Solar ITC’s – Some Risk and Reward Basics for Companies Seeking ‘Turnkey’ ESG Investments

June 17, 2021 | News

By Drew Goldman, Vice President, Investments


This is the first in a series of discussions on how companies can convert tax liabilities into high-quality sustainability investments, which may also produce cash flow.

Every year, many sophisticated corporations divert over $20 billion of federal tax payments into projects in renewable energy, affordable housing, and historic preservation, in exchange for tax breaks and investment benefits. Some perceive a significant level of complication in these programs, and therefore delay taking a closer look. The very word ‘investment’ moves many people outside their comfort zones.

As a manager of funds delivering Renewable Energy Tax Credits (Sec. 48 of the Internal Revenue Code), Foss & Company is in the business of making it easy to take advantage of this high-impact federal tax incentive. ITC (investment tax credit) Funds provide a well-defined system for dealing with project and developer selection, project structuring, negotiation and closing, as well as potential tax benefit delivery including:

  • Determining project eligibility and focusing on any hurdles to placing site(s) into service
  • Structuring the transaction to address developer and investor needs
  • Underwriting the developer, underlying power purchase contract and pro forma operations
  • Valuing and appropriately pricing tax credits and other projected benefits
  • Delivering Tax documents and financial reporting for annual federal filings

In terms of physical asset protection, potential losses at a solar farm typically to fall into two categories:

‘Acts of God’– fire, floods, earthquakes, or storms that damage the array or interrupting operations; and

‘Acts of Man’ – such as terrorism, a vehicle or plane crash, negligent maintenance, or faulty equipment.

These risks can be insured against potential losses. One risk typically not covered in conventional policies is fraud. Foss & Company conducts due diligence and background checks on each developer and its principals prior to closing any project. The lender and the long-term power buyer (typically a utility, municipality, or large corporation) conduct their own independent evaluations as well.

We believe that the most substantial investment risks in a solar ITC transaction include:

Recapture Risk – The full value of the ITC is earned once a project is placed in service. Then, for a five-year compliance period, the tax credit is subject to recapture if (1) the property ceases to be a qualified energy facility, or (2) a change in ownership occurs. During the first year, the recapture would be 100 percent. The recapture rate declines by 20 percent each year thereafter until the end of the fifth year.

Ceasing to Be a Qualified Energy Facility – For a solar project to cease being a qualified energy facility, the project would have to: 1) become permanently destroyed and not placed back into service; or 2) start selling something other than electricity derived from solar energy. 

First, the IRS has no required rebuild time after an insurable event. As long as there is intent and action to replace the assets, there is usually no recapture risk. Foss & Company retains the right to replace an operator in the event of non-performance.  Lenders are required to forego foreclosure during the 5-year ITC compliance period.

Second, working with reputable partners can help ensure projects are built and operated according to the plans and specs. Foss asset management identifies and proactively seeks to remedy issues related to this risk.

Lastly, in the event the credits delivered are less than projected, it triggers a “credit adjuster” where the investor may receive a return of capital plus penalties.

Change in Ownership – This can be a significant risk without experienced legal and accounting advisors. Foss & Company only works with firms who have long track-records in tax credit transactions, specifically dedicated solar practices. This risk can be mitigated through properly structured partnership documents. The manager is the only party who can change ownership allocations (except investor non-performance).

Foreclosure – From available data and lender conversations, Foss understands overall solar default rates to be under 1% (including smaller rooftop arrays). Also, as stated above, creditors may agree to forego foreclosure during the tax credit compliance period; while this is not a guaranty, it can provide significant structural protection to investors.

Foss & Company has a rigorous pre-closing checklist to evaluate every solar project and developer. We address a wide spectrum of risks proactively and can tailor our workflow to suit each investor. We make ITC investing as ‘turn-key’ as possible. We manage and verify:

  • Feasibility and Financial Projections
  • Proper system design, specifications, and equipment installation
  • Solar resource and generation capacity
  • Proper Legal, Engineering, Accounting and Partnership documentation
  • Energy Production Company and Developer ability to perform all obligations
  • Creditworthiness of power purchaser(s)
  • Required financing and documentation thereof
  • Site Permitting, Appraisals and Cost Segregation Analysis
  • Financial reporting, and timely delivery of tax and investment documentation


How Long is Capital Outstanding Until Payback in a Solar ITC investment?

In typical real estate deals, capital must be called upfront, in order to achieve physical completion. Typically, the return of capital depends upon the passage of time; then, stabilized operations may generate cash flow to repay loans and equity.

The ITC partially mitigates this timing concern. Although the IRS requires a 5-year period when capital is ‘at risk’, the lion’s share of tax equity flows into each project as the final piece of funding:

  • After review of and commitment to a Fund, 1% of investor capital is called.
  • Once construction has been fully completed, an additional 19% of the investor’s capital is called.
  • Then the project(s) are connected to the grid and the remaining 80% of capital is called into the Fund. A final cost segregation analysis is received, and the tax credits may commence, typically within a few months, along with potentially accelerated depreciation and possibly some preferred cash distributions.
  • Compared with commercial real estate, ITCs provide a short window when capital is outstanding. By the end of year one of a Foss Fund, investors may begin to see a return on their tax equity. An apartment building, by contrast, may be under construction at the end of year one, with a minimum of 12-18 months remaining before its ability to produce any positive returns.


Preferred Cash Returns

Since ITC investors sign up not only for their tax credits but also a five-year stream of potential cash distributions, it is essential to understand the long-term perspective. Is the power buyer creditworthy, and what if there are delays in placing the array into service? How leveraged is the developer and the project?

Foss & Company seeks to provide an elegant solution to these and other questions. We fully evaluate each counterparty, and require minimum contractual standards, such as power purchase terms, equipment used, developer size and expertise, and actions in an effort to remedy any potential problems.

The inclusion of multiple projects in a fund may also spread risk versus a single utility scale site. In the case of an insurable event, a fund allows the investor to extend its timing, to potentially make up for any shortfall of cash flow.


Capitalizing on the Current Economic and Tax Environment

While large direct investors such as utilities deploy full-time teams to underwrite, negotiate and execute the many issues mentioned above, the typical company has limited in-house resources to focus on ITC’s. In large utility-scale projects, investor returns are often in the single digits. Foss & Company’s funds are fully passive in terms of required taxpayer resources, while targeting a higher level of reward by aggregating commercial-scale projects with high-quality long-term power purchasers in place. Our funds are structured to reduce the investors’ position in the early months. If the federal tax rate rose to 28% today, the impact of more depreciation would increase ROI by 280-300 basis points.

In summary, corporations have two options to satisfy federal tax liabilities: either simply pay the government, or invest in federal tax credits, which may eliminate tax liability, while potentially providing needed social benefits, and allowing some control over how tax dollars are spent. As mentioned above, ITCs may reward investors with a front-end loaded return of tax credits and attractive net positive returns on equity.


Those interested in learning more, can contact me at

Foss & Company Spotlight: George Barry, President

May 24, 2021 | News

Foss & Company is compromised of a group of experienced professionals, representing the best in class within their respective fields. In a new blog series, we will be highlighting different Foss & Company team members to shine a light on the diverse and dedicated people that help make us who we are.

Starting off these series with the president of Foss & Company – George Barry.


How did you get started in this industry?

Mostly by luck. After law school I knew following the huge footprints of my father in a career as a litigator was not for me. My wife had joined an Oil & Gas syndication firm a few years earlier and  I had gotten to know the founder well. He offered me a position in the firm as a sales representative, much to the chagrin of my wife. This was in 1985 and our primary clients were high net worth individuals seeking to manage their tax liabilities in an environment where the top marginal rate was 70%. In less than a year the most significant changes to the tax code in 30 years occurred with the passage of the 1986 Tax Act. This completely blew up our former business model but it did, most fortunately, create the Low Income Tax Credit. We began marketing the LIHTC credits to individuals but soon realized this was better suited for institutional investors. We expanded our presence in the tax credit space to include solar (thermal, initially), landfill gas, refined coal, historic tax credits and more recently carbon capture production tax credits.


What interested you about this industry?

The tax credit industry is full of challenges. I enjoy getting up every day and taking on those challenges. I like that we can offer solutions to our partners, helping them convert a corporate liability into an asset, enhance shareholder value and do so in a sustainable manner. I enjoy meeting new people and helping them understand the value proposition offered by federal and state tax credits.


When did you join Foss & Company and what interested you about Foss & Company? 

I joined during the Miocene Era and was interested in hunting mastodons. Okay, more seriously, I knew our founder Joe Foss and appreciated his dedication, his work ethic, his commitment to setting goals and to achieving both professional and personal success. I wanted to learn from the best of the best.


What is one thing people may not know about Foss & Company?

We have a lot of fun doing what we do. Bad attitudes do not survive at Foss & Company. We are a team where every member has the opportunity to achieve their maximum personal and professional growth and fulfillment.


Any other industry and/or Foss & Company insights you would like to add?

I believe the industry is poised for tremendous growth. Foss is well positioned to be a leader in the growth of the tax credit industry through our sponsored historic, renewable and sustainable technology tax credit funds. I could not be more excited for the future of our industry.


Those that are interested in contacting George can email him at or connect with him on LinkedIn.

Tax Credit Investments are ESG Investments

October 29, 2020 | News

Once a niche investment approach thought to come at the expense of returns, ESG investing – strategies that align with a company’s Environmental, Social, and Governance values – has grown into a $30 trillion market as of 2019. Issues such as energy consumption, health and safety, diversity and inclusion, and effective board oversight are having a greater effect on the financial performance of companies – and investors have taken notice.
One underutilized strategy that can enable companies to significantly boost their ESG performance is tax credit investment. By repurposing and redirecting a company’s estimated tax payments into qualified tax advantaged investments, companies can achieve triple bottom line results while fulfilling their ESG commitments.

What are Tax Credits?

A tax credit is a government-sponsored tax incentive that can reduce a company’s tax liability dollar-for-dollar. The U.S. government uses tax credits to incentivize corporate taxpayers to invest in certain types of projects that produce economic, environmental, or social benefits. Federal and state governments offer tax credits to promote public/private partnerships, encouraging investment capital to flow to beneficial domestic programs, such as:

• Affordable housing,
• Historic preservation,
• Sustainable energy,
• And carbon sequestration.

Tax Credit Investment & ESG Investment

Investing in tax credits, which in turn benefit both the investor and the community at-large, is a clear and simpler avenue of providing investors a framework with which to evaluate investments.

In a new white paper, Reuters Events and Foss & Company share best practices from Patagonia, Facebook, Harvard University, BNP Paribas and more. These examples outline why tax credit and ESG investments together have the potential to incorporate climate-positive and social-impact initiatives into a company’s investment and underwriting policy framework, aligning with their mission and values.

To download the white paper, visit the Foss & Company Insights page.
Questions? Contact Foss & Company today at

Foss & Company Was A Proud Sponsor Of Novogradac’s Annual Historic Tax Credit Conference

October 03, 2018 | News


Foss & Company was a proud sponsor of Novogradac’s annual historic tax credit conference, which was held in Nashville, TN on September 26-28. During the conference, Foss & Company hosted an event for its partners and clients at the Listening Room Café, George Barry and Eric Brubaker attended a breakfast honoring Senator Cassidy’s support of the federal historic tax credit program, Foss team members participated on two panels………and managed to have some fun out and about on Broadway.


Foss & Co. Managed Over $20 Million In Solar Tax Credit Investments In 2017​

January 24, 2018 | News

Growth continues in 2018

January 24, 2018, San Francisco CA – Foss and Company is pleased to announce that they closed out the 2017 calendar year having managed over $20 million in solar tax credit investments. The investments were made into seven unique projects that were all Massachusetts-based and approached 20 megawatts in scale.

Foss Renewables Managing Director Alex Tiller said, “We were pleased with our 2017 results and are looking forward to investing over 10 times that amount in 2018 via our new renewable energy focused fund.” Tiller went on to say, “renewable energy investments are nothing new to this firm. Over our last 35 years we’ve managed over $500 million in renewable and alternative energy tax credit investments including some of the first large scale solar thermal SEGs projects in the Mojave Desert way back in the 1980’s. We’ve participated in landfill gas, refined coal and anaerobic digesters transactions as well.

Foss and Company is a nationally recognized institutional investment management firm dedicated to providing corporate investors the greatest access to federal and state tax credit driven investments in the tax credit marketplace.

Their services for solar developers include market pricing and transaction structuring, direct tax credit equity investments and private placement services. Additional information about the company is available at: Aims To Reinvent The Way Solar Projects Are Funded

September 11, 2017 | News

Launches Innovative Funding Platform for Solar Developers

September 11, 2017, Las Vegas Nevada (Solar Power International trade show), San Francisco California:  Foss & Company announces the launch of, a web platform designed to optimize the tax equity investment process for renewable energy developers.

Arranging financing for commercial and industrial solar projects is notoriously challenging, and getting to a term sheet with a qualified tax equity investor that can close is arguably the most difficult part of assembling the capital stack. There are only a handful of highly active tax equity investors, and the whole process can often seem cumbersome and confusing due to high variability in each project, intricacies of tax code, deal structure and interests of debt providers. Because of this, a considerable amount of due diligence must be conducted on each project, driving up costs and resulting in a slow evaluation process.  These factors set a relatively high barrier to entry for developers; most professional tax equity investors won’t work with developers with projects or portfolios less than 3 megawatts in size.

Foss Renewable Energy Partners Managing Director Alex Tiller said “The goal with is to allow more capital to flow to more renewable energy projects. We can achieve this by standardizing the way we interface with developers and evaluate their projects. Additionally, we will work with debt providers to generate standardized and preapproved documents that a developer can choose to use, which leads to a streamlined evaluation process. Combining the two previous steps with algorithm driven analyses, we hope to cut the time to terms sheet down to hours, rather than days.” Tiller added that in the near future, they would like to find a way to fund projects as small as 100 kilowatts in size.

Renewable energy project developers can evaluate the system on the website () and introduce themselves, execute a mutual nondisclosure agreement, and provide details about their projects. The more detailed the information that is provided, the faster the response time that can be expected.

Solar Industry Veteren Alex Tiller To Launch Renewable Energy Tax Equity Fund

September 01, 2017 | News

Solar Industry Veteran Alex Tiller to Launch Renewable Energy Tax Equity Fund

September 1, 2017, San Francisco, California – Foss & Company is pleased to announce that Solar industry veteran Alex Tiller has joined the firm as Managing Director to launch a new tax equity investment fund and syndication platform focused on renewable energy projects throughout the US. The new group will be based in Denver Colorado and seeks to deploy $300 Million in renewable energy projects by the end of 2018.  Foss Renewable Energy Partners primary focus is on photovoltaic solar and storage projects but may make discretionary investments in other renewable energy technologies.

When asked about the new fund Mr. Tiller said, “due to the nuance and complexity of the tax code, the tax credit market is extremely inefficient for investors and energy project developers alike. Our goal is to streamline and simplify the process on both sides, allowing more capital to flow to high quality projects faster.”

Mr. Tiller is the former President of Vancouver BC based Solar Alliance Energy, Inc. and the former CEO of Sunetric, previously Hawaii’s largest solar company.  Tiller was also a founding partner of Sunetric Capital, Aloha Solar Energy, and Aloha Solar Partners.  All three entities operated within the solar project development, financing, and asset management space.  Prior to his career in renewables, Tiller led the development of a private equity investment fund focused on agriculture and he started his career at Fidelity Investments.

Foss & Company is a national institutional investment management firm founded in 1983.  The company has deployed over $5 Billion in cash equity from institutional investors including national insurance companies and large corporations.  Foss provides its investors with a broad array of tax credit programs combined with the most efficient implementation available in the tax credit marketplace. To date the company has focused on traditional affordable housing credit and more narrowly focused historic and brownfield credit programs.