On Dec. 22, 2017, President Trump signed the Tax Cuts and Jobs Act. The top individual tax rate dropped to 37 percent as a result of the bill. It also cut income tax rates, doubled the standard deduction and eliminated personal exemptions. For corporate, the tax rate went from 35 percent to 21 percent beginning in 2018.
Like with any other bill passed in Washington, addendums are always added that many of us may never hear about, because often times it is hidden deep in the bill in the small print.
For several decades, sprinkler systems have been required in local building codes in every municipality all across the U.S.
On the surface, what we envision is that this will help stimulate the sprinkler contractor industry, but as a risk management and safety professional — I can say that this will undeniably save the lives of countless American workers and families in the future.
It is never disputed that fire sprinklers save lives, and it is fact you can trace the long history of today’s modern sprinkler systems all the way back to the early 1800s. The impact of that invention has saved hundreds of thousands of lives ever since.
According to the National Fire Protection Association, sprinklers were effective at controlling the fire in 96 percent of fires in which they operated. They are designed to control a fire until the fire department can arrive and extinguish the fire.
For several decades, sprinkler systems have been required in local building codes in every municipality all across the U.S. This isn’t the issue; the problem is that many buildings were built prior to fire safety code enforcement and have been grandfathered in.
Or the occupancy of the building has changed since when it was originally built and the sprinkler systems weren’t required for the original occupant. Then when the new occupant moves in, the industry and operation changes raising the potential fire load and there aren’t any building codes that would require them to put in a sprinkler system unless they make significant renovations to the building.
Therefore, there are tens of thousands of buildings scattered throughout the U.S. that are still unprotected and are potential disasters waiting to happen.
Providing an economic incentive to property owners to do the right thing and retrofit properties with automatic fire sprinklers have the potential to have a significant impact on addressing the nation’s fire problem and it will save lives.
According to the National Fire Protection Association, sprinklers were effective at controlling the fire in 96 percent of fires in which they operated. They are designed to control a fire until the fire department can arrive and extinguish the fire.
Small businesses will now be able to fully expense installation of fire sprinklers under section 179 of the tax code up to a cap of $1 million in each year of expense. This will allow for the retrofit and upgrading of numerous occupancies including nightclubs, restaurants, retail spaces other establishments to protect their employees and customers. In addition, small businesses that may need to borrow money to pay for the retrofit will be able to fully deduct the interest expense on the loan.
Larger entities can fully expense capital expenses during the next five years. Starting in 2023, the amount that can be expensed will slowly taper down. This part of the provision means that fire chiefs and local policy officials can now ensure business owners have five years for full expensing, which we believe will provide the opportunity for many high-rise and other high-risk occupancy buildings to improve their fire safety features.
Many safety groups and lobbyists have been pushing congress for this change for over a decade and like with any new fire safety regulation or tax incentive, a tragedy served as the incentive for such change.
In this case, the bill was championed by Congressman Jim Langevin of Rhode Island. He recognized the critical importance of fire sprinklers after his district was profoundly impacted by The Station nightclub fire in 2003, when 100 concertgoers lost their life to a fire that could have been controlled if fire sprinklers system were in place at the time.
In November of 2017, Langevin introduced language that was ultimately included in the tax bill which now incentivizes the installation of this life-saving technology. This provision will encourage property owners to install fire sprinkler systems that will upgrade their buildings and protect their tenants.
This is a win, win, win for everybody at stake — including you, the reader — as many of will sometimes find yourself in old buildings in which a sprinkler system should be required.
According to NFPA, in 2016 there were 1,342,000 fires reported in the United States, leading to 3,390 civilian fire deaths; 14,650 civilian injuries; and $10.6 billion in property damage. When you include the indirect cost of fire, such as lost economic activity, the cost is closer to $108 billion annually. Studies by NFPA have concluded that buildings outfitted with sprinklers reduce the death rate per fire by 81 percent and decrease the property damage by up to 68 percent.
The problem with the life-saving tax incentives is that it hasn’t been communicated very well to the thousands of business owners/property owners in the U.S., and it appears to have been lost in the message.
I happened to stumble upon the news a couple months back in a little article buried deep in a monthly safety magazine that I receive, and I suspect that many business owners/property owners are unaware of these new tax incentives if their accountant hasn’t made them aware of it.
So I am doing my part to get the message out there and to better educate the business owners/property owners in my community.
Be Safe, My Friends
Keven Moore works in risk management services and is an expert witness. He has a bachelor’s degree from University of Kentucky, a master’s from Eastern Kentucky University and 25-plus years of experience in the safety and insurance profession. He lives in Lexington with his family and works out of both the Lexington and Northern Kentucky offices. Keven can be reached at kmoore@roeding.com.
