 7 years, reducing taxable income by the entire cost, while permanent construction depreciates less than 18%, reducing taxable income by only $179,500. At a 34% tax rate, the Envirosep solution offers $279,000 in real dollar tax savings during the first 7 years.

To learn more about how your business could benefit from modular equipment center systems, contact Koch Applied Solutions.