Electrical Installation Decisions
Scott Paper allowed a load-based split of a mill primary electrical system. Morrison adopted that approach in the Eleventh Circuit. A.C. Monk rejected allocation in the Fourth Circuit. Dedicated equipment circuits are the usual study focus.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- Scott Paper allocated primary electrical cost by machinery design load on a pulp-mill record.
- Morrison affirmed a 55.9 percent cafeteria allocation and allowed kitchen panel boards that served only kitchen equipment.
- A.C. Monk rejected percentage allocation and asked whether components could be adapted to more general uses. The audit guide treats that case as forum-limited.
- IRS acceptance of functional allocation is for primary and secondary electrical distribution, not plumbing or HVAC.
- Educational information, not tax advice.
Electrical cost is one of the most frequently disputed lines in a study. Wiring that lights corridors and powers convenience outlets is listed as a structural component. Wiring whose only job is to serve process or restaurant equipment is often analyzed as personal property. The cases do not agree on whether a mixed primary system may be split by percentage.
Scott Paper Co. v. Commissioner, 74 T.C. 137 (1980), is the origin of the load-based split. The Tax Court held that a mill’s primary electric was not an inherently permanent structure. The share that powered overall operation or maintenance of buildings was a structural component. The rest qualified as tangible personal property. Designers had sized feeders from kVA demand, so load was a rational allocator. The Commissioner had already used that method on Scott’s secondary electric.
Morrison, Inc. v. Commissioner, 891 F.2d 857 (11th Cir. 1990), adopted Scott Paper and Illinois Cereal Mills and rejected A.C. Monk. The parties agreed that 55.9 percent of cafeteria primary electrical load served qualifying equipment. The Eleventh Circuit also affirmed personal-property treatment for kitchen panel boards that did not serve lighting, cooling, or heating. It kept kitchen hand sinks and sanitary tile with the buildings.
A.C. Monk & Co. v. United States, 686 F.2d 1058 (4th Cir. 1982), is the contrary electrical authority. A tobacco plant’s power was split at switchgear and run through a bus duct that could be tapped anywhere. The Fourth Circuit said electrical components are structural if they could reasonably be adapted to more general uses than the specific machinery they serve, and it rejected percentage allocation. On remand the district court denied the credit. The high bay and railroad dock also failed. The audit guide treats A.C. Monk as limited to its forum.
AmeriSouth later refused to allocate apartment panels because labels were missing and the taxpayer extrapolated from bad data. Dedicated appliance outlets and data jacks survived on an HCA-style “serves specific equipment” record. Illinois Cereal Mills is listed in the audit guide’s table for a 95/5 electrical split; that appellate text was not opened for this page, so it is not quoted. Super Intelligence is proposed only. This page is educational information, not tax advice.
Practice implication
Document the load and the equipment served. Do not apply a flat percentage to every panel in every building type. Do not describe functional allocation of plumbing or HVAC as an IRS-accepted method (flag F-09).
Circuit split
The Eleventh Circuit binds Morrison’s allocation approach in that circuit. The Fourth Circuit binds Monk’s adaptability approach there. Elsewhere the opinions are persuasive. Present electrical allocation as fact-specific, never as a rule that an asset “is” 5-year property (flag F-10).
How to use this page
Start with the circuit. A study that copies Scott Paper’s mill load split into a Fourth Circuit tobacco plant is ignoring A.C. Monk. A study that treats Monk as a nationwide ban on allocation is ignoring Morrison and the audit guide’s forum-limit note. Dedicated equipment circuits — a 220-volt range outlet, a hardwired process feeder — are usually easier to defend than a percentage of the building service.
AmeriSouth is the evidence check: unlabeled apartment panels and an extrapolated load study failed even if allocation were legally available. Document design load, the equipment served, and why a feeder cannot reasonably serve general building uses. Do not apply the same percentage to plumbing or HVAC and call it IRS-accepted (flag F-09).
Illinois Cereal Mills remains an audit-guide table citation on this page because that opinion was not opened. Educational information, not tax advice.
Limits and flags
Scott Paper is a pulp-mill record. Morrison’s 55.9 percent is a stipulated cafeteria load split in the Eleventh Circuit, not a published restaurant percentage. A.C. Monk is forum-limited per the audit guide: adaptability of a tobacco-plant bus duct is not a nationwide ban on allocation, and it is not a reason to ignore Scott Paper outside the Fourth Circuit.
The IRS audit guide’s acceptance language is for primary and secondary electrical distribution (flag F-09). Do not apply the same percentage to plumbing or HVAC. AmeriSouth refused an apartment-panel allocation because the load study was unreliable; dedicated appliance and data outlets survived on a different, equipment-specific record. Present every electrical result as fact-specific (flag F-10).
Super Intelligence is proposed only. Educational information, not tax advice.
Practice note
Prefer a dedicated feeder with a named machine over a percentage of the building service. Morrison’s kitchen panel boards that served only kitchen equipment are that cleaner record. Scott Paper’s mill primary electric needed a kVA design-load split because the same switchgear also lit buildings. Copying 55.9 percent into an office panel is the F-10 error.
If the project is in the Fourth Circuit, read A.C. Monk before you write an allocation. If the panels are unlabeled, read AmeriSouth. If the claim is a plumbing or HVAC percentage labeled “Scott Paper,” stop — that extension is not IRS-accepted (flag F-09).
Sources
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- 5IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
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