IRS GUIDELINES / THIRD-PARTY VERIFIED
WHAT DOES THE IRS HAVE TO SAY?
In 2014, the Internal Revenue Service (IRS) published a Private Letter Ruling (PLR201404001) determining that “zip type partitions are tangible personal property for depreciation purposes.” The IRS Private Letter Ruling (PLR) assigned a shorter life depreciation of construction costs associated with the installation of drywall partitions on non-load bearing walls that are demountable and reusable. Drywall partitions installed with the Green Zip technology may be depreciated over five years as opposed to 27.5 years or 39 years for drywall partitions installed in the conventional manner. The accelerated depreciation achieved with Green Zip can be very attractive for the tax-paying owner.
IRS Guidelines allow glass, doors, frames and other hardware, wall finishes and specialties associated with non-load bearing walls to be classified as personal property.
LAW & ACCOUNTING FIRMS WEIGH-IN
While a private letter ruling published by the IRS applies to the facts and circumstances of the specific applicant (Whiteco Industries), Akin Gump Strauss Hauer & Feld, LLP cites numerous court cases affirming the IRS ruling where business activities and circumstances require that the partition”…may be moved.” In fact, the tax court held in Metro National Corporation v. Commissioner (52 TCM 1440 (1987) that the gypsum board partitions were tangible personal property because they could be readily and easily moved and reused without damage to other partitions. Note that the PLR does not require that the drywall partitions actually must be moved or have to be moved within a specified time frame.
In April 2015, RSM (formerly McGladrey) the fifth largest accounting firm in the United States, provided Ver-Sus Group with an opinion letter on the tax treatment of Green Zip technology. RSM in its opinion, noted that “…(GreenZip) patented technology may allow certain property subject to a shorter cost recovery period in certain circumstances. Without the use of this technology that property would not be considered personal property. Therefore, the property would be depreciable over a substantially longer period of time.”
PricewaterhouseCoopers (PWC) noted in its February 2014 “Accounting Methods Spotlight” that “zip-type partitions… must be included in asset class 57.0 of Rev. Proc. 87-56 under Section 168” and commercial tangible personal property for depreciation purposes.
THIRD PARTY OPINIONS
ARCHITECT, The Magazine of the American Institute of Architects, awarded Green Zip its prestigious R+D Award in 2010.
“It’s hard to get simpler in conception and execution than Green-Zip Tape. The product is a substitute for the joint-compound tape that has been used between gypsum board panels since the introduction of prefabricated plasterboard in the early 1930s. The product impressed all three jurors.”