Tools to advance your architectural firm’s growth and success

During these tough economic times, the AIA Leadership Academy and tax-intelligent planning for clients can give architectural firms a competitive edge. AIA partner Engineered Tax Services explains.

In the wake of the pandemic, these are challenging times for architectural firms, particularly regarding the field of commercial real estate. But there are tools you can access to give your firm the competitive edge it needs to triumph in today’s marketplace. One such tool is the AIA Leadership Academy: A Leadership and Business Development Program for Architects.

The Leadership Academy

Consider taking advantage of AIA’s new flagship leadership development program, the AIA Leadership Academy, developed in partnership with The Growth Partnership (TGP), an executive coaching and advisory firm that’s a subsidiary of Engineered Tax Services, an AIA Innovation Partner.

This three-year program is designed for architects and architectural firms who are ready to advance their firms by learning critical business and leadership skills to grow their business, lead change and innovation, empower and engage people, and create immediate impact.

It’s the first—and only—multiyear program for architects that focuses on firm, professional, and community leadership. Expert instructors lead small classes (cohort-based classes) limited to 28 students. Students receive one-on-one personalized virtual coaching sessions.

The curriculum will teach you to lead across four key areas: managing yourself, your architectural firm's growth, your profession, and your community. The program combines annual retreats, virtual classes, and individualized coaching. Sessions include knowledge-based lectures, facilitated exercises, panels, small- and large-group activities, success labs, best practice forums, and project-based assignments between sessions to promote problem solving and application-based learning.

Architects already have the technical knowledge and expertise to be successful, but interpersonal skills and leadership are an area that many professional service providers struggle with.

In addition to the development of leadership skills, it’s important for professionals to offer advisory services and suggestions to bring added value to clients. This can strengthen the client relationship and loyalty.

Architectural Firms Can Differentiate with Value-Added Services

To achieve success as a leader in the architectural world, it’s important to focus not only on technical skillsets, but also to build your personal soft skills. You can act as an advisor to your clients by bringing to the table value-added services, such as a knowledge of incentives and benefits they can claim for projects you’re designing.

This can save your clients millions in tax dollars. For example:

  1. Did you know that your clients could claim a $2,000-per-unit tax credit for energy efficient (EE) multifamily projects via 45L? And you could help them qualify for this credit based on your design specs?
  2. Or for commercial buildings, did you know your client could claim $1.80 per square foot if the project passes EE requirements?
  3. Also, the current tax code allows a significant first-year write-off for new construction; this can equal 25% to 35% of your client’s total construction costs in year one with cost segregation.
  4. These tax advantages bring substantial value to your clients. In addition, your firm could be claiming R&D credits and 179D deductions directly for some projects.

    You can enhance your client’s bottom line by introducing the following tax strategies:

    Winning clients by identifying hundreds of thousands of dollars in additional value

    Clients can gain substantial tax savings in unexpected ways—but sadly, most CPA firms are unaware of these incentives, and because they require an engineer, they’re overlooked. When most architects hear “tax credits,” their eyes glaze over because they assume their CPA is supposed to handle anything tax-related. As a result, these incentives are left on the table. 

    Simple suggestions for architectural firms tax planning might include:

    • In a hotel with a porte cochère, a sort of massive carport for arriving guests, a construction tax planning study identified that if the porte cochère wasn’t physically attached to the building, it would qualify as a land improvement and would become fully deductible in year one, rather than depreciating over 39 years, creating a $150,000 first-year write-off. 
    • In hotels, moveable walls are considered equipment, whereas permanent walls are structural. The difference allows owners to depreciate the walls under bonus depreciation and take an expense in year one, rather than spreading the write-off over 39 years.  
    • Flooring is another example that shows how the installation method can make a big difference. Adhered floors, such as tile and glued-down wood, are considered permanent, while carpets and floating floors, such as luxury vinyl plank, are considered property that can be deducted in the first year under the current tax code.

    Align yourself with strategic partners

    With the proper advice, your clients can pre-qualify for energy efficiency tax incentives stemming from 179D and 45L—and 179D’s new regulations make it much more challenging to qualify for. However, utilizing a strategic partner can make you shine. For example:

    • A developer began construction on a large 300-unit Las Vegas multifamily apartment building, and a pre-qualification review by Engineered Tax Services found that the units didn’t qualify. However, proactive planning identified that if the client changed the bathroom exhaust fan from a standard model to a variable speed, continuously running fan for $150, they’d qualify for a $2,000-per-unit energy credit. For 300 rooms, that’s a $600,000 tax credit.
    • Another example involves an apartment complex in Colorado that narrowly missed the EE requirements for 45L, but only needed to install ceiling fans to qualify; 45L takes into consideration tightness of construction and airflow. Because the client was still able to make the change before construction was completed, they were able to claim the entire tax credit at a minimal cost.

    Yes, architectural firms are facing difficult times. But you’re not alone. The AIA Leadership Academy can help you develop leadership skills so your firm can achieve its full potential. In addition, Engineered Tax Services offers consulting and certification for these tax incentives and partners with hundreds of architectural firms across the United States to offer specialty tax services and consulting to help you achieve even greater success.

    Recent Posts

    IRS Guidance on I.R.C. § 41 Research Credit Refund Claims: What You Need to Know

    Navigating the complexities of tax credits can be daunting, especially when it comes to the I.R.C. § 41 research credit. This credit, designed to incentivize research and development (R&D) activities, offers significant financial benefits but requires meticulous documentation and adherence to specific guidelines. Recent guidance from the IRS Office of Chief Counsel, outlined in Memorandum

    Read More »

    Can Cost Segregation Be Used as a Planning Tool in Real Estate Investments?

    In the world of real estate investing, savvy investors are always on the lookout for strategies to maximize profitability and streamline financial management. One such strategy that has gained significant traction is cost segregation. But can cost segregation truly serve as a planning tool, beyond its immediate tax benefits? The answer is a resounding yes.

    Read More »

    Contact Us