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.
Paddy O’Brien joined Foss & Company as an Investment Operations Intern in March 2020. As Vice President of Investments, Paddy plays a crucial role in all aspects of investment sourcing, client relations, and research processes. Prior to joining Foss & Company Paddy was researching the impact of regulation on the growth of emerging financial technology markets at the University of Otago. He was the youngest graduate with both a Bachelors of Science in Economics and Masters of Finance degree in his Alma Matter’s history. Outside of work, Paddy spends his time volunteering and finding ways to support small-scale regenerative agriculture with technology.
Get to know Paddy in the latest Spotlight Series blog:
How did you get started in the tax credit investing industry?
I started as an intern working at Foss & Company in the research division, I saw this as an opportunity to leverage my analytical and sustainable finance-oriented background.
When did you join Foss & Company and what interested you about the company?
I joined Foss & Company in the first half of 2020, just as the COVID-19 pandemic began. I was looking for a company that aligned with my personal goals and had the opportunity to make an outsized impact with my efforts. At Foss & Company, this is possible because we are able to introduce very large institutional investors to attractive sustainable technology and vital infrastructure investments. The impact that these projects deliver is far greater than any single person could accomplish in the fight against anthropogenic related climate change, and that is exactly what I set out to achieve. My role at Foss & Company sits at the nexus between investors and these economy-sustaining infrastructure projects such as a solar energy facility, a battery energy storage system, a carbon capture facility, or the preservation of a historic building in a disenfranchised community. I believe this role is very important for the development of these projects and I’m grateful to have the opportunity to participate.
What do you find important or interesting about tax credits?
The government programs that created tax credit investments are immensely important to society and are one of the most successful relationships between the government and the business world in the history of the United States.
Traditionally, the role of the government is to preserve all public goods. Examples of public goods are clean air, clean water, national security, rule of law and access to education. Tax credit investments allow non-government entities such as corporations and financial institutions to contribute to the preservation and development of those public goods. For example, a Fortune 500 company can decide to invest a large part of its federal tax liability into the development of a solar facility that is delivering clean renewable energy to the grid for taxpayers to consume. This didn’t just allow the company to reduce its tax liability, but it allowed the company to participate in the upside of this project, thereby generating a positive return. Companies with large tax liabilities can directly contribute to society using dollars that are earmarked for tax liabilities and earn a 10-20% return on their invested capital. That to me is absolutely amazing.
What is one thing people may not know about tax credits?
I would tell people that are not already participating in these programs that there is an incredible diversity of project attributes and benefits, meaning there are projects that fit into nearly every investment criterion. Every company in the United States with a federal or state tax liability that wants to make a positive impact and generate net earnings has the ability to do so with tax credit investments.
How has the tax credit investing industry evolved and where do you see it going?
The tax credit industry has been around for a very long time, since the 1986 tax act. For the first couple decades of the tax credit industry, large banks and insurance companies we‘re the only market participants., More recently, companies from all walks of industry are coming to the table to participate. In an efficient market, businesses will naturally see their competitive edges eroded by increased competition. These companies will naturally be looking for strategies to enhance their earnings and streamline their internal or back-office operations such as their tax management functions. Going into the future, we will see all types of companies increasingly adopt tax credit investment strategies. The companies who implement these strategies will have a distinct advantage compared to those who don’t. The larger the company, the more obvious the advantage. For example, if a company manages a $1 billion federal tax provision, you can utilize that to generate approximately $100-$150 million in net earnings every year with tax credit investments. Accomplishing this feat doesn’t require a massive internal effort or the development of an additional team. All a company needs to execute this strategy is to work with a company like Foss & Company.
Any other insights you would like to add?
In conclusion, it is vital that the United States continue to develop sustainable technology, generate renewable energy, and rehabilitate its existing infrastructure. This advances the productivity of our economy, increases our standard of living, and maintains the competitiveness of the United States on a global scale. These programs, known as tax credit investments, are one of the strongest ways every US taxpayer can make an impact in the world while making a profit.