christina

HOW INFLATION REDUCTION ACT SOLAR ITC ADDERS SUPPORT SUSTAINABLE DEVELOPMENT GOALS

Incentives for renewable energy have been a hot topic in the U.S. lately, especially with new provisions geared towards implementing recently developed technologies that aim to fight climate change. The Inflation Reduction Act (IRA), signed into law in August of this year, contained significant adjustments to several climate and sustainability solution incentives. Widely regarded as landmark legislation, it was one of the most extensive environmental policies in decades. It laid the groundwork for incremental change through increases in tax credit incentives for projects like Carbon Capture, Utilization and Sequestration (CCUS), battery storage, and solar Investment Tax Credits (ITCs). Under the IRA, institutional investors may now see higher tax credit returns on their investment and new opportunities through ITC adders. The U.N.’s Sustainable Development Goals (SDGs) offer a blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. No one action can address all 17 goals at once but using the SDGs as guidelines can help inform corporations of processes that can help tackle some of the most pressing issues of our time. The adjustments made to policies under the IRA align in many ways with the SDGs including those made to solar ITCs. ITCs are calculated as a percentage of the cost that solar developers spend on solar power production equipment while constructing a project. Before the IRA, ITCs were set to reach 10% by 2024, but under the IRA, they now have a base rate of 30% locked in for the next ten years. The law also includes certain adders that can increase the total amount to 60%. The increased incentives can help move solar projects forward despite the recent high interest and inflation rates. These adders include, but are not limited to: 10% for projects located…

Read More

CARBON CAPTURE & SEQUESTRATION EXPLAINED AND HOW THE 45Q TAX CREDIT CAN ALIGN WITH YOUR ESG GOALS

Carbon Capture, Utilization and Sequestration (CCUS) is the process of capturing carbon oxide (can be either carbon monoxide or carbon dioxide, but most commonly we speak of carbon dioxide or CO2) from emission sources for the purpose of preventing it from reaching the atmosphere, which would amplify greenhouse heating. Typically, the CO2 is permanently stored deep underground, but it can also be utilized in other ways, so long as the CO2 never reaches the atmosphere. CCUS and the related 45Q tax credit provides a unique opportunity for tax equity investors to invest in an Environmental, Societal, and Governance (ESG) friendly tax credit. The process of CCUS typically involves the following steps: Locate a predictable and constant source of carbon dioxide emissions: Most combustion processes create CO2, a few examples are coal/natural gas plants, power plants, and ethanol production. Capture the CO2: The process involved in capturing the CO2 depends on the concentration or purity levels of the source emissions. High purity emissions of CO2 (>95% by volume), such as the CO2 emitted from the biorefining of ethanol requires minimal, off-the-shelf-technology to separate out the CO2. Low purity emissions (<95% by volume), such as the CO2 emitted from a coal power plant require advanced technology and various chemical processes to separate out the CO2. Find storage site: A suitable storage site is required to permanently sequester the CO2. Currently, the most suitable sites may be a saline aquifer or in a depleted oil reservoir as is the case in enhanced oil recovery (EOR).  Other means of permanent storage are being pursued, for example permanent sequestration in concrete during the manufacturing process. Transfer the CO2 to the sequestration site: In some instances, producers (emitters) of CO2 may be conveniently located on or near a suitable storage site. In all other instances, pipelines are used to transport the CO2 from the emitters to the…

Read More

Spotlight Series: Tony Pucci, Director, Real Estate Investments & Portfolio Management

Foss & Company is comprised of a group of experienced professionals, representing the best in class within their respective fields. In this blog series, we highlight different Foss & Company team members to shine a light on the diverse and dedicated people that help make us who we are.   Tony was born and raised in the San Francisco Bay Area, earning his bachelor’s degree from UC Berkeley and his law and business degrees from Santa Clara University. After spending years as an attorney, he joined Foss & Company in 2017. As Director of Real Estate Investments & Portfolio Management, Tony oversees the underwriting and asset management of Foss Historic Tax Credit (HTC) investments, working closely with real estate developers, institutional investors, and industry partners.   Get to know Tony in the latest Spotlight Series blog:   What originally interested you about the historic rehabilitation industry?   I have always been interested in real estate development, especially projects that have a meaningful impact on the community. I also like old buildings and historic architecture. I would much rather see a building repurposed than demolished. The rehabilitation of a building is an interesting process, and more challenging than new construction. In the end, a valuable resource is being conserved and enhanced, and that’s a great benefit for all.    When did you join Foss & Company and what interested you about the company?  I joined Foss in January 2017. I was looking for new opportunities and when I learned about Foss, I did a lot of research on the company and the tax credit industry. The more I learned, the more excited I was about joining the company. I wanted to be a part of financing historic rehabs by monetizing tax credits. It’s a great business, and it’s rewarding to be a part of the rehabilitation…

Read More

WHY ARE TAX CREDITS NOT MORE WIDELY USED IN CORPORATE AMERICA

BY ALEJANDRO SANTA CRUZ, CFA, VICE PRESIDENT OF INVESTMENTS Federal investment tax credits (ITCs) are government-endorsed, social-engineering tools designed to create a “partnership” between the government and the private sector, providing financial incentives to encourage corporations to deploy capital investments in areas that are considered important or strategic for the country. These areas include affordable housing, new market development, historic rehabilitation and renewable energy among many others. The government is simply not in the business of, or does not have the capacity to, properly assess the risk and evaluate these types of projects, so it turns to the private sector to lead the charge and recognize the opportunity presented the financial, social and environmental benefits of investment tax credits. All companies that are U.S. federal taxpayers should consider tax credit investing. Banks and insurance companies are the most common players to-date, and while corporations have become more active in recent years, tax investing overall remains underutilized. It is estimated that only a short list (less than 10%) of the qualified tax paying companies actively participate in the ~$20 billion annual tax credit market. This low participation rate has resulted in billions of “less than efficient” income tax payments to the U.S. government that could have otherwise generated value for companies, shareholders, and communities. Given the large number of mature, cash-flowing companies in the US seeking earnings enhancements, cash or tax management improvements and lower expense ratios, these are eye-opening statistics. So why are tax credits not more widely used by corporate America? While there may not be a clear-cut answer to this inquiry (or perhaps it is a combination of factors), here are some possible, common explanations: Too Good to be True – When companies first learn about tax credits, they think they are “too good to be true,” and…

Read More

Investment Tax Credits: An Underrated Tool Delivering Financial & ESG Benefits

BY ALEJANDRO SANTA CRUZ, CFA, VICE PRESIDENT OF INVESTMENTS It is rare to find a multi-functional, multi-faceted “Tool” that creates a “win-win-win” outcome in the world of corporate finance. Fortunately, there is a Tool that creates value across multiple corporate areas simultaneously, but it is little known, often overlooked, and certainly underused. This Tool is the Investment Tax Credit (ITC). Approved by the U.S. Congress, enshrined in the Internal Revenue Code, and encouraged by the federal government, ITCs allow those with a US tax liability to redirect their federal income tax obligation towards specific economic sectors or qualified projects. In other words, with the blessing of Uncle Sam, a company can repurpose its tax liability and invest in ESG (Environmental, Social and Governance) initiatives and reap a financial reward. Unfortunately, ITCs continue to be underutilized despite the benefits afforded to corporations seeking to deploy impactful strategies to manage tax rates and create shareholder value. Let’s be honest, the tax strategy of a corporation may often be disregarded and undervalued. Tax departments tend to be isolated from the executive floors and often excluded from strategic decisions. Perhaps it is time for the C-Suite to pay more attention to their tax teams. Similarly, it’s also time for the market (i.e., equity research analysts and portfolio managers) to pay closer attention to what companies are doing below the standard EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) line with regards to tax strategies and give them credit when these strategies lead to secondary, yet impactful, noble causes.  Admittedly, it is not an easy (or exhilarating) task. For one, understanding the Tax Code is daunting. In addition, companies tend not to disclose much about their tax strategies. Other than the effective tax rate or “ETR” (actual income tax paid/EBT), and the occasional disclosure of…

Read More

FOSS & COMPANY SPOTLIGHT: MATT LAUER, VICE PRESIDENT, CARBON CAPTURE, UTILIZATION AND STORAGE

Foss & Company is comprised of a group of experienced professionals, representing the best in class within their respective fields. In this blog series, we highlight different Foss & Company team members to shine a light on the diverse and dedicated people that help make us who we are.  Matt Lauer joined Foss & Company in July of 2021. In his role as Vice President for Carbon Capture, Utilization & Sequestration (CCUS), he is responsible for the identification of and development of new CCUS opportunities. He has over 10 years of experience working in all aspects of the tax equity space on projects including refined coal, solar, and CCUS.   Matt’s experience includes assisting in the development of refined coal opportunities, providing financing solutions (PPAs) to commercial solar customers and working with producers of mixed alcohol products and the associated capture of carbon dioxide. A graduate of California State University at Northridge, Mr. Lauer holds a B.S. in Business Administration with an emphasis in Finance.    Get to know Matt in the latest Spotlight Series Blog:   How did you get involved in the tax credit industry?  My background has always been in finance. I had been working for the last 10 years at a private equity firm and I was fortunate to work on some fairly complex and esoteric projects. One of those projects involved a refined coal tax credit (Section 45 Refined Coal), whereby, a tax credit was generated for reducing toxic emissions from coal fired power plants. While there, I gained broad experience both from developing tax credit projects as well as securing tax equity investments. In addition to the refined coal tax credit, I spent some time working at a solar EPC firm where I became intimately familiar with the Solar ITC.       What originally interested you…

Read More

FOSS & COMPANY SPOTLIGHT: BRYEN ALPERIN, MANAGING DIRECTOR

Foss & Company is comprised of a group of experienced professionals, representing the best in class within their respective fields. In this blog series, we highlight different Foss & Company team members to shine a light on the diverse and dedicated people that help make us who we are. Bryen Alperin joined Foss & Company in November of 2017. As Managing Director, Bryen leads all aspects of the investment, origination, and asset management process for renewable energy and sustainability funds. Prior to joining Foss & Company, he worked in commercial banking and led debt financing for a broad range of middle market businesses and commercial projects.  Bryen earned his BA in Economics and graduated magna cum laude from the University of California, Davis. He has an Executive Certification in Sustainable Capitalism & ESG from the University of California, Berkeley. He is based out of our Denver office.   Get to know Bryen in the latest Spotlight Series Blog:   How did you get started in renewable energy and sustainability tax credit industry? Prior to joining Foss & Co., I was a commercial underwriter at a community development bank. During that time, I was often tasked with underwriting our largest and most complex loans. I became the subject matter expert on loans to renewable energy projects, as well as low-income-housing projects and various other impact oriented products. While I enjoyed commercial banking, I was excited to join Foss & Co. so that I could spend more of my time focused on impact projects. I initially joined Foss & Co. as an investment manager for our real estate division, then transitioned to renewable energy to help expand our renewable energy and sustainable technologies division in Denver.   What interested you about tax credits? The government tends to offer tax credits to incentivize projects that have a…

Read More