While there have been local and state incentives for improving built-in fire protection within communities, there has never been a federal tax incentive to improve built-in fire protection—until NOW!
NOW is the time to utilize the benefits of the provisions included within the Tax Reform and Jobs Act that allow for accelerated depreciation of fire protection improvement, including fire sprinkler and fire alarm system improvements and retrofits. The IRS is writing the regulations that determine how all this will be applied within Section 179 of the IRS Regulations, but the key is for the fire service community to encourage business owners to check with their tax professionals about how they can benefit from these new tax incentives. As with modern tax regulations, there are many factors involved. However, this is the first time that fire sprinkler systems have been separated from traditional building components and not depreciated over 39 years. The improvements here could be expenses in the first year or potentially over 5 years.
Does the following community sound like yours? If so, NOW is the time to make improvements that can have a significant impact on life safety.
That old warehouse in the industrial park has been protected with fire sprinklers and by the fire department for over 50 years. Fire sprinklers and firefighters have kept this business operating without a full day of interrupted productivity as the result of fire. And now it’s time for an upgrade of the system because the fire sprinkler heads are over 50 years old and the system’s annual inspection, test and maintenance (ITM) indicates deficiencies that need correcting.
NOW is the perfect time to make these improvements to the fire protection system that has served its purpose and protected the workers, operations and firefighters alike, as there is likely a federal tax incentive to upgrade the fire sprinkler system and fire alarm system. The owner has ensured that the fire sprinkler contractors who have been performing the ITM work have kept the system operational, and the fire department has ensured that inspections were conducted and records were filed.
The Committee on Historical Preservation in the city has been working for over a decade on a plan to minimize the impact a fire would have on its downtown district, which is currently thriving after the past decade of revitalization investments. However, most of the businesses operating have been there since the revitalization after the 1980s and would like to expand. The buildings were first erected in the early-1900s, and the fire protection is mostly passive protection with fire walls and separation. Most buildings don’t have automatic fire sprinklers, and the fire alarms were installed over a decade ago and could use upgrading.
Like most urban areas, especially in the downtown areas of smaller communities, there is a lot of vacant space on the floors above the business. These spaces are usually zoned for residential use above the business or mercantile use, and since modern codes require fire sprinklers in residential spaces over businesses, they remain vacant. Even if these occupancies were retrofitted in the past with fire sprinklers and fire alarms, these fire protection improvements would have all been depreciated on their taxes over 39 years in the business and 27.5 years in the residential. This isn’t the case NOW.
The city is also undergoing a water line improvement project and a street resurfacing project in the downtown historical district. The city is going to be replacing the waterline under the street and then resurfacing the street. The city is willing to increase the water tap sizes to each business downtown, and because of the project, there is no cost for the infrastructure repairs with increasing the water tap size. This is a great opportunity to install fire sprinklers into the businesses to allow more flexibility in the building’s use and preserve the historical district.
NOW is the perfect time for the business community and the city to cooperate to improve fire protection in the historical district while allowing for greater flexibility in the use of space in the downtown business district. The involvement of the fire department early in the planning of these projects will be key to success. Bringing together the business owners, city officials, fire sprinkler contractors, project general contractors, and inspectors will be key to ensuring that timing is managed to bring all components together. This is a win-win situation and certainly now, when the cost of the water and street improvements are being covered by the city and the expense of the fire sprinkler system can be fully depreciated in one year.
A nightclub in the unincorporated area of the county has an occupant load of 350 people and is classified as an A-2 occupancy under the International Fire Code. The county is on cycles to adopt the latest series of codes and standards when they are released. This progressive public policy ensures that all new construction is built to the latest codes and standards, which will for the life of the buildings ensure that they enjoy the most reduced insurance premiums available as the county and the buildings are evaluated by the Insurance Service Office (ISO). With the adoption of the 2018 International Fire Code, the nightclub will be required to retrofit with fire sprinklers because of an occupant load over 300 and the fact that they serve alcohol.
NOW is the perfect time for this nightclub to retrofit with fire sprinklers and ensure their business is uninterrupted, the patrons are safe, their liability is reduced, and firefighters don’t have to face a tragedy that places their lives at risk. This small business will be eligible to fully expense the cost of the system on their federal taxes under Section 179. The retrofit of fire sprinklers and the upgrade or installation of a fire alarms system is considered fire protection, which is eligible as a tax incentive under the Tax Cuts and Jobs Act.
While these situations may be hypothetical, the fires in San Antonio, Honolulu, Pittsburgh, Charleston, West Warwick, Charlotte and every other town in America that has suffered a tragic fire claiming the lives of citizens and/or firefighters are not hypothetical—and the opportunity to make significant improvements is NOW. This is the time for fire departments to reach out with the opportunity for an incentive instead of just a mandate. Utilize the International Fire Code along with NFPA codes and standards to make improvements in a cooperative manner that is a win for the business and a win for the community.
As you continue your pursuit of improving fire protection within your community to those you are sworn to protect and serve, know that you don’t have to tackle that enormous task alone. Your national organizations have numerous resources that can assist you with information on where and how to apply these new incentives. The National Fire Sprinkler Association is one of those organizations with information and personnel to assist you with improving fire protection. We have personnel in the field, as well as in our national headquarters, who can assist you from a local, state and national level, and from a technical to a political perspective.
NOW is the time for cooperation and collaboration that will save lives and property long after our careers are complete—what a legacy!
