With a changing tax and digital landscape all around us, we have seen a surge of companies offering “15-Minute Cost Segregation Studies” which leads us to believe they are generating them based on an AI algorithm. AI has its place, but not as the sole creator of IRS-approved studies. Here’s why:
- No physical inspection: The IRS requires Cost Segregation Studies to include a physical inspection of the property, plus a review of actual construction documents. AI tools that rely on generic public records and satellite imagery without an engineer walkthrough fail this standard.
- Lack of professional accountability: Under IRS rules and Circular 230, generative AI cannot act as a qualified tax preparer, sign off on a methodology, or defend a position during an examination. Therefore, if the study were ever to come under audit, it wouldn’t be legally defensible.
- Quality standards: The IRS ATG framework (Publication 5653) outlines 13 quality elements for a valid study, such as specific engineering methodologies and detailed asset substantiation. Automated AI software cannot legally or professionally satisfy these stipulations.
Real People Make a Difference
While AI may be a useful tool to double-check that a study has identified all the available assets and reclassed them accurately, it is not a standalone solution to be used in order to complete a study overnight.
To avoid risk and ensure your study can hold up against legal scrutiny, partner with a company that has been doing Cost Segregation studies since 2001. Our team of engineers, accountants, and tax professionals are here to help identify opportunities, document the analysis, and work alongside tax advisors to get the job done quickly and accurately.
