Federal Income Tax Incentives for Fire Protection
Businesses and individuals are all required to pay taxes on income. Since income tax rules vary from state to state, we will focus on deductions that can be allowed on federal income taxes.
Businesses that install fire sprinkler systems in their buildings can benefit from three types of federal income tax deductions:
- A tax deduction can be taken for the interest spent on a loan that is used to install a fire sprinkler system.
- Renovations of older or historic buildings may qualify a business for a federal Qualified Rehabilitation Tax Credit of 10-20% of renovation expenses.
- A depreciation allowance can be taken each year for the value of a fire sprinkler system.
Individuals who want to invest in a fire sprinkler system for their home may use the equity in their home to take out a second mortgage to pay for the sprinklering system. The interest from that second mortgage can then be deducted on federal income taxes.
Federal Legislation Provisions for Fire Protection
The federal government has enacted three key pieces of legislation that help building owners make or save money by having a fire protection system in place. These laws include the Americans with Disabilities Act, the Hotel and Motel Fire Safety Act, and the Federal Fire Safety Act.
The Americans with Disabilities Act requires that all buildings have an “area of refuge” where at least two people in wheelchairs can safely go in the event of a fire. The law outlines a number of special requirements for areas of refuge, often making compliance expensive. However, buildings with fire sprinkler systems are able to more easily comply with the rules for areas of refuge.
Passed in 1990, the Hotel and Motel Fire Safety Act applies to travel arrangements for government employees. The act requires that bookings only be made at fire safe hotels; this includes overnight stays as well as conferences or meetings paid for with federal funds. To be classified as “fire safe,” hotels or motels with three stories or more must be equipped with a fire sprinkler system. With billions of dollars of federal funds spent each year on government employee travel, investing in a hotel sprinkler system allows the chance to earn a share of that money.
Finally, the Federal Fire Safety Act states requirements for new construction and some existing construction of federal office buildings, federally subsidized housing and multi-family housing for federal employees. Passed in 1992, the Federal Fire Safety Act has three provisions that apply to existing construction.
- Any newly leased office space that will accommodate 25 or more federal employees must be sprinklered.
- If any building with five or more stories of federal office space undergoes a renovation of more than 25% of the current value of the building, a fire sprinkler system must be retrofitted as part of the renovation.
- Fire sprinkler systems must be installed if the number of full-time federal employees in an existing building increases by 100 over the number of employees in the building in 1992.
If an existing building owner wants to attract or maintain income earned from space used by federal government agencies, it is a wise investment to equip the building with a fire sprinkler system.
AIE can consult you on the benefits of a fire sprinkler system for your building or business. Contact us today to learn more.