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Fire Sprinkler Incentive Act of 2011 Introduced in House
On Thursday May 5, 2011 Representative Aaron Schock (R-IL) introduced the Fire Sprinkler Incentive Act of 2011 (HR-1792). The primary cosponsor is Representative James Langevin (D-RI). The bill has been referred to the House Ways and Means Committee of which Representative Schock is a member. See below for details regarding the bill, as it has changed from the original version.
Fire Sprinkler Incentive Act of 2011
The primary challenge to retrofitting a large inventory of critical existing structures that are still not sprinklered is the Internal Revenue Tax Code. Under current depreciation rules, building owners have a strong disincentive to invest in a sprinkler system given the 39 year depreciation schedule for commercial buildings and 27.5 year schedule for residential structures.
The Fire Sprinkler Incentive Act (FSIA) of 2011 is significantly different from earlier versions that simply reduced the depreciation schedule of commercial and residential structures upgrades to 5 years. The changes made were done in consultation with key legislative staff on Capitol Hill and with the support of the fire service community.
This more focused version of FSIA addresses two key occupancies:
- Section 179 tax treatment- Section 179 of the tax code allows small and medium sized businesses to write off the full cost of equipment purchases like machines, equipment, vehicles, and computers in a single year. Fire sprinkler systems are not currently a 179 property and the FSIA would make them eligible for 179 tax treatment.
Under current law, this change would allow small and medium size property owners to fully deduct the cost of a sprinkler system up to $125,000. Assuming a per square foot retrofit cost of $2.50 per square foot this could cover a structure up to 50,000 square feet. This will allow coverage of a large majority of high fire risk properties such as certain off campus housing, night clubs, nursing homes and assisted living facilities.
- High-Rise Retrofits- The most vulnerable structure not covered by section 179 tax treatment are high-rise structures (those 7 stories or higher). In the United States, there are nearly 10,000 high-rise fires annually and they are some of the most deadly fires for civilians and fire fighters.
This legislation will provide a financial incentive to high-rise building owners to install sprinkler systems by reducing the depreciation schedule from 39 and 27.5 years to 15 years. This reduction will also put sprinkler improvements more in line with the current tax code that allows 15 year depreciation for leasehold improvements.
Special thanks to Dominick G Kasmauskas & Ed Comeau
Lt. John Shafer