Leading Health Insurance Company Uncovers Tens of Millions in Tax Savings with Paragon’s Cost Segregation Services

CLIENT SUCCESS STORY

Paragon’s cost segregation studies helped one of the largest health insurers in the U.S. generate tens of millions in tax savings over several years across various construction and renovation projects.

Background

The tax department at one of the nation’s largest health insurance companies knew that many construction-related costs for their facilities might be eligible for accelerated tax depreciation timelines. They also knew they could optimize their tax savings across multiple locations during a renovation if they correctly reclassified their disposed assets and new construction-related items as personal property instead of real property.

Challenge

Unfortunately, their general contractor’s billing was mainly in lump-sum costs, and the health insurance company’s tax department could not quickly and accurately identify the detailed asset costs necessary to determine the correct tax classifications.

Adding to the complexity of this process, they knew they needed to analyze the disposed components from their renovation to determine potential write-offs properly, but many assets currently on the ledger had been misclassified in the past.

Solution

Paragon helped them avoid a headache. The insurer engaged Paragon’s tax depreciation experts to provide cost segregation services for all new projects, along with a thorough review of existing assets on the ledger.

After meticulous work, Paragon correctly reclassified a wide range of assets as personal property, accelerating these assets’ depreciation timelines, making many of them eligible for bonus depreciation, and reducing the health insurer’s income tax liability.

The process required Paragon’s unique expertise: “Paragon bridged the gap between asset tax accounting and facility construction costs that generated millions of dollars in tax savings immediately,” said Ken R., former Vice President of Tax and Accounting at the health insurance company.

Results

By implementing Paragon’s cost segregation, asset reclassification, and asset retirement services, the health insurer generated tens of millions in tax savings over several years on various projects.