{{letter_date}}
{{company_name}}{{company_address1}}{{company_address2}}
RE: CSA Partners Study – {{proposal_subject}}
Dear {{dear_name}}:
CSA Partners (“CSA”) is pleased to present this engagement letter (the "Engagement Letter") to {{company_name}} ("Company") to provide services which are set forth on the Summary of Benefits.
The objective of a Cost Segregation study is to maximize income tax benefits by segregating the depreciable basis into the appropriate recovery period classes under the IRS’s Modified Accelerated Cost Recovery System (MACRS).
The objective of the 1245 Exchange study is to provide a market valuation of the short-life property at the time of sale, including Section 1245 assets and applicable Section 1250 improvements, and to lower the amount of short-life recapture. The estimated income tax benefits will vary depending on the tax rate.
The objective of the 179D report is to fulfill the Efficient Commercial Building Deduction requirements and to acquire tax deductions pursuant to IRC §179D.
Anticipated Results
The provided estimates were developed based on experience, industry averages, and a general review of the information provided by Company. Actual results are dependent on the detailed inputs analyzed during our tech-enabled proprietary process and are subject to change as a comprehensive study is completed. The estimates should not be used for any financial or tax reporting purposes.
Based on a preliminary assessment, CSA anticipates that the Cost Segregation study will increase depreciation for the first year by {{year_1_increased_depreciation}}. Further, CSA estimates that Company could benefit from {{year_1_tax_savings}} in tax savings over the first year by completing this engagement.
Based on a preliminary assessment, CSA anticipates the 1245 Exchange decreasing ordinary recapture for the year of sale by {{1245x_recapture_decrease}}. Further, CSA estimates that at Company’s tax rate of {{1245x_tax_rate}}, Company could benefit from {{1245x_tax_savings}} in permanent tax savings in the year of sale by completing this engagement. This estimated tax savings is evaluated in relation to the maximum amount of allowable depreciation recapture for the short-life property.
Based on a preliminary assessment, CSA anticipates the 179D study to provide a tax deduction of {{179d_tax_deduction}} for Company’s Energy Efficient Commercial Building Property. Further, CSA estimates that Company could benefit from {{179d_tax_savings}} in tax savings over the first year by completing this engagement.
For a further breakdown of Company’s anticipated results, see the Summary of Benefits page.
Services
This engagement includes the following services, each listed by property on :
Cost Segregation study. A study that segregates each property’s depreciable basis into the appropriate MACRS recovery period classes, delivered with a narrative report as described under Report below.
1245 Exchange study. A market valuation of the short-life property at the time of sale, delivered with a narrative report and a Pro Forma Tax Form 4797.
179D study. A study of the Energy Efficient Commercial Building Deduction under IRC §179D, delivered with a narrative report, a Pro Forma Tax Form 7205 and the required certification.
Engagement Fee
Based upon CSA’s understanding of the nature and extent of this assignment, the base fee for the Cost Segregation study described in this Engagement Letter is estimated to be priced at {{total_fee}}.
CSA will bill out-of-pocket expenses (e.g., travel expenses) along with any additional fees for work performed under a signed change order.
CSA will bill a maximum out-of-pocket expense (e.g., travel expenses) of {{oop_max_value}} along with any additional fees for work performed under a signed change order.
Out-of-pocket expenses (e.g., travel expenses) incurred as part of the scope of work set forth in this Engagement Letter are included in the base fee of this engagement and will not be billed separately. Additional fees for work performed under a signed change order will be billed separately.
Any change to the scope of work, deliverables, fees, or timeline set forth in this Engagement Letter will be documented in a written change order signed by both parties. A change order form is attached as Appendix A. No change shall be effective, and CSA shall have no obligation to perform work outside the original scope, until a change order has been fully executed. Each executed change order shall be incorporated into and become a part of this Engagement Letter.
CSA will summarize comprehensive findings when the engagement is complete. CSA will deliver the full report after the invoice for services has been paid in full. No deposit is required, and invoices are due upon receipt. On larger projects, CSA will progress-bill every 30 days.
This engagement fee is valid for 30 days from the date of this letter.
Report
Cost Segregation
CSA will issue a narrative report at the end of the engagement showing the analysis of the relevant laws, rulings, and judicial precedents for positions taken. CSA will generate the final report to meet the definition of a "quality report" as described in the IRS Cost Segregation Audit Techniques Guide. By formatting the analysis based on IRS criteria, the study can be defended as a stand-alone product.
1245 Exchange
CSA will issue a narrative report at the end of the engagement showing an analysis of the relevant laws, rulings, and judicial precedents that support the reevaluation of the Section 1245 property and applicable 15-year Section 1250 improvements. The report will include a Pro Forma Tax Form 4797, documentation of the applicable assets, and documentation of the fair market value of each asset. The report is intended to assist with allocating the total sales proceeds among asset classes for tax reporting purposes.
179D
CSA will issue a narrative report at the end of the engagement showing an analysis of the relevant laws, rulings, and judicial precedents that support eligibility for the Section 179D deduction. The report will include a Pro Forma Tax Form 7205, Certification authorized by a Qualified Individual, and supporting documentation required to substantiate the quantification of the qualifying deduction amount in accordance with IRS and Department of Energy requirements.
Each report is intended for Company and Company’s CPA or Tax Advisor for income tax compliance purposes.
Scope of Work
The scope of work and fees payable are outlined belowon . There shall be no alteration to the scope of work and fees except pursuant to a written agreement.
Methodology
The basis for developing and supporting the classification of components will be a detailed construction cost analysis and experience with and knowledge of tax depreciation rules and precedents. The capitalized basis Company provided will be the basis for the final report. The substantiation of such basis is Company's sole responsibility. Changes to the basis, in-service dates, applicable tax year, improvements, completion costs, etc., following the delivery of the final report will incur additional fees.
Conclusions will be based on CSA's interpretation of the rationale of the Internal Revenue Code, regulations, court cases, and revenue rulings.
Cost Segregation
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CSA's experts will work from construction drawings, internal cost ledgers, depreciation schedules, closing statements, and other available information that will provide us with the total original capitalized project cost.
CSA will inspect the facility and secure photographs for the purpose of documenting those components that, in our opinion, qualify for accelerated depreciation.
1245 Exchange
{{text_1245x_methodology}}
CSA's experts will work from internal cost ledgers, depreciation schedules, third-party appraisals, closing statements, existing cost segregation studies, and other available information that will provide us with the total original capitalized project cost.
CSA will analyze the Section 1245 property and the applicable 15-year Section 1250 improvements that, in our opinion, are revalued at the fair market value at the time of sale, in proportion to the sale price of the Company’s property.
179D
{{text_179d_methodology}}
CSA’s licensed professional engineers will work from construction drawings, internal cost ledgers, depreciation schedules, closing statements, and other available information that will provide us with the total original capitalized project cost. CSA will inspect the facility and secure photographs for the purpose of documenting those components that, in our opinion, qualify for the Energy Efficient Commercial Building Deduction.
Exhibits
The following are attached to and form part of this Engagement Letter:
General Service Conditions
The services provided by CSA will be performed in accordance with professional standards. CSA accepts, without independent verification, the accuracy of all data provided. CSA acts as an independent contractor and reserves the right to use subcontractors. All files, work papers, or documents developed during the course of the engagement will be CSA's property.
The final report will be used only for the specific purpose stated herein, and any other use is invalid. No reliance may be made by any third party without prior written consent of CSA. Company may show the final report in its entirety to those third parties that need to review the information contained herein, such as CPAs or Tax Advisors. CSA does not assume the role of Company's CPA or Tax Advisor and will not be preparing or making tax filings on behalf of Company. CSA's services are limited to those described in this Engagement Letter.
CSA reserves the right to include Company in its client list. CSA will maintain the confidentiality of all conversations and documents provided. Final reports will not be shared or sold to third parties.
Audit Guarantee. CSA stands behind the quality of its work. If the Cost Segregation study delivered under this Engagement Letter is challenged in connection with an examination by the Internal Revenue Service, and following completion of the full IRS examination process, the tax benefit identified in the original study is reduced by more than ten percent (10%), CSA will refund the engagement fee paid by Company under this Engagement Letter. This guarantee is conditioned on each of the following: (a) Company notifies CSA in writing within ten days after Company receives notice of the audit or examination; (b) Company timely provides CSA with copies of all relevant audit correspondence, information document requests, and proposed adjustments; and (c) Company cooperates with CSA, and engages CSA to assist in responding to the IRS, in defense of the original study findings throughout the examination and any administrative appeal. CSA shall have no refund obligation if Company fails to satisfy any of the foregoing conditions, or if the reduction in benefit results from changes to the underlying basis, in-service dates, applicable tax year, improvements, completion costs, or other facts not reflected in the original study.
The signature below affirms Company's understanding of this Engagement Letter, and CSA is prepared to begin work upon receipt of the signed Engagement Letter.
CSA sincerely appreciates the opportunity to perform these professional services and looks forward to delivering the results outlined. CSA is available at {{opp_owner_phone_number}} to answer any questions.
I have reviewed the Project Add-Ons table found in Appendix B and understand that any additional requested project add-ons not included in my selected price tier will be billed separately under a written Change Order.