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Jeff sets the stage with his guest Abby Massey.
In this inaugural episode, show host Jeff Nichols sets the stage with Abby Massey who leads the energy tax incentives team at TaxTaker. As a civil engineer, Abby knows the systems and design methods for how to make buildings operate more efficiently. As an expert in energy tax incentives, Abby has helped countless building owners and operators discover new possibilities and opportunities in energy upgrades. Abby and Jeff discuss the tricky nature of energy efficiency conversations with building owners and a roadmap for capitalizing on lucrative energy tax incentives.
In this inaugural episode, show host Jeff Nichols sets the stage with Abby Massey who leads the energy tax incentives team at TaxTaker. As a civil engineer, Abby knows the systems and design methods for how to make buildings operate more efficiently. As an expert in energy tax incentives, Abby has helped countless building owners and operators discover new possibilities and opportunities in energy upgrades. Abby and Jeff discuss the tricky nature of energy efficiency conversations with building owners and a roadmap for capitalizing on lucrative energy tax incentives.
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What is Reframe?
Reframe is the podcast about building sustainability.
Commercial and public buildings are among the biggest producers of carbon emissions. It’s a problem of massive scale. But, for building owners, engineers and contractors, solving it may actually be more of an opportunity than a challenge. That’s what the “Reframe” podcast is all about. Join host Jeff Nichols on an exploration of the forces driving sustainability in our built environment. And meet the people who are leading the charge.
Reframe Ep1 - Too Good To Be True?
[00:00:00] Jeff: Welcome to the inaugural episode of the reframe podcast. I'm Jeff Nichols, and I'm a tech guy. Started my career at Microsoft, spent a decade there in a variety of roles. And then about a decade as a Microsoft partner implementing solutions for other businesses. But ultimately, as I thought about what I wanted to do next, one of my criteria was that I really wanted to do something that mattered to me.
[00:00:43] And it was Bill Gates's book called How to Avoid a Climate Disaster that really kind of first brought my attention back to the topic. And it was there that I first started to kind of realize that buildings, We're a huge contributor to greenhouse gas emissions. 37 percent of all greenhouse gas emissions globally derived from our buildings.
[00:01:09] That's an insane number. I had no clue about that before. And then the second step that I learned that really blew my mind was the 30 percent of all energy to buildings is wasted. Man, we could get a 30 percent improvement if we just figured out how not to waste that energy. And that's what led me on the journey that I've been on, to try to figure out how can we solve problems in this space.
[00:01:37] But I also wanted to contribute by Bringing a different conversation to the table, what people aren't talking about is like the real business dollars and cents, the benefit of looking at doing some of these sustainable improvements that drives me nuts. Why aren't we having more common sense conversations around how you can take advantage of some of these programs to really propel and drive your business?
[00:02:04] So Reframe is really a podcast for building owners, both public and private, and those that serve building owners, principally around energy tax incentives. And what we plan to do is talk to stakeholders across the spectrum, mechanical contractors, engineers, accountants, regulators. We want to talk to all of the different stakeholders to really unpack the space and help people to understand it better, but also think about it, hopefully in more business terms and kind of context.
[00:02:37] And so I'm thrilled to open up my first episode with the very first person that I met with in this space. And her name is Abby Massey. She's a professional engineer, professional Who has worked at accounting firms and is now at a specialty tax firm. And really Abby is going to walk us through and just give us a great overview of the lay of kind of the energy tax incentives space and begin to peel back the primary objection that most building owners have.
[00:03:07] Here's my interview with Abby Massey. Abby Massey, welcome to the reframe podcast. I'm so thrilled to have you on.
[00:03:16] Abby: Hi, Jeff. Glad to be here. Very exciting that we get to do this together.
[00:03:20] Jeff: I know. You have been somebody who has been very helpful in my own journey of understanding energy tax incentives. The exciting world of energy tax incentives.
[00:03:31] That's right. To get to pick your brain a little bit to talk about strategy and help building owners and really all the people that play in the space to kind of think maybe a little bit differently about You know what's possible? Um, i'm just i'm thrilled to get that opportunity to do that with you
[00:03:49] Abby: Yeah, I I love talking about these things.
[00:03:51] So this will be a good conversation.
[00:03:54] Jeff: That's right Well, I um I first wanted to kind of dig into a little bit about you and your background. So tell us, how did you get to here? How did you, how did you get to tax taker? How did you get to be VP of energy incentives? Tell us the story. How did you get started?
[00:04:10] Abby: Sure. I'm a structural engineer, civil engineer by degree. Um, but I did building design right out of college and I loved it. It was everything I enjoyed. I was having a good time. I worked for an all disciplines architecture firm, so I got exposure to, to all of the systems. Um, but in my career, actually a recruiter found me and said, listen, you'd be great for this tax incentives work.
[00:04:33] And the first thing I said was, I think you probably have the wrong person. Um, but I took an interview and sure enough. Now I've been doing this for about 10 years. Um, My journey with tax takes her has been especially interesting. I joined this firm so that I could start out my own energy incentives practice.
[00:04:52] So we're really focused. I have a very niche market for real estate, energy efficiency in real estate, and then renewable energy property that serves real estate, tying back to, to my roots.
[00:05:06] Jeff: Is there like a key moment as you think about, especially over the last 10 years, you know, that, that made you, you know, really kind of pivot or realize that there's really a tremendous opportunity here?
[00:05:18] Like, was there any kind of inflection point that you can think back on?
[00:05:23] Abby: I think at the beginning, when I started to work with clients, we had some big clients at the firm I was with, but we also had small and medium sized clients as well. When you see some of these incentives from these buildings impact a small and medium sized business in the way that they can, and then them come back and say, listen, now has been a hard time in construction industry.
[00:05:44] And because of these incentives, we've been able to keep everybody. Um, It made me realize that even what might look small because we're working on giant studies for giant clients can be really impactful for a business. And what they're already implementing in project scope probably already triggers these incentives.
[00:06:04] Maybe they need a little bit of tweaking, but usually not much. And so, I think that was a really important moment for me to see, okay, for some of these smaller business and building owners, these can be extremely impactful and they're going to have to make upgrades to their building at some point. So why not get all of the benefit?
[00:06:26] Why not feel like this is an easy process for the work you're already going to plan to do?
[00:06:32] Jeff: I think one of the things that really. Blue, my mind was, you know, in many ways, the space still feels, I think, very new is it's just not well known, right? Some of these different programs. Um, and they're just now starting to kind of gain some of that, that mass adoption.
[00:06:49] But in many cases, these programs have been around for a long time, right? In the case of 179 D, it's been around since 2005. When you talk about inflection points, Certainly, the Inflation Reduction Act for, you know, all of these programs have been, has been a major inflection point. You know, what kind of excites you about the Inflation Reduction Act, or what do you think that that enables for business owners?
[00:07:11] Abby: Sure. Uh, there's a lot of things in the Inflation Reduction Act. There's, first off, they enhance, uh, So many incentives. Plus they introduced some new incentives. So when it comes to somebody who's thinking, I wanna make some energy efficient impacts or sustainability impacts, there's something for everybody, which is wonderful.
[00:07:29] The other thing that's exciting about it is it, one, it made a lot of them more valuable. So like one seven I, for instance, since you mentioned that program went from a dollar 80 square foot to a potential of this year, $5 and six. Um, even the transfer and selling of credits because some businesses are just structured where they can't utilize them.
[00:07:42] Um, so that's a huge increase in benefit for the same type of work. But also things like, uh, extending the programs to folks. And once I have an ID doesn't fall within this, unfortunately, but some of the other credits. The elective pay that allows nonprofits to capture it for things like solar panel installation.
[00:08:00] Um, even the transfer and selling of credits because some businesses are just structured where they can't utilize them. Now they can sell them. And so there's value for them. The transfer credits go to somebody who sees value. So the ability to grab them in more facets, I think has been really important and really special.
[00:08:21] Jeff: You know, I imagine for, for some people that are doing research on this, or, you know, just starting to get up to speed, you know, the, the logical question is like, where, where do I get started? How, how do I, you know, I'm going to be doing some, some upgrade work to my building. I want to see if it's going to qualify.
[00:08:36] Like, how do I even. Begin to think about this.
[00:08:40] Abby: So for a lot of the energy incentive programs that I focus on, if you're doing any sort of work to your building, you should be talking to somebody about this new construction, renovation, addition projects. They all qualify getting the right resources is the trick, right?
[00:08:58] I think a lot of people don't realize. In buried in the tax code are incentives that require things like energy modeling, like professional engineer certification. And so it can be tricky, right? Your CPA is very knowledgeable. They know so much, but there are areas of the tax code that they literally cannot do.
[00:09:16] And so going to your CPA to see if they know these things, and if not finding a trusted resource that can get you that information, you're It's not a knock on the CPAs. Again, there's so much to know and how they can't provide these services. So making sure that you're getting that information, learning a little bit about yourself and being willing to look outside of your professional, um, who's preparing your taxes.
[00:09:39] I think it's good. It gets you equipped and will help you identify. Okay, wait, I think maybe I have an opportunity and I know who to go ask to get the information.
[00:09:50] Jeff: Yeah. It was one of the things as I was learning about this space that I thought was so unique. People don't really, you know, they think taxes, they think accountants CPAs.
[00:09:58] I just need my accountant to help with this. The reality is for almost all of these energy incentive programs, it requires collaboration with an engineer. And in many cases, right, they need the professional engineer stamp. So you can't. Actually legally take it without involving, you know, the engineering side of the house.
[00:10:16] Yes. For many people, their CPAs are not coming to them proactively and talking about it because not only is it You know, maybe seem a little complex, but it's, it's out of their wheelhouse. What are some of those conversations like when you, you know, get engaged with somebody who's, you know, maybe, you know, working with a CPA that is not as knowledgeable about this area as you are.
[00:10:41] Abby: Yeah. Um, this happens all the time. I'm still surprised because for like the one seven ID program, it's been around since 2005. So we're coming up on the 20th anniversary here of this tax incentive, but I'm still surprised how many people have no idea that this exists in the tax code and that they could qualify.
[00:11:00] I had a restaurant building owner that owns their own real estate come to me. He read an article we posted online and said. It is my job. He was in the accounting team for this restaurant chain. It is my job to know what tax incentives are available for the things that we're doing. This is the first time I'm hearing about this.
[00:11:21] And so it's great. Cause I get to come in and tell them, okay, this is an amazing program. It's in this case, they were doing a lot of lighting upgrades. And so we got to talk about how their lighting and upgrades would trigger the incentives, but not only that, then we get to lay the shocker on them, which is.
[00:11:38] Hey, we know you did projects in the past that fit this Scenario two, it's not too late to go claim it. So what we do is we help them implement a strategy into their current projects on how to claim the one seven 90 benefit. But then we do a corrective study. We look back at all their old projects and we help them capture the incentive we're available to correct all of the work that they had missed prior.
[00:12:02] And so, um, I have that conversation at least once a week.
[00:12:07] Jeff: Wow.
[00:12:08] Abby: Yeah.
[00:12:09] Jeff: And so it's not too late.
[00:12:11] Abby: It's not too late. Yeah.
[00:12:14] Jeff: It's how far back can you go?
[00:12:16] Abby: So it depends on who's claiming it. And this kind of gets a little bit into the weeds of the program, but for building owners, you can go back to any project that was completed, not maybe construction completed or placed in the service since the program existed.
[00:12:30] And so once I have an ID became eligible on January 1st, 2006, so. That's a, that is a crazy amount of time. I usually recommend for my building owners to look back. We can look back 10 years and still realistically pick up a project. The restaurant under we worked with, we analyzed a new construction project in 2012 and it qualified for a deduction.
[00:12:53] So, um, you know, you might not look all the way back to 2006 at this point, but there's still a ton of benefit that can be captured in 10 years.
[00:13:02] Jeff: Wow. Yeah, that is, that is mind blowing. Are we talking like a couple thousand dollars, you know, in taxes? Like what, what are we talking about in terms of numbers and benefit?
[00:13:13] Abby: Yeah. Building size matters because one 790 is a rate per square foot. So you can now get a maximum of 5 and 65 cents per square foot. And that's against your total conditioned building space. So. Think areas that are, have heating and cooling or have just cooling or just heating. That's what we can analyze for developers.
[00:13:35] I had a conversation with a developer yesterday. They are learning about this program on a project that they're currently in planning for. And so they're trying to capture that maximum benefit. But in the conversations we find out they actually hold their properties. And so we're going to probably be able to do a corrective study on all of the projects that they placed in the service in the last few years.
[00:13:56] I mean, each building, because there are larger developments in this case, we're talking about deductions anywhere north of 500, 000 to some of their projects are even in the 2 million range. Wow. Yeah.
[00:14:09] Jeff: What would you say in practical terms is kind of the square footage that you think, you know, is there like a ROI standpoint?
[00:14:20] Abby: Yes, and we always try to talk to our clients about that when they have smaller buildings. We want to make sure that whatever fees we charge to do the study don't end up taking too much of that benefit away from the building owner. Because at the end of the day, we want to make sure that they feel like they received a benefit worth.
[00:14:36] Performing this study with our team. So my quick rule of thumb is anything under 20, 000 square foot usually is too small for us to really make sense of it. Now, we will look at any project with somebody if it really matters. We'll see what we can do to make it work. Um, sometimes my building owners have multiple buildings underneath that size.
[00:14:56] So because we can group them together. Uh, we're able to bring down those fees and make it worthwhile for the client. But the larger the building, the better in truth, because it is that dollar per square foot rate. So the, so those big, I think, I think of the manufacturing facilities or the industrial facilities, those can be great candidates for the one seven 90 tax deduction.
[00:15:17] Jeff: Interesting. Yeah. We're not just talking about office towers here, right? We're talking, um, you know, warehouses and yeah, kind of, uh, things that people wouldn't normally maybe think about. Let's dive a little bit into kind of some of the barriers. Like what, what would you say are like the top three misconceptions that building owners have about these programs?
[00:15:40] Abby: The first is the energy efficiency in the name, right? It's called the one 790 is called the energy efficient commercial buildings deduction. So one of the first questions or, or I guess pushbacks I get as well, this project wasn't overly energy efficient. And so, um, my counter to that is. Yes, it'd be great if it was, and I think that's what we're all trying to enhance here, including, you know, IRS's intent in the legislation.
[00:16:07] However, to determine qualification right now, we measure the building, we do an energy modeling analysis, and we measure that against an ASHRAE baseline standard. So what that means is what ASHRAE outlined as the minimum design standard for a building in 2007, that's what we have to measure against. So I use LED lighting as a perfect example.
[00:16:32] In 2007, LED lighting was not the minimum standard. So if you're installing LED lighting in your building, you are going to do better than that baseline standard. I can't guarantee you'll get a deduction because design matters. If you have lights everywhere, it's probably going to be less energy efficient, but.
[00:16:52] Most of my clients who do full led upgrades qualify for some benefit from this program. So that's the first and most common misconception. I get, um, the second I think is, hey, this is just, this sounds like way too much work, uh, for us to make sense of this in truth. What I need from a building owner is.
[00:17:13] Your project details, some of your construction drawings, some of your specifications for the equipment you installed. Allow me on site because that is a requirement, a professional engineer, whose third party to the building owner must go on and visually verify that the project is actually completed the equipment's installed and operational.
[00:17:31] And then that's it. My team runs with everything. Our deliverable is the final report and the documentation you need to put this on the return. And so, um, while that is a common misconception up front about the. Uh, upfront work, uh, at the end, people are like, wow, that was, that was way easier than I expected.
[00:17:49] And like, I, I tried to tell you, I'm glad you trusted me through this first one, because now we'll do all of them on all of your projects.
[00:17:57] Jeff: Because it's unknown, it just sounds overwhelming, right? And especially if you start to dig into it, you know, there, there are, you know, things, especially get that max deduction from prevailing wage and apprenticeship now to, you know, the energy model, it can just seem overwhelming.
[00:18:13] And you guys, you guys take care of all of that.
[00:18:16] Abby: Our mission is two things, right? One, we want to make this as easy as possible, as accessible as possible to these building owners, because we want them to capitalize on these incentives that are out there for them to capitalize on the second is we provide.
[00:18:31] I would say a little bit different service in a lot of the providers out there, which is more consultative. We'll come on up front. We'll educate. We'll walk them through their choices. We'll help them determine ROI, right? If we meet prevailing wage, if we don't meet prevailing wage, what does that look like?
[00:18:46] What are the increased costs and how can we determine the best way forward for you to claim at least some benefit? In truth, 95 percent of the work lands with us. Again, it's just as couple of things up front that we need, and then we'll. Deliver to you the paperwork that you need to file.
[00:19:04] Jeff: I was talking to somebody the other week and they were talking about, you know, for a lot of these projects, one of the benefit is, especially for maybe not for profits or, you know, schools, that sort of thing is, you know, you can get upwards of like 70 percent of, let's just take an HVAC system of that cost, you know, covered or back, you know, through these different incentive programs, which.
[00:19:29] Yeah. pretty wild. I would imagine one of the barriers and misconceptions is like, like, is this real? Like, it sounds too good to be true. Like, come on, Abby. Like, it can't really be that good, right? Yeah,
[00:19:42] Abby: right. We get that all the time through the investment tax credit, I think is what you're specifically referencing Jeff.
[00:19:48] Solar installations are a perfect example. Um, yes, in a perfect 70 percent of your cost to install. And that's not only the cost of the System itself, but also labor costs. Some of the design fees it's dependent upon the project. And that's where our work comes in, but it can be significant. I think it's been most unbelievable by my nonprofit organizations who are like, wait a second.
[00:20:14] First off, you're telling me a tax credit is available for me. And that doesn't seem real. And now you're telling me it could be up to 70%. And it's funny. We'll, we'll walk them through it. And, um, Yeah, I mean, I think they're excited to know and are implementing again, future strategies to try to take advantage of this because it's a lot of money that can be on the table.
[00:20:37] And if for like anybody, even my private building openers in the investment tax credit space, if you are ever considering solar, now's the time because tack on top of it. You can take the federal incentive and in many cases you can take the local utility rebate that's there for solar, maybe the state program that's for solar.
[00:20:57] So now we're stacking incentives and. Who knows? Maybe the project can pay for itself.
[00:21:02] Jeff: Yeah. And that's where kind of the strategy I would imagine, you know, part comes in, right? Because, and I think that's one of the things that is overwhelming when you talk just energy incentives in general is that, you know, you have the federal level, you have state, you have sometimes County city, and then of course you have, you know, the PUD.
[00:21:22] And so trying to map all those together is, is can be very complex, uh, to figure out on your own. Is there a third misconception?
[00:21:32] Abby: Maybe it's the too good to be true. I think that is, you know, that's probably the third misconception. Now, the one thing I like to highlight right now is with that Question often comes, well, who, who's done this successfully for the investment tax credit?
[00:21:48] It's interesting. There are some past investment tax credits that were available. This program also morphed, um, but a lot of the nonprofits and government agencies, we still haven't heard about their success stories yet because they're really just filing for their first eligible year right now. And so I think.
[00:22:05] Maybe early fall, winter time, we'll start hearing some of the first success stories. So I'm certainly excited for some of my clients to share theirs. Uh, once we get that file, they see those checks in the mail.
[00:22:18] Jeff: So let's actually talk a little bit about, you know, the opportunity or, you know, if you're able to share a real story, um, you know, about a building owner organization that How did they come to you and how did they move past kind of that, that hesitancy to, to actually, you know, move forward with a particular project or study?
[00:22:41] Abby: Yeah. One comes to mind. Uh, we just worked with a developer based out of Austin, which tax takers headquartered out of Austin. We met them just through regular networking. They're part of our networking circles, heard a little bit about what we do. And so we set up a call to talk about the incentives. This particular developer, um, was in the middle of a multifamily type project, several buildings, plus a clubhouse, some of the buildings, three stories, some of them, four stories.
[00:23:08] So a little bit of a mix of properties, but all done is one project. We got on the phone with them and talk to them about all of these incentives that they can capture on the federal side, they're already using a, a A strategy that's been around for a very long time called cost segregation. Um, and what we told them is, listen, once have an ID.
[00:23:31] Is triggered from HVAC interior lighting and building envelope, which are obviously installing as a part of these projects. The mechanism is the same as cost segregation. So it's just a different method of calculation, but the way it is. Put onto your taxes is a similar strategy. So you absolutely should be doing this.
[00:23:50] But in those conversation, we also identified the potential for the 45 L new homes credit. We also identified that they had an investment tax credit opportunity because they were putting solar panels on the clubhouse. And so. In the study, we roped in several of these incentives as one package for this project, calculated them all.
[00:24:11] We did the cost segregation work for them as well so that we can make it, you know, one contact point for all the incentives and they got a ton of benefit back. And a part of that was getting online with their financial team, right? Their accounting team is wait a second again, like we've used cost segregation, but we haven't heard of these other things before.
[00:24:29] And it's not uncommon for us to get a little bit of pushback here too, but. Because they, you know, there's a couple of things, right? They feel like we should have probably known this. And so I don't want your team to highlight that we weren't telling them about these opportunities. And then, um, you know, also the too good to be true, right?
[00:24:47] Okay, well, now you're explaining this to me. What's the hitch here, but now we get on board with their leadership and their accounting team explained to them what's happening. We explain how it works, everybody gets on board. And then at the end of the study. Everyone's elated, right? They're so excited about the incentives and the increased value.
[00:25:04] They ended up partnering on this one to pursue solar, uh, utility rebates as well. So they got a little bit there and now they are in their planning stages, planning for some of these incentives on their future work so that they can maximize the benefit back because there is some planning to be done if you want to maximize the benefit.
[00:25:24] Jeff: Are we talking like, you know, 10, 000 in bet, like, are we talking hundreds of thousands, like, you know, how material is this? Right. Cause I think that's a big question is like a lot of the programs, you know, it just seems like it's not really worth the effort, right? Is this, is this material?
[00:25:39] Abby: Yeah. So in that particular case, again, this was a big project near 50 million.
[00:25:45] In total cost, but with the combined incentives, what we estimate the cash value because again, the deduction just reduces down your ordinary business income. So it's not exactly cash in hand, but the end result was approximately two and a half million dollars back. Right. It's a significant chunk of that project.
[00:26:06] It's not, these aren't financial tools that are going to solve all of your budget issues, but would you leave two and a half million dollars on the table? I wouldn't.
[00:26:15] Jeff: Yeah. Yeah. That's material. That's material. That's right. Yeah. I would definitely say that's material. Yeah. What a great. Kind of use case of, you know, multifamily, you know, developed, like how many of those are out there?
[00:26:28] Like maybe a few.
[00:26:30] Abby: Oh my gosh, there's so many, I actually have done a couple of conferences spoken on panels at multifamily events specifically because it's such a hot market right now. There's a, I mean, you're having multifamily projects all over the country. So, um, I think. Yeah, that's a, that's an area that needs to be looking into this.
[00:26:51] Cause again, it triggers in just that example, there were four federal incentives that were triggered and could all be claimed. And so I think, you know, if anybody's looking at it, they should at least be looking into it to see if it works. If you haven't looked into it, you're probably doing yourself a disservice.
[00:27:08] Jeff: So what do you let's let's touch on a little bit of like who is the best target right in the case of the investment tax credit Not for profit hospitals is a great use case, right? Yeah, typically they're gonna be doing something and you know solar at least may maybe geothermal or whatnot Right that is gonna you know You know, be applicable in the case of ITC, what are some of the other industries, or I guess the, the end users that really should be doing more homework in this area?
[00:27:37] Abby: Sure. So the investment tax credit is the one available percentage of your costs back on things like solar and geothermal. This is the program plus some others that are eligible for elective pay. So you've got your nonprofits that can benefit, you've got your state and local government agencies that can benefit.
[00:27:54] So. Some of the industries that I'm seeing the most movement in, and I think. More folks should be exploring our K through 12 schools. Um, universities now are really looking into that. So that's two hot markets, but nonprofit organizations, churches, if you've ever looked into maybe making renovations to your church and you want to consider things like solar.
[00:28:18] I think that's a, now's a great time to do that because normally, when would you be able to capitalize on a program like this? And then just for the audience, in case you don't know the elective pay, at least as of now is available through the end of 2032. So there's some time, uh, to claim some of these incentives, but you certainly don't want to run out of time and find out that you missed out on all these benefits.
[00:28:39] Jeff: That's really focused on ITC, right? What about like one seven nine D or, you know, 45 L is going to be more for, you know, uh, home developers, but other industries like for, especially one seven nine D
[00:28:52] Abby: one seven nine D is interesting. So you've got your private tax paying building owners. If you pay taxes and you own a building, you're probably making renovations.
[00:29:01] And so you should be looking into one seven 90. My trigger for most people, if you're, if your accountant is using cost segregation, You should absolutely be doing section 1790 as well. Again, because they're the same tax application, it's just calculated differently. For government agencies and non profits, They can't claim the 1790 tax deduction.
[00:29:22] They don't have anything to offset to reduce their tax liability with a tax deduction. So there's a caveat to this program that's unique to any other program. They can actually give their deduction over to their designers of their energy efficient systems. This opens up a whole, probably a whole second conversation, but it's out there and it's something to note, um, because designers can and do, uh, take advantage of this program.
[00:29:47] And it's a good way. Maybe to work with your designers to give them this deduction and have them help you design a system that qualifies for the investment tax credit. There's a lot of ways to work together to share in the benefits
[00:30:00] Jeff: That's I think the the especially for 179 D where people focus the most are those architecture design firms that are, you know, designing these energy efficiency improvements, especially for, you know, not for profits that can't benefit from tax deductions.
[00:30:16] So, Abby, I think a lot of people, you know, the Inflation Reduction Act has changed a lot of these programs and a lot of people focus on the additional dollar per square foot benefit that people can take advantage of. But as we were talking earlier, that's not the thing that actually gets you the most excited.
[00:30:34] So, what is it that gets you the most excited?
[00:30:37] Abby: Yeah, so the 179D program specifically, Originally before the inflation reduction act, there was a one time maximum deduction you can claim on a building. So let's say you do a new construction project. Even you get that maximum benefit, no matter the energy efficient improvements you did after that project, you couldn't claim the deduction again.
[00:30:57] So it was just a one time deduction. And I think the miss here was that we weren't encouraging. Building owners to make continual improvements on their buildings as new technologies come out and things of that nature. So the inflation reduction act changed this. Now the deduction essentially resets every fourth year.
[00:31:17] This is great for building owners because, uh, again, if we go back to the small, medium sized building owners, they can't always overhaul their building into an amazing energy efficient project or building. Uh, So they have to piece it together, right? Maybe this year, their budget allows for some new HVAC.
[00:31:35] Maybe next year, it's going to be the LED lighting, whatever it might be. If you schedule your one 790 deductions every few years, continue to prove more energy efficiency, you can claim the benefit again. And so I think this is great.
[00:31:51] Jeff: So you can take the benefit. Again in year four.
[00:31:55] Abby: Yeah, that's right.
[00:31:56] Essentially how it really works is you have to consider the deduction you took in the last three years so that you don't cap out at the maximum. But once you get past that three year mark, there would be no deduction that you claimed in the last three years. And therefore you're back at square one.
[00:32:11] Jeff: That is amazing.
[00:32:12] Abby: It's
[00:32:12] Jeff: and that's great. Yeah.
[00:32:14] Abby: Yeah.
[00:32:14] Jeff: And that speaks to the strategy of, because you're right, most people, they're not going to do everything all at once. And I mean, you know, new construction may be the exception, but in the renovation example, it's just the CapEx budget doesn't allow for that.
[00:32:29] So. Really working with somebody that can help you to maximize that is is going to be key You know, we're talking energy tax incentives. So people think taxes they think cpas I'm, right, you know, how how are cpas engaging or leading these conversations?
[00:32:46] Abby: So I think we all cross our fingers that the cpas are bringing this up to their building owners But it's been my experience that they don't Again, I can't knock them.
[00:32:57] This isn't a service that they can provide You I know CPAs to be incredibly busy. They always are right. So if they can't offer it as a service, they don't have a trusted consultant like myself on the line, then they might not even be telling their building owners about this. And so I do think it's very important as a building owner to find resources that you can learn a little bit about this and not to solely rely on your CPA.
[00:33:19] Or if you are at least be the one to engage that conversation and say, Hey, are there energy efficiency incentives or building related incentives out there? That are available to myself. Um, I think that's really important. It's, it's tough though. It's like, how do you get the building owners to know to even ask?
[00:33:38] Sometimes? Hopefully you're getting plugged in with your organizations and folks are, are, are telling you more about what's going on. Um, because again, it's tough for the CPAs, if they can't provide it, provide it as a service, why would they tell their building owners?
[00:33:52] Jeff: I think you brought up a good point earlier, though, around cost segregation, which, you know, that wasn't a thing.
[00:33:59] I don't know, even 15, 20 years ago. And now it's, it's kind of, you know, if you own a building, it's something standard. And so I think some of these, it's just going to take us a little bit of time. And as you know, the most powerful form of marketing is word of mouth. So as one building owner talks to another, you know, that's where I think you're going to see, you know, people.
[00:34:19] Kind of the market flip and and owners are now saying hey, tell me what we should be doing You know to to maximize our energy tax incentive strategy. That's right Um, but the the cpas, I mean this is there's a huge opportunity whoever can You know really dive into this and and I would say, you know focus There's there's a phenomenal opportunity here for those that are are looking to lead the charge
[00:34:43] Abby: Yeah, you know a big part of my effort is You We, of course, educate building owners.
[00:34:49] We want them to know what's available to them, and we'll walk them through the process. But the flip side of that is educating the CPAs. We hold webinars. We do, you know, they have to have continual, continuous learning credits. So we'll set up webinars to help educate them, let them know they don't need to know all of it, but we're here as a partner and a resource for them so that they can extend the value to their clients.
[00:35:11] Jeff: How do I move this to action? I'm, I'm interested. Some of these things have piqued my interest, like where can I go to learn more? What would you recommend that people take as a next step or action?
[00:35:22] Abby: Sure. So there's a ton of resources, especially centered around the Inflation Reduction Act. So some organizations that have a lot of webinars for you to watch, USGBC, uh, the Department of Energy.
[00:35:35] Both put on lots of webinars to learn about these programs, but you can also go find and Google tax consultants like ourselves. Tax taker. We have guides online. We have opportunities to make your information. If you want to talk about a project or a building. So there's a lot of choices and information out there.
[00:35:53] If you can't figure out where to start, go to your CPA to ask and see if they know anything. Um, there's a lot of options, uh, to get this information.
[00:36:02] Jeff: USGBC is a U. S. Green Buildings Council. That's right. For those, uh, yeah. Uh, and of course, TaxTaker. Abby's always available, uh, out there to, uh, to field questions, calls.
[00:36:13] She fielded my call, uh, just about 18 months ago as I was looking to dive into this space. And I'm so grateful that she did. Last question that we love to ask every guest is, is around trying to look forward or look into the future here. So using your crystal ball, what do you think the future looks like in five years for building owners?
[00:36:36] Abby: I think we're going to see a lot more. Rules and regulations implemented by cities and states to achieve energy efficiency in their buildings. We've got some states and cities that are already doing this. Like New York. I think Colorado even has some as well. It's going to get more common. And so there will be penalties for folks who don't comply.
[00:36:59] So go be the forward thinker, go start making these improvements or looking into them and capture the incentives while they're available. I think this is going to be really, really important. Grab the carrot. Don't get punished by the stick is, is how I see the next five years going.
[00:37:18] Jeff: That's a phenomenal way to put it.
[00:37:20] Yeah. Carrots are always better than sticks, right?
[00:37:23] Abby: That's right.
[00:37:25] Jeff: Right. Uh, well, Abby, I am so excited. so thankful you had to make the time to talk with us a little bit about this space. I think it was incredibly helpful. You know, as people are coming into this, maybe they've heard about some of these programs or acronyms and they're just trying to get their bearings on, you know, okay, what is this?
[00:37:43] How do I begin to map out a strategy? So some, some really helpful. Tips, uh, and hints that you've given folks. So thank you. I
[00:37:51] Abby: hope somebody can walk away with something from this podcast. Education is key, but Jeff, I certainly appreciate the fun combo about the incentives. This has been great.
[00:38:02] Jeff: Wow. What an insightful interview with Abby.
[00:38:06] There are really three takeaways that I got from the conversation. The first is this concept around it's too good to be true. When you look at adoption of these energy incentives, something like less than 5 percent of the market are taking advantage of this today. There are real dollars out there. And it's going to be up to, you know, people to really, you know, take advantage of that opportunity.
[00:38:30] So, first takeaway, if you're not looking at this, you need to be looking at this. The second is, everybody focuses on, you know, the increased payout or benefit. In the case of 179D, the quadrupling of the dollar per square foot payout. What is really interesting, while that is helpful, it really is the fact that now the rules allow for you to take this benefit every fourth year.
[00:38:58] So if you do qualifying work within the right time frame, you can actually take this benefit more than once. That is ginormous. Something you should be thinking about strategizing, uh, and should be a part of your CAPEX plan. And finally, it's not too late. Uh, like we said, it's still early in terms of adoption, but what's amazing is that if you've done qualifying work in the last 10 years, you likely could qualify for, you know, many of these incentives and dollars.
[00:39:32] So, you should not be sitting on the sidelines waiting. I hope you join me in our next conversation, exploring the forces that drive sustainability in the built environment. Until next time.
[00:39:45] Announcer: You've been listening to Reframe, the show about building sustainability, presented by Pilot Light. Opinions shared by the Reframe guests aren't necessarily the views of their companies.
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