GENERAL FAQ
Foss & Company is a nationally recognized, institutional investment fund sponsor, striving to provide corporate investors the greatest access to federal and state tax credit-driven investments available within the tax credit marketplace. Our sole focus is to assist our investor and developer partners in selecting and structuring the most appropriate and efficient tax credit programs to meet their strategic tax planning and funding needs.
Foss & Company was founded in 1983.
Foss & Company headquarters are located 832 Sansome Street, San Francisco, CA 94111. Foss & Company has representatives across the US, assisting both national and local partners as they navigate the world of tax credit investments.
Foss & Company is active across the US, serving all 50 states.
Tax credits allow taxpayers to subtract from the total tax payment they owe the government. Unlike deductions and exemptions, which reduce taxable income, tax credits reduce the actual amount of tax owed on a dollar for dollar basis. These congressionally approved incentives are intended to enhance social, economic, and environmental impact while providing alternatives to traditional tax expenditures.
No. Congress approved these programs to encourage capital to flow towards programs and projects the government sees as beneficial. The U.S. government wants taxpayers to make these investments.
ESG investors and professionals have identified tax credit investments as a key component of strategic ESG integration. Strategic utilization of tax liabilities reduces effective tax rates and improve earnings, all while enabling the fulfilment of sustainability and ESG goals. Foss & Company provides services that allow corporate taxpayers to direct their dollars to worthy projects that match their corporate sustainability goals.
Foss & Company forms proprietary funds for the purpose of investing in projects that qualify for specified state and federal tax credits. These Funds afford corporations an efficient way to reduce their state and federal tax liabilities by acquiring interests in projects that generate tax credits.
Foss & Company operates state tax credit funds in nearly every state in the U.S. Contact our team for additional information on state tax credit availability.
Foss & Company has an inhouse, dedicated underwriting and asset management team to serve clients and investment mitigate risks. Foss & Company also utilizes the services of leading third-party advisers and legal counsel to ensure each transaction is optimally structured and risk mitigated.
For questions regarding real estate developer service options, please contact Eric Brubaker. For questions regarding renewable energy and sustainable technology developer service options, please contact Bryen Alperin.
For questions regarding available investor options, please contact George Barry
FOR INVESTORS
Tax credit investments provide an economic return on dollars that would otherwise be used to pay taxes, while generating positive environmental and social benefits.
Please see our whitepaper on the GAAP implications of tax credit investments. For additional information, please contact our team.
Eligible participants are Institutional Investors with a tax liability sufficient to utilize tax credits. Governmental and other tax-exempt entities typically cannot benefit from tax credits. There are special qualifying requirements for individuals, S Corporations, and closely held C Corporations. To learn more about options, please contact our team.
The project is monitored continuously by our professional asset management team, and investors receive periodic reports on project performance.
In a recapture event a portion or all the tax credits may be lost or recaptured. The compliance period for federal renewable energy and historic real estate tax credits is 5 years and represents the total period over which noncompliance could result in disallowance or recapture of tax credits.
The likelihood is very low if the project is properly planned and the investor works with a reputable developer, syndicator and asset manager.
Foss & Company requires a forbearance agreement on any project-level debt in place during the investment period. This ensures that a default on a loan payment will not lead to a foreclosure during the first five years of the investment, thus protecting the tax equity investor from a tax credit recapture event that could be triggered by the foreclosure.
Tax Credits and losses from depreciation are reported by the fund on a federal partnership Schedule K-1 which is provided to the investor annually. Information on the Schedule K-1 is then used by the investor’s tax preparer to report the tax credits and losses on the investor’s tax return.
A preferred return is an annual cash return you receive as the tax equity investor based upon a percentage of your original capital contribution (typically 2.0% – 3.0%). It is paid before any other distribution to other investors or owners.
Your preferred return is paid quarterly or annually.
Yes, the credit is first carried back one year, and then carried forward 20 years.
You must remain in the partnership for a period of 5 years to avoid recapture. Once this time period is complete, there is typically a right on the part of the investor to have their interest purchased at fair market value and a right on the part of the project sponsor to buy the investor’s interest for fair market value.
Investors provide capital and bear economic risk while Syndicators are intermediaries that assist investors in sourcing, underwriting, closing and ongoing asset management of the investment(s) for a fee. The Syndicator takes the place of a multi-member staff generally required to thoroughly evaluate the financials and developer of each potential new project, as well as managing all of the compliant legal documentation, investment reporting and ongoing review.
Syndicators are not the recipients of the tax benefits, nor do they hold economic interest in the project(s), though their fees are typically aligned with the positive performance of the project. The primary function of the syndicator, once each deal and developer has been fully vetted, is to manage the delivery of all cost certifications for federal tax credits as agreed.
FOR DEVELOPERS
If you are a developer looking for capital, Foss & Company has set up an easy, straight forward process for submitting projects for potential funding. Contact us today for more information.
Foss & Company has had unparalleled success in the last five years in delivering competitive tax equity pricing and terms on every project. Our efficient, full-service team is your one stop partner from beginning to end, identifying funding options and helping you drive social, environmental or economic benefits in your community.
Having deployed billions of dollars in project capital over the years, Foss & Company has identified the tools and talent vital to accelerating the process. From legal and accounting to project management and documentation, we have the people and processes in place to get your project funded efficiently.
Foss & Company has the proven expertise and institutional investor base to get high-quality tax credit-advantaged projects financed, making room for developers to focus on advancing and cultivating their projects. We leverage our relationships on your behalf – whether it is sourcing capital from Fortune 1000 companies, navigating the complexities of tax guidance, or decoding government bureaucracy.
HISTORIC PRESERVATION
Yes. Treasury Regulation 1.48-12(d)(7)(ii) states that if the final certification of completed work has not been issued by the Secretary of Interior at the time the tax return is filed for a year in which the credit is claimed, a copy of the first page of Part 2 of the Historic Preservation Certification Application must be attached to Form 3468 filed with the tax return. The taxpayer must reasonably expect that they will receive final approval and that their project will be certified by the National Park Service.
Final certification by the Department of Interior is required. If the taxpayer fails to receive final certification within 30 months after the date the taxpayer filed a tax return on which the credit was claimed, the taxpayer must agree to extend the period of assessment for any tax relating to the time for which the credit was claimed. If the final certification is denied by the Department of Interior, the credit will be disallowed for any taxable year in which it was claimed.
The credit is claimed on Form 3468. Attached to the Form 3468 (or by way of a marginal notation), specific information must be provided. See Treasury Regulation 1.48-12(b)(2)(viii) for details.
The rehabilitation credits are subject to recapture if the building is sold or ceases to be business use property. The HTC compliance period is 5 years after which recapture risk of the credits no longer exists. The amount of such recapture is reduced by 20% for each full year that elapses after the property is placed in service. Thus there is a 100% recapture if the property is disposed of less than one year after the property is first placed in service; an 80% recapture after one year, a 60% recapture after two years; a 40% recapture after three years; and a 20% recapture after four years. See Internal Revenue Code Section 50(a) for additional information.
If the substantial rehabilitation test has not been met at the time a building, or some portion of the building is actually placed in service, the building does not meet the definition of a qualified rehabilitated building. As such, placed in service is deemed to be at the point in time when the substantial rehabilitation test is actually met. See Internal Revenue Code Section 47(b)(1) and 47(c)(1)(C) and Treasury Regulation 1.48-12(f)(2) and 1.48-12(c)(6) for additional information.
Generally speaking, the 24-month measuring period ends sometime during the year in which the property is placed in service.
“Placed in service” generally means that the appropriate work has been completed which would allow for occupancy of either the entire building, or some identifiable portion of the building. See Treasury Regulation 1.46-3(d) for additional information.
The property must be substantially rehabilitated. During a 24-month period selected by the taxpayer, rehabilitation expenditures must exceed the greater of the adjusted basis of the building and its structural components or $5,000. The basis of the land is not taken into consideration. It is important to note that any expenditure incurred by the taxpayer before the start of the 24-month period will increase the original adjusted basis. See Treasury Regulation 1.48-12(b)(2) for additional information.
Foss & Company connects investors with the strategic opportunities in this underserved portion of the market – where the supply of credits is outpacing demand – leading to higher tax equity yields and a diversified pool of historic real estate assets.
Established in 1978, the Historic Tax Credit (HTC) program has facilitated the rehabilitation of over 42,000 certified historic buildings, attracted more than $90 billion in new private capital to the historic cores of cities and towns across the nation, and created more than two million jobs.
RENEWABLE ENERGY & SUSTAINABLE TECHNOLOGIES
Carbon capture and sequestration play an important role in reducing greenhouse emissions and preventing the release of large quantities of CO2 into the atmosphere, thereby serving as a critical tool in the fight against climate change.
Carbon capture and sequestration is the process of capturing waste carbon dioxide (CO2) – typically from the burning of fossil fuels or other industrial processes – then transporting it to a storage site and depositing it where it will not enter the atmosphere – typically in an underground geological formation. The aim of this process is to prevent the release of large quantities of CO2 into the atmosphere.
Section 45Q of the US tax code provides a tax credit for CO2 that is sequestered. The 45Q tax credit is a production-based tax credit, whereby the federal government offers a tax credit for the capture and storage per ton of CO2 that would otherwise be emitted by an industrial facility or power plant.
No. The Consolidated Appropriates Act of 2016 extended the ITC through 2019 as a 30 percent credit for qualified expenditures. It dropped to 26 percent for facilities that began construction in 2020 and will drop to 22 percent for those beginning construction in 20221, before it becomes permanently 10 percent in 2022.
The investment tax credit (ITC), also known as the federal renewable energy tax credit, is a dollar-for-dollar credit for expenses invested in renewable energy properties, most often solar developments. For more information, please contact Bryen Alperin.
Some PPAs have a constant rate throughout the term of the agreement, and some include an annual escalator.
A PPA rate is the value applied per unit of solar power produced (e.g. cents per kilowatt hour).
A PPA is a Power Purchase Agreement between the project and the utility. It establishes the terms under which power will be sold to the utility.
Some utilities are required by law to obtain a certain portion of their power from renewable sources. It varies on a national basis, and widely from state to state.
Renewable energy tax credits can offset up to 75% of your federal income tax liability.
Renewable energy investment tax credits are the last remaining federal tax credit that can be fully claimed in the first year. There is rich ground for investors seeking to achieve high risk-adjusted returns while generating positive environmental impact. Investors have the opportunity to earn a return with mitigated risk and become more tax efficient, all while making progress towards their sustainability and ESG goals.
The Inflation Reduction Act of 2022 is a landmark legislation in the U.S. that significantly impacts clean energy and climate change initiatives. It includes unprecedented federal support for the transition to clean energy, expanding and extending various tax credits for renewable energy technologies such as wind, solar, battery storage, and more. The IRA aims to bolster investments in renewable energy and support the Biden Administration’s clean energy goals.
The IRA introduces several new tax credits covering technologies that previously did not benefit from similar incentives. These include credits for standalone battery storage, clean hydrogen production, carbon capture, and sustainable technologies like electric vehicles and their charging infrastructure. The IRA also expands existing credits for wind, solar, and other renewable energy sources.
The IRA introduces new ways to monetize tax credits, allowing for direct payment and transferability of credits. This means investors can now purchase federal renewable energy tax credits for cash, simplifying the investment structure and potentially attracting new investors to the renewable energy market.
The IRA implements a two-tier credit system that requires satisfying certain labor standards, like prevailing wage and apprenticeship requirements, to qualify for increased credit amounts. If these requirements are not met, taxpayers are eligible only for a base tax credit, which is a reduced percentage of the maximum credit amount.
The IRA is expected to lead to a significant increase in the tax equity market for renewable energy. Innovative structures like the “transfer partnership flip” are emerging, allowing new market entrants to access tax credits while optimizing project economics. The Act’s provisions are anticipated to drive a rapid expansion in both the tax equity and transferable tax credit markets.
Yes, the IRA provides incremental credits for small-scale wind and solar projects, particularly those located in low-income communities or on American Indian land. These projects can receive additional tax credit percentages, making them more economically viable.
The IRA significantly enhances incentives for carbon capture technologies, including increased tax credit rates and reduced capture threshold amounts. This is expected to stimulate investment and growth in carbon capture projects.
The IRA includes provisions that offer additional tax credits for projects satisfying domestic content requirements. This means a certain percentage of the materials and products used in the project must be manufactured in the United States to qualify for these additional credits.