Heidi: 00:07

Welcome to today's episode of Slash Tax, where we uncover smart strategies to slash your tax bill, unlock incentives, and invest strategically to build wealth. I am your host, Heidi Henderson. And before we dive in, have a really exciting announcement. If you're listening on Spotify, all of our future episodes will also be available to watch right on the app. So make sure that you hit subscribe.

Heidi: 00:31

So you don't miss out on the conversations and the insights that we'll be sharing every single week. And today my guest is Adam Carver, who is the CEO of Sunsaver Tax Equity and Tax Credits. Adam and his team help corporations, high net worth individuals, and family offices mitigate 10% to 25% of their federal tax liability by leveraging clean energy tax credits. This will be an interesting topic. What makes Sunsaver unique is their ability to create tailored portfolios and white labeled programs that empower tax directors and CPAs and wealth advisors to offer cutting edge solutions to their clients as well as our accredited investors.

Heidi: 01:12

So Adam's background in venture capital and FinTech includes raising capital for blockchain and AI and sustainability driven investments, giving him a powerful perspective on both technology and tax strategy. At Sunsaver, he combines advanced software with strategic partnerships to make renewable energy tax credits, not just an environmental investment, but a smart financial one. So in this episode, these are some of the questions I have for you. We're going to discuss how these top equity, how these tax equity strategies work when the timing of investments matter, because on this episode recording towards the end of the year, The returns that most investors might expect are kind of how these are structured and then how these credits interact with rules on passive activity and ordinary income. So kind of deep kind of technical topics, but this is what a lot of our listeners here on the podcast are looking for.

Heidi: 02:07

And we're like, you know what? Let's just get into it. So with that, no

Adam: 02:11

surface level. Let's dive in.

Heidi: 02:14

That's exactly right. So welcome to the show.

Adam: 02:17

It's great to be here. Thanks for inviting me, Heidi. And how are you doing after the tax deadline?

Heidi: 02:22

Oh, this is great timing. This is the, the week after September 15. It was the week of September 15. We survived one of the biggest tax deadlines of the year for us, particularly after the one big, beautiful bill, which we can talk about. Cause I know that that was something that was potentially, something that could dramatically impact your business.

Heidi: 02:45

And so I'd love to kind of dive into that as well. But yeah, here we go. Now the whole game is like, we've finished 2024 tax filing now onto 2025 tax planning and strategy. It's all shifting into what do we do before the end of the year? And that leads

Adam: 03:05

us to you. Right.

Heidi: 03:07

So let's hear it. Tell us a little bit about what your focus is and, you know, let's start with your background, like share a little bit of how, what got you here first off.

Adam: 03:15

That's great. So I began my career in structured finance. I worked for the Royal Bank of Scotland and, in the Morgan Stanley structured products group for many years throughout the 2000s, and then decided that I wanted to get into renewable energy investment banking and investments. I went to the University of Michigan and completed a Master's in Science and an MBA in energy systems. It was a combined program.

Heidi: 03:40

Wow.

Adam: 03:40

Then I didn't do anything with that degree for the next decade. I discovered venture capital and was entranced by early stage technology investing. So I became a VC here in New York, and then raised a small venture capital fund myself, which is still in operation, although I'm not operating there any longer. And then I moved from venture capital and transitioned to the operating side. I worked for a company named AngelList.

Adam: 04:09

Some of your clients may be very familiar with that angel investing platform.

Heidi: 04:13

Oh, yeah.

Adam: 04:13

Then 2018, 2019, became enamored by blockchain and distributed networks, left AngelList and began building tools using blockchain and distributed ledgers. Sometime in 2021, I began thinking about how we could create liquidity in environmental markets. Some engineer friends and I began researching ways to invest into renewable energy projects, And that ultimately led to what we're going to discuss today, which is an extremely effective and yet seldomly understood strategy for providing project finance for renewable energy investments that simultaneously mitigates the tax burden for us institutions and high net worth individuals. And there's this beautiful marriage of tax mitigation plus renewable energy investing and renewable energy generation that I found so compelling at the time that in early to mid twenty twenty two, when my team discovered this and then also recognized that it is so seldomly understood by private wealth managers and many accountants, we decided that it was a product unto itself and pivoted from everything that we were previously doing and started from scratch to build this platform that we now call Sense saver.

Heidi: 05:50

Amazing. That is a pretty crazy background. And while that you've been in all these different areas and blockchain and AI, I feel like we could do a whole another podcast on all of that. I would be completely behind the eight ball because those are things that I still struggle to grasp or wrap my head around. But for today, we're going to try to wrap our heads around this whole concept of investing in renewable energy and then how this is structured.

Heidi: 06:17

Let's dive into that as, I guess, gently as possible as to how does this actually work as an investment.

Adam: 06:26

It's ironic that, you say that block you're behind the eight ball with blockchain, but many folks feel that way about the tax code. What we're trying to do here is to demystify what are sound structures where there's guidance from the US Treasury for decades and make these investment opportunities or these strategies available and accessible to your listeners. So let's start with what is the problem that we're trying to solve with these tax credits and these tax equity structures? Well, fundamentally, it's very likely that some of the listeners, many of the listeners on your podcast are overpaying the IRS and they're overpaying not by a mere few basis points or one or 2%, but for those who are eligible to utilize these tax credits, they're potentially overpaying by 10%, or potentially even 15%. And that's not, it's not their fault, and it's not necessarily the fault of their tax accountants.

Adam: 07:31

There have been significant changes in the past two and a half years. And as recently as 07/04/2025, with the big beautiful bill that have created these opportunities and made them more accessible for us institutions and individuals. At the heart of this strategy is a tax credit, our clean energy tax credits. And a tax credit is, it's not a security, but it is a dollar for dollar offset against your tax liability. For decades, the IRS has allowed renewable energy developers, so builders, tax credits when they install new renewable energy infrastructure.

Adam: 08:18

Effectively, the tax credit is an inducement for investors and developers to build more renewable energy infrastructure. And this program was expanded by the inflation reduction act in late twenty twenty two, and it was first implemented in 2023.

Heidi: 08:33

Okay. Just quickly on when we define renewable energy, are we specifically talking about like solar projects or is this other types of projects as well?

Adam: 08:43

There are about approximately 15 different technologies that these credits apply to. Oh, and there is a specific tax credit that is called the Section 48 E or 48 Y, which is a technology neutral credit, which spans wind, solar, geothermal, heat pumps, actually small nuclear generation. There's a credit for carbon capture, carbon sequestration. So we are talking specifically about the renewable energy credit, but that spans again, that applies to many different technologies. In order to use the credit, the we'll call them the investor, but they are the tax account.

Adam: 09:27

The taxpayer does not need to be the owner of the physical asset. And that is one of the innovations of the Inflation Reduction Act is that it enabled individual tax accounts to purchase and utilize these credits and then enjoy the benefits of harvesting the tax mitigation without physically owning the asset. Can simply purchase the tax credit, off of the primary market directly from the sponsor or the renewable energy developer.

Heidi: 09:59

Okay. So when we're talking about purchasing credits, what is typically the best application for that? When I talk about the user, like who's the ideal, I know there's a lot of institutions that can do this, and I'm curious as to what you're seeing in terms of how that's utilized at like say the institutional level. And then let's kind of also track that down to how that applies to, you know, what I would call just normal people.

Adam: 10:25

Right. Right.

Heidi: 10:27

Yes. Yes. The

Adam: 10:29

rules are fairly strict pertaining to who would, which tax accounts are qualified to use these tax credits. At the very top are C corporations. C corporations, particularly public companies can purchase the credits or the depreciation that also comes from these assets. We can discuss that in a moment and immediately apply that to their federal tax liability. Buy, for example, you would buy a credit that's worth $1 in tax offset.

Adam: 11:01

If you were to purchase that for 90¢, then you would immediately recognize a 10% tax mitigation. You buy for 95¢, you recognize a 5% tax mitigation. When the user is not a C corporation, let's say it's an individual. It could be a high net worth individual, family office or disregarded entity such as an LLC. That individual or the tax liability that is being offset must be passive.

Adam: 11:34

Typically you find this passive income on K-1s. Yeah. Passive investment by definition is when you own a thing, but you don't work there full time, which is kind of defined as five hundred hours a year or so as a material participant in that activity. So if you're an owner of a thing, you're an investor, but you don't work there and yet you're receiving dividends or some cash benefit that's passive. Really, the bull's eye for passive investments are real estate leasing businesses, advertising, such as advertising billboards.

Adam: 12:08

But if you owned a share of a restaurant, you weren't working at the restaurant and the restaurant was paying you a dividend. That's a passive investment and your passive income, which will probably be captured on a K one can be offset with these tax credits simply. However, many of us have income that emanates not from a passive activity, but from an active activity. W-two income, for example, $10.99, or your portfolio income, the sale of capital gains, basically the sale of stocks or collecting interest from bonds.

Heidi: 12:45

Like, you like stock options and things like that. We have quite key investors who have like a stock option buyout or something.

Adam: 12:51

That's kind of a, We have a strange definition. There's an overlap in that definition because it is passive, but there's an exception for portfolio. Portfolio gains. Right. Portfolio gains are not passive in the sense of qualifying for the tax credits.

Adam: 13:08

However, for this third category of people with active W-two income or ten ninety nine or portfolio, for example, not only are these high net worth individuals, very often they may be general partners at private equity funds, limited partners, folks who work in finance, or they may be some type of founder who is selling their company or an early employee at a company that is experiencing a liquidity event. There is a third qualification that's known as the one hundred hours test, and you're familiar with this. Yep. States that an individual can utilize tax credits to offset their W2 tax liability or portfolio capital gains liability if they contribute or work one hundred hours in the calendar year in the activity that generated the tax credits. So in this scenario, that would be one hundred hours of work at any point from January 1 until December 31, supporting or operating and managing the renewable energy assets that produced the tax offset, the credits themselves and the depreciation.

Adam: 14:28

Now that work is remotely some work. What counts as work online education, remote. It can be remote work, customer support tickets, working with the developers, the general contractor, collecting payments from the off taker, attending conferences as well as site visits. So there are some tax attorneys and tax accountants who set up this hundred hours protocol on behalf of their clients. And it tends to be very bespoke because it is relative to the specific asset, a solar farm, wind, geothermal, what have you, that is generating the credits.

Heidi: 15:09

So interesting. So for listeners, we, we, I deal with a lot of real estate stuff, a lot of real estate investors. We have talked lot about that on previous episodes of this podcast as well. And passive versus active is something that's talked about in a lot of different episodes, including this one, but this is so unique because rather than this being about real estate participation with rental rental property, we deal on the real estate side a lot with the whole short term rental loophole, which then links to this hundred hour rule because it is considered a business function, not actual real estate. It's very similar, very similar to the short term rental loophole.

Heidi: 15:48

But in this case, it is essentially the same. You are working towards material participation, being active in the business activities as it relates to this renewable energy project. Okay. Now that we understand that, let's pull it again around and go, okay, but wait a second, how the heck does that work if I invest in some solar project? How do I have any involvement in this thing?

Adam: 16:12

It's by the way, that's a great point. And I loved hearing that you've already covered the passive active, as well as the a hundred hours on your podcast. This is not incidental that these, similarities and coincidences have cropped up because inflation reduction acts effectively borrowed the language from real estate investing.

Heidi: 16:34

Oh, I didn't know that.

Adam: 16:36

Yes. Like this, that is the origin. Why there are such familiarity and likeness between the renewable energy tax credit and real estate is because the solar or the renewable energy ITC, the investment tax credit production originated from real estate. So there's always going to be similarity if you're familiar with that former paradigm. So how could a user, how could a taxpayer, as an individual, let's call it engineer these one hundred hours?

Heidi: 17:09

Well,

Adam: 17:11

it's not very easy, particularly if you're not an engineer or a technician who's going to build a project. What my company does, we specialize in building, owning, and operating portfolios of residential solar and battery storage properties. So for an individual who has, let's say, a million dollars of federal tax liability, and they need to engineer the one hundred hours to become active in that portfolio and utilize the tax credits, we will set up a structure known as tax equity. And that is featured in a limited liability company. So an asset holding company where Sun Saver, after we built these residential solar assets, we sell them into a limited liability company that is 99% owned by the individual taxpayer or their family office.

Adam: 18:11

And we retain a 1% management, 1% ownership as the managing member. Those residential properties actually require a significant amount, substantive amount of ongoing maintenance and operation because we're potentially dealing with 150 properties or perhaps 300 or 500 properties, depending on the tax demand or the tax liability that the individual has to offset. Roughly speaking.

Heidi: 18:42

Just real quick on like, just backing up. So I'm wrapping my head around this whole idea. Are you, how are you finding these projects? I mean, are you involved with actually going out and building? Do you have a company that's installing solar panels?

Heidi: 18:55

Where's, how do we get from this idea of, okay, I have this much tax liability. I don't want to invest in something that's a good investment can also help me reduce my tax so that I can kind of just keep that money and reinvest. This is kind of the whole concept we talk about on this podcast a lot. So in this situation, I can work with you at Sunsaver and say, here's my situation. I want to kind of invest something so I can back into this and invest in this project.

Heidi: 19:23

How exactly are you structuring? How do we get from that initial idea to actually

Adam: 19:28

Let's having start at the top. We have the example of an individual or their family that has a million dollar tax liability every year. And one of the beauties of this strategy is that you can repeat it each and every tax year, and you can do it throughout the tax year and then immediately offset your quarterly estimated payments to the IRS, and we can get there eventually. So there's a user who has a million dollars of tax liability. They would connect with Sunsaver through Heidi.

Adam: 20:02

And instead of paying a million dollars to the IRS, which if you think of that in the framing of an Investments, well, that has a negative 100% return on the investment. This scenario instead of paying the IRS, you redirect some percentage of that liability toward renewable, new renewable energy projects. That's where we come in, right? We are the platform that will help to identify those projects. Typically for us, we're building in Texas and California, as well as Washington DC.

Adam: 20:40

And we work with local installers who identify the projects, design them, and then do the installation. Is the one aspect of the value chain that we don't participate in. We don't climb on roofs, but we work with trusted installers and then operations and management teams, the boots on the ground who are actually knocking on doors, identifying homeowners, and then designing and installing their solar panels, as well as their battery storage thereafter, those projects and their contracts are sold into this tax equity limited liability company that we set up on behalf of the investor, the taxpayer. And then those projects will be managed for their lifespan, which are 20 That five management is taken care of, or is addressed by Sunsaver and involves working with the homeowner customer to ensure that their banking information is always up to date. We, you know, we would draw monthly invoices from them on, the fifteenth of every month.

Adam: 21:54

Occasionally they change their bank account information. So we have an ops analyst who works with them to do so. We have an online portal where those homeowner customers can go to see the production of their systems, the storage of electricity in their battery, the amount of savings that they're receiving. And very often they have questions or a customer support ticket that may require us to dispatch a electrician or some type of technician. And all of those customer support tickets, that entire operations effort, which we will typically do on behalf of the tax equity investor.

Adam: 22:30

Let's say if it's a C corporation or one of those passive investors that we were discussing, the real estate investor. In the case where the user requires the hundred hours, we allow them to triage those customer support tickets and those activities when they arrive. And all of this happens within an on a custom online portal that we've developed where that individual can log in any time of the week that they choose and answer customer support tickets. Again, they can also, we encourage them to visit the sites at least once or twice per year, or attend conferences related to renewable energy or tax credits. There are a number of different activities that they can take that enable them to accumulate in excess of one hundred hours.

Adam: 23:20

And one last, one last point that's important is that the principal breadwinner in the family does not necessarily need to be the one to accumulate the hours. If that individual and their spouse are jointly filing, the spouse can also accumulate those hours. So the hundred hours must be a combination of those two, adult taxpayers.

Heidi: 23:45

Got it. Yeah, that's great. That's a great point. Definitely a strategy also correlating to real estate. Oh, it's like looking at, you know, who is involved with the property management or whatnot.

Heidi: 23:59

Okay. I've gone through this with you a few times and I still am always kind of trying to wrap my head around this. So you're working with installers. Are you in essence then carrying the notes? The financing, are you like the, the, are you just managing the, the, like managing the loans in terms of servicing them or are you.

Heidi: 24:24

Taking over and carrying the notes? Cause I mean, let's just think about it as like myself. I, you know, I've got guys banging down my door every day and you should put solar panels on your house and they're trying to sell you solar panels constantly And they want to, yeah, well, look, no big deal. We'll do a twenty year note on this thing.

Adam: 24:42

Told them like Bahamas vacation for whoever converts you as a customer.

Heidi: 24:47

Yeah, exactly. Exactly.

Adam: 24:49

That is true. When when people are on Instagram or maybe somebody's knocking on their home, but when they're seeing advertisements on Instagram or Facebook, or they're hearing free solar on Spotify, that's legitimate. That's what our company We offer free solar, free solar installation. So the installation and the equipment to homeowners, zero money down, and it is not a lease nor is it a loan. At least my company does not participate in leasing.

Adam: 25:20

What happens is that Sun Saver, we will finance and then build the project at no cost for the homeowner. We own the equipment for twenty five years. The homeowner is allowing us to use their roof or some space in the garage for the battery. And the homeowner is then purchasing solar electricity from us. There's a net Oh,

Heidi: 25:45

this, I'm getting, I may be a little bit slow, Adam. I am.

Adam: 25:48

No, that's so, but, but there are many different products in this space. We specialize in what's called a power purchase agreement. So we have an agreement with you, the homeowner, that say, we're going to install $85,000 of solar equipment on your roof. That is not a sale, right? We're not offering you a loan or a lease where there's an interest rate, but rather we're going to install these panels and the battery on your house, zero money down.

Adam: 26:16

And then you're going to pay for the solar electricity that we generate from your roof. Okay. And any excess electricity that you don't use, we'll sell back into the grid on your behalf, and then you'll receive some credit from your utility. So that contract is a power purchase agreement, PPA.

Heidi: 26:37

Of course I've heard of that, that's what a lot of solar installers are doing with the homeowner to sign a PPA with the local power company. But this is so interesting. Okay. So you're structuring this way. Sign

Adam: 26:51

a PPA with Sunsaver. It's branded as Sunsaver and it has my signature on there and it has your signature and the installer. And it states, this is a twenty five year contract. There's going to be a fixed monthly amount that's withdrawn from your bank account every month. Depending on the production of the system, once a year we'll top up or we'll do a top off, right?

Adam: 27:15

So that everybody is even heading into the new year. After twenty five years, if there's no balance remaining on your account, we give you the equipment for free. Typically after fifteen or twenty years, somebody may want to replace their roof anyway. So you remove the equipment, place that in the garage, right? Replace the roof, and then we can replace the PVs and the battery, or we could sign you up to a new contract as a homeowner.

Adam: 27:45

In the event that you sell your home, typically this question comes up, the new homeowner can elect for us to remove the system if for whatever reason they want to pay the

Heidi: 27:55

utility more,

Adam: 27:57

or they can opt to continue the contract. And the contract is extremely lucrative. In the first year, we'll guarantee that there is at least a 25% savings on the homeowner annual electricity bill. There is a small escalator each year, depending on your state and jurisdiction, maybe that's 3% or three and a half percent. But I do put into our contract that it is the lesser of, the escalator from the utility or three or three and a half percent, because I feel that homeowners ought to have that put option.

Adam: 28:32

In California, PG and E raised rates by 10% last year. So if you think about that 10% escalator, even if it's 7% compounded over ten years, five years out, ten years out, the homeowners are saving significantly more than 25% per year. Anyway, so you have a contract. There's a contract that Sunsaver has with the homeowner. We then sell that contract into the asset holding company, which is 99% owned by the taxpayer or the user.

Adam: 29:07

That's that's where this extremely odd coupling of terms tax equity Yeah, name it took us thirty minutes to get there. But this is it is not just the credit that you're buying. But taxpayer is becoming an equity investor in these physical renewable energy assets through this disordered entity, this LLC. And the benefit of being the equity holder is that they receive the tax credits plus property depreciation, which is maybe a great segue now, plus some cash that is then generated on a quarterly basis from the sale of electricity to the homeowner. So it really is, it's a phenomenal opportunity.

Adam: 29:54

Coming back to the idea of an investment. Paying tax to the IRS is not an investment. And if it is, you lose 100% of it guaranteed.

Heidi: 30:02

Yep. Exactly.

Adam: 30:03

It's an opportunity to redirect some of that capital that's already being lost toward solar projects or any renewable energy, but for the purposes of Sun Saver, residential solar and storage projects that then generates up to 20 or 25% tax mitigation for the taxpayer. Wow. You would pay, let's say $800,000 instead of a million, you would take 800,000, invest that, receive back $1,000,000 worth of tax credits and property depreciation, which you would then claim, in your tax filing to the IRS.

Heidi: 30:46

Yes. And if this is an equity partner who is, is in your, in your investment and they're, they're incurring the hundred hours using your platform and through whatever means you, you provide, I'm guessing it sounds like you provide some guidance on, on the tasks and things that would qualify, how to track that. Then they would potentially apply that onto their personal tax return against all of their, including earned income W2 earned income.

Adam: 31:15

Yeah, that's absolutely correct. We knew, and we know that many high net worth tax, taxpayers are working with their tax accountants and tax attorneys to organize these bespoke one hundred hours protocols. Decided instead of using a handwritten journal or an Excel spreadsheet, we now have the technology to timestamp, to track and timestamp all of these activities. Well, and

Heidi: 31:45

you know, you maybe need to build the same technology for real estate because we're dealing with all the short term rental people asking. There you go, Adam. We have our next project, but I love you've already built it for here. You have the technology built, which is amazing.

Adam: 32:01

The idea is to create a digital audit log, and that's not, it's not an advanced piece of technology, but it is reliable. And it is the key here is that it's contemporaneous with the work and the activity that the user is performing. We would never want to see in five years, if for whatever reason there is an IRS audit and the IRS sits down with the taxpayer of the kitchen table and says, I see that you spent an hour answering this email. What was the email about?

Heidi: 32:33

Yeah.

Adam: 32:34

Because it's in your Excel spread. Instead, through our platform, because we are able to connect directly into all of these systems, right? Because the batteries and the inverters, it's all online. It's all in the cloud. So we can sign in.

Adam: 32:49

The investor, even you, we have login for their tax attorneys and the tax accountant. Everyone can be on the same page. For '20 fourseven, you can see the sun is shining on this roof or it's not, or it's cloudy, it's raining. One of 20 panels is out, or there's something up with this battery. Maybe we want to call the homeowner.

Adam: 33:12

Maybe we want to dispatch a truck because somebody needs to wash the panels because they're dusty. Right? And that is, it's not rocket surgery, by any means. But it is the operations of what it, you know, what we do day in and day out to manage large portfolios of residential projects. And somebody needs to do that ops work.

Adam: 33:34

We triage that to the one hundred hours user and we create a digital audit trail. So that at any point somebody could point to an activity and say, did that. And this was the impact.

Heidi: 33:47

Got It's wild. Maybe listeners, I'm sorry. Even my wheels are turning and this is a little bit of my, my wheelhouse, no pun intended.

Adam: 34:00

Got it. You did it.

Heidi: 34:00

Yeah, exactly. Yes. It took us a half an hour to kind of get to the meat of it, but it is, I mean, it's the reason that I wanted to have you on here. The reason I wanted to have you on here right now, this time of year, as we move into the fourth quarter of the year before twelvethirty one, this is the time of year that people start to say, what can I do? You know, I know that I'm going to have a large tax liability.

Heidi: 34:22

What are my options in terms of investing? And we have multiple things, you know, we, and I have talked to again on this podcast about different oil and gas investments, real estate investing. You know, there's a, there's a few different things in all of those things. Active versus passive is one of the biggest caveats to be aware of because your ability to apply tax deductions, tax credits, write offs, or even investments and how it all boils down or crosses over onto your personal tax return ultimately depends on that. Is it active or is it passive?

Heidi: 35:03

So I was still like, repeat myself on there, but this is one of the very few investment strategies that you actually could. It is relatively achievable to meet the active participation rules. So that is again, why I really wanted Adam to come, especially this time of year, because I know people are going to be asking, this is the easiest thing for me to do is, Hey, let's have a conversation. Have to just share it. So I don't have to try to repeat myself Over or get

Adam: 35:29

the course of fifty weeks, it's two hours a week, but you don't need to do two hours a week because you will perform some site visits, which I think is mandatory if you're working with Sunsaver. And my team will meet you there and we'll go visit some projects, take pictures, talk to the homeowner, ask how they're doing, meet the installer, we'll go to conferences. So there are opportunities to accumulate chunks along the way. It doesn't need to be every Sunday during HBO hour, but you should make these hours continuous. And the user needs to have some forethought.

Adam: 36:07

Obviously it's now September 15 or in or around, and it's going to be impossible to accumulate one hundred hours in the month of December. So we're probably getting to a point where a hundred hours becomes somewhat impractical unless a person is not working. But it is important to think about this going into 2026 so that you have twelve whole months and you don't need to rush toward the end of the year to try to accumulate those hours. And there is, there's a good reason to do it early, not only because of the one hundred hours, but the tax credits, of course, are born from projects that are placed into service. So they become commercially delivered in that given year.

Adam: 36:56

So December 31 is very significant because if you're investing in a project that is placed into service on January 1, that cannot count against one's 2025 tax liability. In that way, there is a vintage to the credits, and that is a critical component. You have to use the credits or the depreciation loss against your tax liability from the same year. You can carry them forward twenty years in case you don't use them, but you can't carry them back easily. You can't use a 2026 credit against a 2025 liability.

Adam: 37:35

So therefore there is often right now a race in the industry. Every single tax credit is going to get purchased that originated for renewable energy projects between right now and April 15. Well, most of them will be purchased by December 31 or January. There's a continuous race. Then the pricing of these credits gets higher and higher as there's greater and greater scarcity.

Heidi: 38:02

Yeah. Well, and I'm guessing for your team, I mean, you're, you're to your point, these legitimately have to be installed. And I'm guessing you have projects just that are underway and in progress.

Adam: 38:12

We warehouse, warehouse projects.

Heidi: 38:14

But if you

Adam: 38:15

are, that's one of the benefits of doing residential solar is that we can build projects all year long, warehouse them. And then when a taxpayer shows up in October and they really are behind the eight ball, we can still satisfy that demand. But once you get to commercial projects, those take two years. So you may indicate that you want to be an investor in those projects in 2025. But if they're not commercially operable until 2027, that's a 2027 credit.

Heidi: 38:48

Yep. That's a great Now,

Adam: 38:50

some people may be asking, well, time value of money. Do I want to do this in January or February?

Heidi: 38:55

Yeah.

Adam: 38:56

The answer actually is yes, not only for the one hundred hours, but also, this is an advantage of the tax credit. The tax credit, even if the project is not yet built, if there is an assumption, a reasonable assumption that the credit will be operable by December 31 of that year, the investor can utilize that credit against their quarterly estimated payments to the IRS.

Heidi: 39:24

Oh, okay.

Adam: 39:25

You can, you can in use March, June and September.

Heidi: 39:30

That's So rather than looking at refunds, than paying tax throughout the year and then waiting to file your tax return in March or April and getting your refund, you can actually look at your quarterly payments and then adjust those accordingly based on your projected tax credits or deductions.

Adam: 39:45

So now think about it. Now think about that. In that scenario, there is no holding period on the credits.

Heidi: 39:53

Does that mean?

Adam: 39:54

Typically you invest money into an investment and then you have to wait, right? And then you have a IRR calculation. This case, day that you make the investment into that asset holding company, you can monetize or claim those credits. Now, the projects are never installed. The IRS will likely come back and then recapture the credits and you'll have a liability.

Adam: 40:20

Yeah. But in, in practice it doesn't, it probably won't happen for residential since we have the entire year. Right. Yeah. We don't ask for payment.

Adam: 40:29

Well,

Heidi: 40:32

Yeah. I mean, that's a huge point. Not, that's not one that I was aware of. I think that I thought about being able to reduce quarterly payments because that's an immediate cash benefit ultimately. So instead of again, paying the IRS that they could be holding for anywhere from three, six, nine months, holding your money, that's great to get a refund.

Heidi: 40:52

But imagine your time value of money over that year that you could have had that invested in

Adam: 40:59

companies that are used it immediately. So that's technically an infinite IRR, even though I, again, I try not to frame this as an investment because you're losing the money to the IRS anyway. But if you think of it in terms of, I invest a dollar today and then how long does it take for me to get that dollar back? You get that dollar back today plus. Yeah.

Adam: 41:21

Right. You'll get back a dollar 5 Really

Heidi: 41:24

cool. Okay. I know we dove into it. We got into the meat, but I want to circle back again and we're going to simplify this in like a real world example. And I also understand this is huge for any of our large corporations, family offices, our big groups.

Heidi: 41:43

We've got some of those big investors. I do want to actually focus this on some of our more regular investors, accredited investors. So can we use the example of a taxpayer? Let's say we've got a million dollars of income we've incurred, or we anticipate we're going to have to pay $500,000 in taxes. And I guess first I should ask if you have any limits, to a minimum investment in your, in your, in your program.

Heidi: 42:11

But if not, can we use that example? And can you kind of pencil out the, the, the numbers for me?

Adam: 42:16

Sure. There, the statutes don't state a minimum, which is nice. However, I would say there is some practicality if you have a liability of $50,000 to the IRS, to the extent that you have to perform a hundred hours or let's say one ten to create a buffer or one twenty, what is your time worth? Yes. So I would recommend that this structure, just the hundred hours, right?

Adam: 42:45

Assuming non passive. But if you have a 100,000 in passive, then no problem. There's no minimum. Yeah. It's probably around $400,000 plus or minus 400 to, you know, to 500.

Heidi: 42:57

Okay.

Adam: 42:57

I in fact have a small spreadsheet that I put together if you'd like me to share.

Heidi: 43:01

Yeah. Oh, I think that would be great. Yeah. Yeah. I can link out some of those resources or in the show notes, we'll link that out, and have people request that.

Heidi: 43:09

I'll be happy to share it with me. Then I'll be helpful to, share the spreadsheet if people want to do the calculation, but let's use that example. We've got someone with a million dollars of income. Let's assume $500,000 in income tax. What would be a potential investment?

Heidi: 43:24

Would it be an investment of half a million that they'd be investing in or what's, what, how would you back into that essentially?

Adam: 43:33

Great. I'm going share my screen very quickly. All right. Can you see this? Yes.

Adam: 43:44

All right. So this is a very simple tool that I share with our prospective clients, and that individual can enter their federal tax liability. And then this makes some calculations for them. So in this scenario, right, if you have a million dollars of tax liability, I calculate that your investment is going to be about $8.77. Usually this even be less.

Adam: 44:18

So let's say it's about you invest $812,000 right? For that, and you see that down here on this ledger. So there's an investment of $8.12. That returns 6 and $50,000 of tax credits. Right.

Adam: 44:39

And you may say, Adam, I thought I'm getting a million dollars of tax credits. Well, the total tax benefit package is a combination of credits plus depreciation the big beautiful bill accelerated what was currently a 40% accelerated depreciation in year one to 100%.

Heidi: 44:58

Yes, back to a 100% bonus, which by the way, again, we're talking about this all the time with real estate and all investing, but it does apply in this situation as well. So that's huge.

Adam: 45:07

So this individual would receive $650,000 of dollar for dollar tax credits.

Heidi: 45:13

Okay.

Adam: 45:14

They can claim $975,000 of federal tax depreciation, which of course then has a value. Multiply that by call it 37% or 21, if you're a corporation. So that comes out to about $3.60 in effective cash. And then depending on your state, there may be state depreciation. I used 5% here, which is Illinois, but let's say this is New York or California.

Adam: 45:44

Obviously the value of the state depreciation will increase proportionately. Yep. So you, but the state depreciation is not 100% in year one. So we follow a maker schedule. So there's 20%, 32, so on and so forth for six years.

Adam: 45:59

This is the state depreciation value that the individual would receive. There is always a small cash preferred payment on a quarterly basis that the investor receives for five years. And then typically after, at the end of five years, that investor can choose to remain in the vehicle and receive 5% of all the cash flows that originate from the sale of the solar power, or they can choose to be bought out and exit the asset holding company. In this case, I modeled as a buyout, which comes out to somewhere around seven or 8% after five years. I have So seven or

Heidi: 46:40

8% of your original investment?

Adam: 46:42

That's right. Sorry. Right. Of your, that's right. So I multiply here 8% times G three, which was the investment.

Adam: 46:51

Yes. It's a 65. Really is a net present view calculation, but since that's five years out, I know that it will typically compute to eight to ten, eight or 9%.

Heidi: 47:03

Okay. What's the, what is, can't, I can't see the numbers. And for listeners, if they can't see the screen, what's the, what is the, what's the. The cash amount or I guess distributions you're paying. I understand it's kind of a small amount, but what'd you say that number is?

Adam: 47:20

It's a 2% distribution. Typically it's 2% flat and then another, 1% of the gross, which comes out to maybe 30% ish.

Heidi: 47:31

Okay.

Adam: 47:32

But after we add the tax credits, plus the depreciation, plus that little bit of cash pref on an after tax basis, the year one tax mitigation will be about 28X. But this is an example that you and I put together, We won't always do that, but I expect this to be somewhere from, one point, you know, one five X to 1.25. So in this case, person made an investment of $8.12 or $812,000 then returned, you know, 1.03 in after tax benefit.

Heidi: 48:14

Okay.

Adam: 48:14

And part of the additional

Heidi: 48:16

benefit half like is cash in terms of, of, tax savings.

Adam: 48:22

Correct? Because the purpose of the investment vehicle is not cash. Is the tax benefit. So I think of this all as the tax equivalent benefit.

Heidi: 48:35

Yes. Okay.

Adam: 48:37

And assess they, as the user remains in the vehicle for at least five years, they have to remain in for five years. They continue to accrue value in the form of cash and state depreciation if they're eligible. Okay. Okay. And I'm happy to send this to you, plus an executive summary, and you can share it with your listeners and they can play around with the spreadsheet.

Heidi: 49:03

Yeah. Perfect. I love that. I mean, it's a great exercise. It's a great tool to be able to pencil some numbers.

Heidi: 49:07

So I do like that. So a couple of the most important closing questions. Number one, how's the IRS like these? What is the situation with any scrutiny under audit or with this structure, have you dealt with any issues and how has that been handled?

Adam: 49:23

We haven't encountered any issues ourselves. The IRS could choose to audit the tax account. So we prepare for that. We use the top level accounting teams obviously, and, attorneys. We we've structured this in anticipation of an audit.

Adam: 49:49

If an IRS agent were to ask questions that there is a digital audit trail and that all the paperwork is, is in order to the extent that this would be disallowed. Well, tax equity is a $30,000,000,000 industry per year. It is the primary source of financing for the entire renewable energy industry. JPMorgan and Bank of America represent 50% of the industry with Morgan Stanley, Goldman Sachs, and others at the long tail. We choose to specialize in the true long tail, which are residential portfolios and high net worth individuals.

Adam: 50:29

But this market has been around for it is battle tested is what I'm trying to express. It's been around for decades. Again, it emanated from real estate. The inflation reduction act made this more accessible for individuals. And then the big beautiful bill, it eliminated some of the edge cases and it solidified other use cases.

Heidi: 50:50

Got it. Yeah. Well, and then the bonus depreciation. So you've got that full depreciation back on that, did retain. I was really curious if they were going to get rid.

Heidi: 51:00

They did close a lot of opportunities with some of the energy incentives. Some of the ones that we actually have worked in for many years are closing as of 2026. So it's pretty interesting. Yeah. But yeah, was interesting that this has been retained.

Adam: 51:17

Interesting piece of the bonus depreciation is with 100% property depreciation in year one. That means the federal depreciation, it actually behaves tax credit like. The tax credit is worth dollar for dollar offset, and now you have the depreciation is no longer being depreciated over six years. You can think of that as your, since it's an immediate deduction or it's immediate offset, it effectively behaves as a in tax credit dynamics. Yeah, right.

Adam: 51:48

Anyway, coming back to the very beginning, when we started, we said, what is the problem we're trying to solve?

Heidi: 51:54

Yep.

Adam: 51:55

And it's not necessarily, is this a good investment? Like, are we competing against the S and P 500 or Bitcoin? Or, is this an alternative asset that belongs in my portfolio with a private wealth manager? Right? That's a different question, I think, which is I now have disposable income and I'm going to put it into some risk asset where I'm taking risk and I receive a return.

Adam: 52:28

Then by the way, I need to pay capital gains on that return. I take S and P 500 risk and then market beta risk, I earn seven or 8%, and now I'm paying tax on that, or I'm paying tax on interest for these bonds that I own. Really the, what do you want to call it? The Hippocratic oath of wealth preservation should be tax mitigation. Just don't overpay the IRS.

Adam: 52:56

This structure, that's the problem that we're solving, right? How to not overpay and how not to be too aggressive either. Right? What are some strategies for not overpaying our tax burden? Then the remaining disposable income, then what type of assets do we want to truly invest in?

Heidi: 53:17

Yeah. Well, it's a huge point because it's the whole, like our focus. And I like to bring this up. I made a post the other day about how the IRS actually just posted a thing that there were $163,000,000 in penalties assessed against investors or taxpayers who had utilized tax strategies they saw on social media. It it's a thing.

Heidi: 53:39

There it's become a huge industry and you've got all of these, you know, TikTokers and Instagrammers and all these videos of, you know, write off this and deduct that and do all of these things. I think it's so important to exactly what you're saying, differentiate between what am I investing in for, for wealth growth and for my portfolio growth and for, and, my, my family's future versus tax equity or tax mitigation in terms of those types of investments. And I've said this before, I'll say it again. The IRS has incentives in play for people who are willing to put money into specific things. They're saying, look, if you give us the money to the IRS, we're going to invest in roads and bridges and If schools and you want to invest in solar panels, you know what?

Heidi: 54:31

You can do that. It's fine. We'll use this other money for the roads, the bridges and the schools. So I think that's the important differentiation and, and kind of, trying to, to, to sort of simplify this. It's not that it is a way to get out of paying the IRS or where it's like, Hey, you know, I want a loophole or I want a trick I don't want to pay that.

Heidi: 54:53

Is investing in infrastructure that is a benefit to society in a way that is actually aiding our communities and typically renewable energy. Same with when we look at real estate investing is putting dollars into our local communities, which is jobs, which is sales tax, which is property tax, which is all of these other things that are generating tax at other levels. So that is why these things also exist to simply choose. Would you like to allow the IRS to invest your money for you in roads and bridges and those things? Or do you want to invest your own money in what other other vehicles?

Heidi: 55:32

So

Adam: 55:32

actually, if they were just doing roads and bridges, would, I'd support them more strongly. Yeah. Doctor. Very true. But I agree with that.

Adam: 55:42

It's so rare, not only in finance, but in most walks of life where you truly have mutually beneficial outcomes, that the outcomes are co variant, right? There are win wins. In financial markets, you typically have a fixed pie, which creates this zero sum mentality. If I'm gaining, someone else is losing and vice versa. This is an odd kind of like a hopeful structure where it is truly a win win.

Adam: 56:11

An individual taxpayer is benefiting by reducing their tax liability by building solar in someone else's community. Yep. Yep. Or in their own community. But typically the, you know, the projects are being built in places where the sun shines, right?

Heidi: 56:30

Not in Vermont. Absolutely. Well, in places we want to do site visits. I mean, I hope that I, yeah,

Adam: 56:35

we're not exactly during the winter time.

Heidi: 56:37

On the coast in Southern California. We'll need to talk about that.

Adam: 56:43

It really isn't integrated is a win win. It's a win win for all the parties involved. That's why coming even back to my own coming back to my own origin story when I discovered it. Then I verified that it was real because I saw Bank of America and JP Morgan doing $15.20000000000 of this each year. That was my moment where I realized that I wanted to get involved and I didn't understand why it was not offered to individual tax accounts.

Adam: 57:11

And that is typically because to do it at scale and not in a bespoke way, it requires significant upfront work with accountants and attorneys to structure. But through a digital technology platform, we figured out a way to scale it and still do so responsibly.

Heidi: 57:30

Amazing. That is exactly how we built engineered tax services. Was the exact same concept. Know, Julio founded this coming out of a big four firm, seeing the big fours, the Pricewaterhouse and the ENYs and these huge companies giving these and making it possible for these fortune 100 companies to capture massive tax incentives and credits and deductions and strategies to reduce income tax that were not applicable or available for small to midsize taxpayers, just regular people. Because of, your point, all of the upfront work and the legal work and the analysis and all of that was so complex and convoluted.

Heidi: 58:11

It just was not within grasp unless it was a massive entity. So it really is beautiful what you've been able to build and evolve into a way that it is more achievable for an accredited investor and other regular investors aside from massive family offices and corporations. And I do really want to also pinpoint the fact that I personally have seen some of these massive banks and massive corporations in this country who buy hundreds of millions of dollars of these renewable energy credits for sustainability and for the credits in those entities themselves. I'm appreciative you brought that up because from a SAFE standpoint, from IRS scrutiny standpoint, I think it is important to understand that, you know, this is not, a strategy that's not extremely common or commonly applied at very large scale.

Adam: 59:03

That's right. Although the largest buy, I mean, 90% of all credits, perhaps even more, will be purchased by Fortune 100 and Fortune 500 companies. And the banks are by far the largest purchasers of these credits and sponsors of the tax equity. So we're not talking about some of those more exotic strategies like sponsoring a Siberian tiger to live in a Texas endangered farm or, historic papers that sit in a file cabinet somewhere. I'm not criticizing, but I don't know.

Adam: 59:38

Don't know about like saving peacocks for tax purposes. Is a very different structure that is pervasive within the fortune 100, 500 and many high net worth.

Heidi: 59:53

Well, amazing. Well, I appreciate the time. I appreciate you digging into this. It is complicated for listeners. We kind of went up and down and all the way around to get to kind of the meat of how this functions.

Heidi: 01:00:07

I hope you hung with us throughout this whole podcast episode, because in the end it is complicated. You know, if you, if you, I liken this to the medical space. If you are your own advocate and you choose to educate yourself, the opportunities that are available for your own financial growth and for your family's future can be really significant when we understand how these things can apply. Well,

Adam: 01:00:33

I totally agree. I totally agree.

Heidi: 01:00:36

Thank you.

Adam: 01:00:37

And that disbelief of, Oh, I'm getting this for free. So there must be a catch. Yeah. And take the time to learn about it. You realize that this is a, this is a verified decades old structure that is robust.

Adam: 01:00:50

Amazing. And, we recorded this podcast on the first take.

Heidi: 01:00:55

Yes, absolutely. Well, Adam, thank you so much. I really appreciate your time. It's been great. This is a wrap for the episode of the SlashTax Podcast.

Heidi: 01:01:05

A huge thank you to Adam for sharing how renewable energy tax credits creates a powerful win win and slashing taxes while investing in the future of clean energy as well. If you're a high income earner, you're a credited investor, you're curious about how to participate in solar or renewable tax credit opportunities, check out the show notes. We'll have found contact information there. You can feel free to reach out to me directly as well. And thank you to our sponsor, Engineered Tax Services, the nation's leader in specialty tax incentives and strategies.

Heidi: 01:01:36

Don't forget, please subscribe. We would love it if you would leave a review and share this podcast with anyone you know who may be interested or ready to combat smart investing with tax savings.