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WSJ analysis on the value of getting greener faster: now add 1031 Exchanges to the mix

If you missed last week's Wall Street Journal feature entitled "Greener and Cheaper," have a look - it could change your business. Authored by Dr. Alan Robinson (Isenberg School of Management, University of Massachusetts) and Dr. Dean Schroeder (College of Business Administration, Valparaiso University), the article examines Subaru of Indiana Automotive Inc., which has established a blueprint for making sustainability work as business practice. They outline a six-step roadmap and conclude that despite what many companies think -- that reducing their environmental impact is a nice idea, but impractical because of the cost -- businesses can go green and lower costs at the same time.

If you missed last week's Wall Street Journal feature entitled "Greener and Cheaper," have a look - it could change your business. Authored by Dr. Alan Robinson (Isenberg School of Management, University of Massachusetts) and Dr. Dean Schroeder (College of Business Administration, Valparaiso University), the article examines Subaru of Indiana Automotive Inc., which has established a blueprint for making sustainability work as business practice. They outline a six-step roadmap and conclude that despite what many companies think -- that reducing their environmental impact is a nice idea, but impractical because of the cost -- businesses can go green and lower costs at the same time.

We've talked elsewhere about how businesses in all industries can leverage 1031 Like-Kind The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Exchange s (LKEs) to help them green their operations. The situation goes something like this:

  • Up until the last couple of years "green" and "sustainability" were words primarily associated with the environmental movement. Now, though, I think most companies have come to understand that greening is a business imperative. It makes financial sense and it's an inevitability - a "when," not an "if."
  • Greener technologies - whether we're talking about fleet, HVAC, supply chain processes, etc. - are money savers. You use 40% less energy, you save 40% on your energy bill.
  • However, you have to invest in the new infrastructure, and that costs money. For a lot of businesses today it can be hard to think about cost savings down the line when you're cash-strapped right now.

The Accruit answer:

  • There are local, state and federal tax incentives than your business can take advantage of now (how much benefit you can derive depends on where you're located);
  • the Obama administration makes clear that there's more infrastructure funding on the way; and
  • you can then supplement these funds by using LKEs to defer the taxes you'd have otherwise had to pay when selling the old equipment.
  • Between operational savings, 1031 deferrals and tax incentives, all of a sudden making the transition sooner rather than later begins to make sense.

Still, I understand that this isn't the kind of one-shot panacea that a lot of businesses might prefer. The solution is incremental and draws from multiple sources, which means that Total Cost of Ownership (TCO) and Return on Investment (ROI) propositions can be trickier to articulate.

Robinson and Schroeder's Subaru Indiana analysis, though, makes the case for acting sooner rather than later even stronger. It outlines a proven process, provides concrete advice and illustrates the company's success with solid financial data, all of which suggests a clear course of action: begin greening your business now.

Depending on your business, Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange s may play a huge role in your drive to sustainability. Or it may play a small role (or none at all). Either way, the WSJ analysis shows how the math tips more in your favor than you may have realized once you factor in all the variables.