Lifestyle the March 2019 issue

Doing Well by Doing Good

A construction demolition company is making it possible to reduce waste while gaining a tax benefit.
By Scott Sinder

What if I told you that you can help the world, support the needs of individuals who are less well off in your communities, and do so while netting a benefit potentially of tens of thousands of dollars (or more) all at the same time? If you (or a client) are doing any sort of home or commercial demolition or renovation project, this one’s for you.

Today, Americans generate over 250 million tons of trash per year, which translates into individual waste generation of about 4.5 pounds per day. And we recycle or compost only about 1.5 pounds of that amount. Needless to say, we are generating a lot of trash. Donating the contents and building materials from a home or commercial space helps reduce landfill burdens and gives a second life to those materials.

The economics of this are compelling, and a cottage industry (complete with formal deconstruction training and certification programs) is being built to help you take advantage of it.

The program allows you to get others to do the demo work. In many cases, they use the process as an employee training exercise and use the materials to support charitable causes more broadly in the community. They also effectively pay you for the privilege of doing that work (as you will be donating everything) and make you eligible for what, in many cases, will be a significant charitable tax deduction (and you will save the costs of doing the demolition work yourself).

What’s Not to Like?

Ryan Mariman, deconstruction manager for Second Chance, a Baltimore-based deconstruction nonprofit that does deconstruction work throughout the mid-Atlantic region and beyond, outlined a real-life example for me.

An individual bought a property with the intent of demolishing the existing home and building a new home. Green Donation Consultants, an independent appraisal firm that now focuses exclusively on these types of charitable deconstruction projects, at its own expense did an initial inspection of the property—a 5 bedroom rental home—and estimated that the building materials and contents had an appraised value of $250,000.

The economics of this are compelling, and a cottage industry (complete with formal deconstruction training and certification programs) is being built to help you take advantage of it.

The $250,000 donation was projected to have a net cash benefit to this donator of $100,000. Second Chance will do all of the deconstruction work in exchange for a donation, which also is a tax deductible contribution. Green Donation then charges a fee to prepare the tax appraisal that can be used to support the tax deduction which varies but in this instance was approximately $5,000, which also may be tax deductible.

The net cash benefit to the donator was therefore approximately $60,000 (40% of the $250k plus 40% of the $50k donation less that donation, the $5k appraisal charge and the $5k in saved demolition costs). Naomi Ganoe, a managing director and CPA with CBIZ, cautions that “the IRS has strict rules which govern these donations, so you should obtain your tax appraisal from a ‘qualified appraiser’ under those rules and consult closely with your tax advisor throughout the process to ensure you will qualify for the full tax benefits.”

Bernie Mancuso, president and CEO of Mancuso Development, an award-winning luxury home builder based on the Outer Banks in North Carolina, worked with Second Chance on a recent project. “I was pleasantly surprised with the experience. They showed up the day after the new owners had closed on the property as promised, spent one week as promised, and stripped that house down to the studs. They took absolutely everything. And the process was seamless. They did not disrupt our schedule at all.”

This type of deconstruction opportunity is not limited to complete home demolitions. Jessica Marschall-Newbee, Green Donation’s CEO, says, for example, that Green Donation’s projects have ranged from a $7,000 kitchen remodeling project to a $9 million commercial renovation. In the past eight years, Green Donation has assisted with the complete or partial deconstruction of more than 2,500 properties that resulted in over $275 million in donated materials and an estimated net benefit to property owners of over $86 million. What’s more, millions of tons of materials were diverted from landfills through these efforts.

Mariman explains that Second Chance distributes some of the materials they reclaim to community organizations immediately. Then, they warehouse others to be resold to the public, with the proceeds being used to support the program’s overall efforts and the efforts of other charitable organizations.

Obviously there is a financial benefit to the individual or organization that is donating, but we have many clients interested in reducing landfill loads.
Jessica Marschall-Newbee, CEO, Green Donation

Second Chance also uses its deconstruction process as a workforce development and job training platform through which it has provided a pathway to sustainable employment for hundreds of Second Chance associates. Associates who have completed Second Chance training now are employed by a broad array of mainstream employers including, for example, for the University of Maryland Medical School, Amazon and Baltimore-Washington International Airport.

Marschall-Newbee notes, “Obviously there is a financial benefit to the individual or organization that is donating, but we have many clients interested in reducing landfill loads.” Patrick Smith, founder and president of Green Donation, thinks “of the benefits in three tiers: (1) helping the environment by giving a second life to the materials and being good environmental stewards; (2) helping society by helping organizations that support those in need; and (3) helping ourselves through the financial benefits.” Doing well by doing good, you might say.

Mariman says the program’s biggest challenge is awareness. “You are going to throw those things out anyway so why not help the world and get a good tax benefit while doing it?” Sounds like a no-brainer to me.

Scott Sinder Chief Legal Officer, The Council & Partner, Steptoe & Johnson LLP Read More

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