Recent Covid-19 Legislation Makes Now the Time to Retrofit Fire Sprinkler Systems

On March 25th, Congress passed the Coronavirus Stabilization Act of 2020. This legislation, which includes over $2 trillion in aid to combat both the virus and the negative economic impacts associated with social distancing, also includes a technical correction to the 2017 Tax Cut and Jobs Act (TCJA) that gives incentives to corporations that retrofit their businesses with fire sprinkler systems.

“Words cannot express the level of dedication that is at work across our nation from family-owned businesses that are ensuring fire & life safety are not compromised in the midst of this COVID-19 crisis that is our new normal,” states NFSA President Shane Ray. “I am in awe of those who are serving on the front lines during this crisis, from first responders (fire, EMS, and police, as well as health professionals) to our members ensuring that fire sprinkler systems are not compromised during this unprecedented national crisis.”

One of the provisions of the TCJA was intended to provide accelerated depreciation for what are known as real estate qualified improvement properties (QIP). Real estate qualified improvement property is defined as any improvement to an interior portion of a nonresidential building that’s placed in service after the date the building is first placed in service. In other words, it applies to all building upgrades and retrofits, with the exception of enlarging the existing building or installing an elevator or escalator. This definition includes fire sprinklers retrofits and would mandate a 15-year depreciation schedule for fire sprinklers and also make them eligible for bonus depreciation.

“This is a big win for our industry because we have been pushing since 2003 and the tragedy of the Station Night Club fire that claimed 100 lives and left over 200 with burn injuries” added NFSA President Shane Ray, who went on to say. “We have been educating and advocating for nearly two decades for incentives and we will continue to make our point that a fire sprinkler system is not a plumbing system and shouldn’t be treated as such in the tax code, as it is certainly not treated the same in the building and fire codes across the country and around the world.”

In the case of bonus depreciation, this would allow fire sprinklers to be depreciated over the next 10 years, even quicker than the 15-year schedule. After 10 years, fire sprinklers would permanently revert to the 15-year schedule. This is an enormous improvement over the legacy 39-year depreciation schedule for fire sprinklers in commercial buildings. Most importantly, it removes what is probably the single biggest hindrance property owners and local elected officials are faced with when deciding to either install sprinklers or mandate them – cost.

To learn more, visit the NFSA for updates to the latest information on tax reform benefits for your facility: https://nfsa.org/taxreform/.