Hospitality - Specialty Tax Advisors

The Hospitality sector involves heavy capital investment, energy efficiency and sustainability goals, and technology and workforce innovation, all areas that are candidates for tax incentives.

Ideal Candidates:

Hotel and resort developers and owners
Restaurant groups and franchisors
Resort and lodging operators
Hospitality design-build firms
Short-term rental and extended-stay brands

Here’s an overview of how Hospitality companies can benefit.

Cost Segregation

Hotels, resorts, restaurants, and entertainment venues are prime candidates:

Reclassifies assets like FF&E (furniture, fixtures, and equipment), decorative lighting, specialty plumbing, paving, and signage into 5-, 7-, or 15-year property
Applies to new builds, acquisitions, or renovations

Benefit: Accelerates depreciation, creating significant year-one tax deductions and improved cash flow.

45L Tax Credit

For hospitality brands that build or manage:

Extended-stay suites, employee or workforce housing, or branded vacation rentals
Up to $5,000 per unit for qualifying energy-efficient construction (ENERGY STAR or Zero Energy Ready)

Benefit: Direct federal tax credit per residential unit built or renovated.

179D Tax Deduction

Applicable to hotels, event venues, and restaurants with major upgrades:

Up to $5.00 per square foot for qualifying lighting, HVAC, and building envelope improvements

Benefit: Deduct energy-efficient retrofits and new construction costs.

What Services are Included?

Research & Development (R&D) Tax Credits (Yes, Even in Hospitality!)

Innovative restaurants, hotel brands, and hospitality groups may qualify:

Developing new menus, processes, and prep techniques
Integrating technology into operations (e.g., smart kitchens, automation)
Custom design or renovation solutions for new experiences

Benefit: Federal and state R&D credits for qualifying innovation and development costs.

Section 263A (Uniform Capitalization Rules) & Fixed Asset Reviews

For large hospitality portfolios:

Identifies misclassified capital costs, especially during expansions, rebranding, or PIP (property improvement plans)
Enables retroactive deductions via Section 481(a) adjustment

Benefit: Increases current-year deductions and ensures IRS-compliant capitalization.

IC-DISC (Interest Charge – Domestic International Sales Corporation)

Export Tax Incentive for companies exporting branded goods or selling hospitality-related products internationally:

Converts ordinary income into qualified dividends for tax savings

Benefit: Up to 20% tax savings on eligible export income.

Form 3115

A Form 3115 - Application for Change in Accounting Method, allows businesses to request approval from the IRS to change their accounting method. This form might be required when making changes to claim various tax credits.

Changing Depreciation Method
Inventory Method
Accounting for Repairs vs. Capital Improvements

Benefit: Tax relief through audit protection, improved financial reporting accuracy, potential tax benefits, and compliance with IRS Regulations.

Payroll Tax Reduction Strategy

Companies with W2 employees will qualify for this tax credit program.

Proven ROI with significant Payroll Tax savings recognized on first payroll cycle
Eligible employees see an increase in net take-home pay
Zero upfront or out-of-pocket cost to employer or employee
Attract and retain top talent
Audit compliance

Benefits: Employer FICA Tax Savings is $56.80 per month or $681.60 per year per eligible employee. Employee FICA/State/Federal Tax Savings includes an approximate 3-4% increase in monthly net take-home pay.