Demystifying Solar Tax Credit Transfers with Marc Palmer, Conductor Solar

Transcript

WEBVTT

00:00:00.000 --> 00:00:32.960
There's a pretty big variance in terms of the pricing out there for tax credit transfers. People tend to see some headline price of, you know, 94 cents on the dollar is what somebody sold their task credit for. And doesn't mean that didn't happen, but that's oftentimes, you know, in a very large transaction where there's a ton of economies of scale, and maybe that's US Bank is selling off a tax credit that they have from an investment they've made.

00:00:28.399 --> 00:00:46.240
And so people think that's maybe set the expectation that that's what they'll see for the tax credit value. But when you're transferring $100,000 tax credit, right, it's a very different amount of work for you know, the amount that gets transferred. So are

00:00:46.240 --> 00:01:00.539
you speeding the energy transition here at the Clean Power Hour, our host, Tim Montague, bring you the best in solar, batteries and clean technologies every week. Want to go deeper into decarbonization.

00:00:56.380 --> 00:01:10.620
We do too. We're here to help you understand and command the commercial, residential and utility, solar, wind and storage industries. So let's get to it together. We can speed the energy transition

00:01:12.299 --> 00:01:19.620
today on the Clean Power Hour, the ITC transfer, it's a thing. My guest is repeat guest. His name is Mark Palmer.

00:01:19.799 --> 00:01:36.500
He is the founder and CEO of conductor solar, and we're going to geek out for you listeners on the ITC transfer. You know, the ITC has been emboldened by the IRA, the inflation Reduction Act and the Biden administration.

00:01:33.439 --> 00:01:48.159
It's happy days. You can get up to 60% on the ITC. The question is, how do you transfer the ITC in those instances when your customer doesn't have a liability? So welcome back to the show. Mark,

00:01:48.879 --> 00:02:01.980
thanks. Tim, great to be here New Year. New topic still focused on mid market solar, at least our world. I know you touch, you touch some other areas, but sure to be back on the on the pod and and reconnecting.

00:02:02.400 --> 00:02:12.780
And we'll put, well, we'll put a link to our previous interview, but tell our listeners a little bit about yourself and conductor, and then we'll get into the topic de jure.

00:02:13.259 --> 00:02:41.259
Yes, great. So I've been working in renewable energy finance for, uh, close to 15 years now, starting the utility scale part of the world, and have been focused on CNI and community solar projects for the last eight years, about now at this point, and lens is always financing, but really focused on new projects and development and financing of solar, and then, you know, inevitably storage.

00:02:38.780 --> 00:03:24.860
And I've got some experience with wind and natural gas too, but I haven't, haven't played in those worlds since I was in the utility space. In 2021 I launched conductor solar. And just to give everybody a quick overview of that, it's conductors, a deal platform really, built by experts in project finance, DG, development and software. We work with solar developers, contractors and investors on CNI and community solar projects, and we help these parties really do two things, one is find each other in really targeted way, and two is making it easier for them to work together. So we find that this drives a lot of value in the project for all parties involved, and helps these deals that, as we all know, take a long time come together a little bit quicker.

00:03:26.060 --> 00:03:47.020
Very good. Yeah, check out conductor. Dot solar, and don't hesitate to reach out to mark and company if you're looking for a solar PPA or ITC transfer. So what are we talking about with the ITC? And maybe just set the table a little bit.

00:03:47.020 --> 00:04:00.460
Mark. Here we are in 2025 and we will talk about the Trump administration part two, because Trump is about to come into office for the second time, and that's a bit of a wild card.

00:04:00.879 --> 00:04:08.639
But, you know, just a couple of years ago, Mark, we were expecting to have a de minimis ITC in this day and age, right?

00:04:08.699 --> 00:04:24.620
It was stepping down, I think, to 10% soon, and and so now the Biden administration put it back to 30% which is, which is wonderful. And then the IRA added some adders. But what is your table setting for the ITC?

00:04:25.699 --> 00:06:34.220
Well, and just on that point, I remember towards the end of the first Trump administration, you know, I think it was, I forget the year, I guess this would have been probably towards the end of 2019 if I remember right where the ITC was set to step down from 26 to 22% and then I think was 10% the year after that, and at the end of the year, kind of out of nowhere in a spending spending, or budget bill, the Trump administration passed, you know, passed legislation to keep the ITC at 26% so kind of holding on to that. You know, recent activity of signals. That the administration's not going to completely blow up, blow up the ITC, yeah, and, but you're right. Who knows what's going to happen? We're planning for, you know, all sorts of different scenarios here at conductor. And I think the we expect probably there to be some blowback. You know, there's been a lot of discussion with the administration about doing things to the inflation Reduction Act that, you know, negatively impacted release from from our industry's perspective, I think my read on the general consensus is that the, you know, the middle market, solar and the investment tax credit is not going to be, not going to be in the crosshairs too heavily in the short term. You know, we might see some the runway of this. ITC be pulled in a little bit and not run through 2032 but I think there's other areas in the inflation Reduction Act that are going to be targeted more heavily. So I'm optimistic that, you know, we won't see too many significant changes. What worries me the most, though, is just how long this uncertainty is going to sit out there without any resolution. I'd rather whatever's going to happen happen, you know, on January 21 then have nothing happen until, you know, 2027 where it's just a lot of discussion. So, yeah, I'm hoping for quick action, whatever it is. And obviously we're hoping that it's not going to be, you know, too drastic, because there's been a lot of investment and a lot of lot of companies that have built businesses around the policy that was put in place.

00:06:34.339 --> 00:07:25.279
I mean, the thing I think about Mark is that Trump wants people to pay less taxes, and that is at the core of the ITC right. Companies are paying less taxes by leveraging the ITC and and I think Trump sees that as a good so from that perspective, I think I don't see Trump, and you pointed out, rightfully so, that the Trump administration extended the ITC in in their part one. So it's at 30% with the adders. Do you see any reason to put the adders in the spotlight? I mean energy communities, domestic content, low income communities. Of those three, I would see low income me being potentially in the target but, but what do you think about those adders? Yeah,

00:07:25.279 --> 00:07:30.079
that's, that's my thought, too. I mean, I've, I've definitely heard a lot of different perspectives here.

00:07:30.920 --> 00:08:32.419
Some of the people we work with are planning for all adders to be thrown out the window altogether. I do think low income is probably the most likely one to ultimately get, you know, reduced or cut all together. I think energy communities, a lot of the country is on that energy community map. Tim, so yes, it is. A lot of projects that qualify for 40% which is, which is nice. So I could see changes to that, either, you know, removing it or maybe focusing on some different aspects that shrink that map ultimately, and then domestic content, Trump wants people to be buying American and that is influencing that. I think where my head's at on that one is, I've heard discussion on making that more stringent to actually qualify for, which is too bad, because that's already not easy to qualify for, but making it harder a higher bar, basically, for people to get there. So, you know, maybe they all go away.

00:08:29.779 --> 00:08:32.419
Maybe there's changes to them.

00:08:32.480 --> 00:08:36.679
Yeah, it's hard to say, but that's the some of the things that we've been talking about. I

00:08:36.678 --> 00:09:18.359
mean, idea I talk with my clients a lot about domestic content, and it's so complicated, this truly is rocket science. And that's the thing. Is, Trump is not a rocket scientist, and he doesn't want to be, and and so it's like, if you put tariffs on solar cells, for example, right? That impacts potentially domestic content. So anyway, so there's, there's tariffs which the administrations Biden Trump are using. Both administrations have put tariffs on solar equipment.

00:09:19.259 --> 00:09:37.999
It's, you know, that's a counterbalance, in some regards, driving attention to domestic content, but, but it's, it's, it's, it's very complicated, because we can't just prop up cell manufacturer in the US.

00:09:33.798 --> 00:09:37.999
That's a longer term prospect.

00:09:37.999 --> 00:09:42.519
And it's really complicated.

00:09:37.999 --> 00:10:44.739
It's really expensive. You see rec just pulling back from their facility in Washington because they couldn't get a green light on a high enough quality product. So making solar cells is super complicated, super technically difficult, because REC is the real. Deal like they're a global player in silicon manufacture and so anyway. So, yeah, I want, I want domestic content too, and I encourage the manufacturers that I have dialog with to build factories in the US. But I also appreciate why Trina Solar sold their factory to to fryer the Norwegian battery company, because Trina is Chinese, and they see themselves being in the crosshairs of the US government, and it's just too high risk with too potential, little reward.

00:10:39.499 --> 00:10:44.739
But let's talk about transfers.

00:10:44.798 --> 00:11:00.339
And how does this work? Who, what are the scenarios that are relevant, and if you could also touch on direct pay, is, do you have a signal on direct pay? And is that working in this ITC realm?

00:11:01.720 --> 00:12:00.220
Yeah. Let's start there before we shift into transfer. So direct pay allows for nonprofits and some other entities, I think, rural co ops and tribal organizations, to be able to file for basically a cash payment instead of having to go through a tax credit when they don't pay taxes. So that's why that exists, I think, in general, that has had some impact on the industry, and it's been favorable in terms of getting more projects built and simplifying things. A deal where somebody buys a solar system directly versus going down the third party ownership route is just it is simpler, and direct pay allows more people to do that. I think when, when that was launched, I mean, we it still doesn't make sense for everyone to go down the direct pay route because they can't necessarily afford it, and they don't necessarily aren't able, or don't want to raise financing to fund the rest of the system.

00:12:00.580 --> 00:12:45.100
But we work with a grant based organization in focus on Central Appalachia called the solar Finance Fund, and in our role, they're reviewing a lot of the applications. We see a lot of nonprofits coming in for this direct pay grant, and it's made things a lot simpler for kind of the sub 200 KW projects, because there's a lot of lot of those projects that are smaller going on organizations that they can't use the tax credit. So that's where we've seen it trickle in the most. We've heard, you know, we've heard of some conversations of it being leveraged by other municipalities and some large organizations, but that's generally where we've seen it, have to have the biggest impact.

00:12:40.779 --> 00:12:45.100
I like the chopping block too.

00:12:45.100 --> 00:12:51.340
For the IRA and Trump administration. We've heard that as well. So you know, since we're talking that,

00:12:52.720 --> 00:13:37.159
I love the direct pay. It really is a game changer for nonprofits and government entities, which, you know, it was unfair that they couldn't leverage that historically, they couldn't leverage the ITC and, and so, you know, they weren't getting they weren't installing solar on their facilities nearly as much as for profit entities and and We want to both end, you know, 6% of our landscape mark is covered with roads and buildings, right? And so a lot of that can be utilized. A lot of that existing infrastructure can be used to green the grid, if we can put solar on those facilities, but only if

00:13:38.480 --> 00:13:42.100
so. What a great stat.

00:13:38.480 --> 00:13:42.100
Tim, oh, yeah, I love

00:13:42.100 --> 00:14:58.779
to bring that up, because, you know, one of the pushbacks we get in the solar industry is, well, Tim, you're going to pave over the bread basket in America with all these solar panels and wind turbines and battery farms. And I'm like, You have no idea the footprint of Greening the Grid with solar is so small, it's one to 2% of the landscape, right? So if we can't afford 20% of what we've already done, you know, and it's not even going to be that, because we're going to use some of the existing infrastructure, right? So it's a fraction, it's a small thing. And the other thing that real quick, that just irks the heck out of me is when people freak out about ground mount solar, like the the array you see behind me, okay, this is a behind the meter project that was on a I think it was a playing field before. This is a part Parkland College in Champagne, but let's just say it was a cornfield. Well, guess what? The biggest threat to cornfields in America is not solar, but urban sprawl, like urban sprawl, has swallowed massive acreage in America in the last 30 years. Just Google this. Look how Chicago has grown its footprint in the last 30 years, and it'll blow your mind.

00:14:53.559 --> 00:15:05.399
So anyway, let's talk about the ITC transfer. What is it? How does it work? And how does conductor facilitate this process?

00:15:06.120 --> 00:15:08.399
Sure. So, so what is it? Let's start with that.

00:15:09.600 --> 00:15:58.120
You could view it as a little bit of a direct pay concept for for profits at a discount. It's a little more complicated than that, but if you think about a for profit entity that wants to buy a solar system in the past, they had to use it against their tax return. Now they're able to transfer the tax credits for, you know, dollar for dollar for dollar to a third party who can use those tax credits when the for profit entity couldn't, and so that's at a discount. And, you know, there's some risk premium and timing premium that gets factored in, but that's effectively what the tax credit transfer is. Big picture, tax credits are great, but they're hard to use by a lot of organizations, ones that aren't making money, ones that maybe aren't structured properly.

00:15:54.639 --> 00:17:09.240
There's different reasons why these tax credits are hard to monetize, and from a solar perspective, oftentimes it results in the, you know, a very few number of very large entities buying these tax credits that are typically cash heavy. Think banks or tech companies. Those have been, historically some of the largest tax equity players, insurance companies as well. And tax equity is just so complicated because it necessitated somebody to actually, literally be an equity partner in the in the project and in the solar asset with the owner of the solar system. And that's just a complicated structure for people to undertake. And as a result, it was really hard for smaller projects across the country to necessitate the complexity of that structure. So with tax credit transfers now, it simplifies things pretty dramatically in terms of allowing just a third party arms length agreement where you don't need to have an equity arrangement in the project. So that's it in a nutshell. Tim, any questions on that before? I mean, I want to make sure it's clear to the audience. And I'm I know I tend to go down, I have

00:17:09.240 --> 00:18:17.099
to admit, my eyes start to glaze over a little bit here. Yeah. So I think it would be helpful if we just walk through a concrete example. It could be, it could be a for profit or nonprofit. I don't care it's it's more about the transferability, because many for profits can't use the ITC as well because of their tax structure and and so if you have$100,000 let's just say, though, in tax credits on a project, right? The idea is that some third party entity can now access those credits for their own tax liability. So you can move it's just a matter of moving the credit from one entity to another. And then, of course, there has to be some benefit to both parties. And if, if I'm party a with the initial credit that I can't use, I'm going to then give some discount to party B for the headache of doing the transfer, because there's paperwork and professionals involved in doing it, right?

00:18:17.460 --> 00:18:21.240
Yeah, exactly. So, you know, typically, uh, 100.

00:18:21.240 --> 00:18:47.200
Let's just use, use some round numbers. We'll go with a $2 million project and a 50% ITC, so we'll call it a $1 million tax credit, just using a round number, sure, and let's say we're building it on, I don't know, thinking of some random company, let's say the headquarters of Domino's pizza or something, right? Some for profit entity is putting on there. They buy the system, but they can't use the tax credit.

00:18:47.500 --> 00:19:14.640
So what they're able to do is sell it to a third party, let's say Google, who wants to buy the tax credit. And they buy it for, you know, call it $900,000 so in exchange for, you know, the some of the risks associated with it and the timing of when this tax credit comes, as well as Google wanting to make sure they get a benefit, so Google sends$900,000 to Domino's. Domino's then sends their million dollar tax credit over to Google.

00:19:14.640 --> 00:19:24.619
Google pays a million dollars less in taxes. It's kind of that straightforward. So it's a lot simpler than some of the other arrangements of how these things have been monetized in the past.

00:19:24.619 --> 00:19:35.900
But there's still a lot of, still a lot of nuances and and things I think that are worth mentioning around when these task credits get transferred.

00:19:32.720 --> 00:20:57.579
You know what? What's important, what's important to know about, and maybe some of the misconceptions of of these task credit transfers and how they work. So I'll run through a couple Tim of how you know some of the misconceptions we see about tax credit transfers, and you know how they work and who can do them. So okay, you know one is, is pricing. There's a pretty big variance in terms of the. Pricing out there for tax credit transfers, people tend to see some headline price of 94 cents on the dollar is what somebody sold their tax credit for. And doesn't mean that didn't happen, but that's oftentimes in a very large transaction where there's a ton of economies of scale. And maybe that's us. Bank is selling off a tax credit that they have, you know, from an investment they've made. And so people think that's, you know, maybe set the expectation that that's what they'll see for the tax credit value. But when you're transferring $100,000 tax credit, right, it's a very different amount of work for, you know, the amount that gets transferred. So pricing, you know, we tend to see pricing somewhere between, you know, 75 cents on the dollar to 90 cents on the dollar, for what, what sellers can get for, for transferring their tax credit.

00:20:54.460 --> 00:21:10.680
So that's one is just understanding that there's a pretty wide range out there today in terms of what these are getting traded at, and they depend on the project size as well as the risk profile of the tax credit. And we can go down that go down that minute, if you want, but

00:21:13.089 --> 00:22:23.319
the Clean Power Hour is brought to you by CPS America, maker of North America's number one three phase string inverter with over eight gigawatts shipped in the US. The CPS product lineup includes string inverters ranging from 25 kW to 350 kW, their flagship inverter, the CPS 350 KW is designed to work with solar plants ranging from two megawatts to two gigawatts. CPS is the world's most bankable inverter brand, and is America's number one choice for solar plants, now offering solutions for commercial utility ESS and balance of system requirements go to chintpowersystems.com or call 855-584-7168, to find out more. Yeah, that makes sense. So at face value, this is not complicated, and I am curious like, how does the IRS track all of this information? Because presumably they have some backstops to prevent tax credits from being sold multiple times?

00:22:20.289 --> 00:22:23.319
Or is that a thing?

00:22:24.130 --> 00:22:31.539
No, you can't sell it multiple times. It can only be sold once. And they do it through a registration portal.

00:22:31.569 --> 00:23:02.680
So they have a portal where you need to register your project, and then you file a transfer election statement with your tax return, and it basically has the same number. So if I sell you a tax credit, Tim, I need to file my tax return that I sold the tax credit to you, and it has the number of the reference project that they've already, you know, have in their database, and then you do the same on your tax return as include that number. And so that way they can match it all up and make sure that number isn't showing up on multiple people's tax returns, okay?

00:23:02.769 --> 00:23:15.279
And are they using Blockchain or some good way of preventing that information from being stolen, corrupted or otherwise disappearing into the ether?

00:23:15.880 --> 00:23:37.900
That's a good question. I don't have an answer to that. I would assume so, and I would imagine that there's a fair amount of controls around that from happening. I haven't heard of that happening, of, you know, any sort of, like fraud, or, you know, kind of major issues with the tax credits, you know, being taken multiple times. It concerns

00:23:37.900 --> 00:24:07.750
me when you see in the news that the Russians hacked the Treasury Department, or China hacked the I can. There was some story in the news recently where Russia or China hacked the Treasury computers. I think I'm just like, really, holy cow, yeah, greatest country in the world. I choose to live in the United States. I do think this is a fantastic place to live, but we're far from perfect. All right, so you mentioned risk. I don't know.

00:24:04.750 --> 00:24:14.619
Should we talk a little bit about that? I mean, is there an objective way of measuring a risk factor affiliated with a project?

00:24:17.289 --> 00:24:58.119
No. I mean, I think it's pretty hard to do it objectively. There are, there are things you can do to make it more objective. When we think about, you know, the risk profile of these tax credit transfer and these transactions that are taking place, we really think about it in three different categories. The first one is, really, you know, what's the credit amount? You know that, I think that's a pretty easy one to think about. It's like, what are all the things that ultimately lead to the that million dollar tax credit? So thinking about, how is that tax credit amount determined, which is built basically based on the underlying cost of the project, and what all, what

00:24:58.119 --> 00:25:01.900
all is eligible to be the tax. Portion of the project, right

00:25:01.930 --> 00:25:25.900
portion, that's right. So, so then you get into those nuances, right? And then, you know, there's a lot of people out there that are doing, we'll call it financial engineering, to increase the value of that tax credit through, you know, an arm's length transaction, which then result in it being based on a fair market value appraisal, and not necessarily, you know what I paid you to build it for me.

00:25:25.900 --> 00:27:29.589
Tim, so that's one. It's making sure the adders are actually legitimate and aren't going to get, you know, kind of kicked back by the IRS. So did this get a low income award before it was turned on, is this in a qualified energy community? Does it actually qualify for domestic content? And then you can go the next, another layer, right prevailing wage, if the project's over megawatt AC, did you actually comply with the prevailing wage requirements, and do you have the right documentation for that? So these are all things that can help influence the credit amount. And so that's one that's kind of the, probably the most objective one to be able to actually, you know, evaluate and understand that risk. There's two others ones. There's structure risk. So basically, that was pretty simple. I think it's, is the person selling the tax credit and is the person buying the task credit? Are they both legally, you know, is this like a legally and a valid transaction based on their entity structure and organization type and who they who owns them, so making sure that that structure is actually legitimate. And then the last one, which is gets a little harder to objectively measure, is on the recapture side, so credit amount, the structure of the transaction, and then the recapture risk. So everybody knows in this industry that the tax credit can get recaptured within five years after the project's turned on. So understanding what are the risk factors that might lead to that happening, of a change in ownership of the solar system, some sort of casualty event. So is it properly insured with, you know, property and casualty insurance in the event there's, you know, a hurricane that wipes out a majority of the system, or, you know, there's another reason that it ultimately can't continue operating. So those are the three ways we look at the risk for a tax credit transfer, and all of those factor into the price of the tax credit. There's insurance out there that can help insure on some or all of those risks. It's not cheap for especially for smaller projects.

00:27:27.640 --> 00:27:52.690
You know, when you when you start talking about tax credits under $5 million it's hard to meet, like the minimum, the minimum needs of the insurers in order to underwrite a policy. So anyways, just talking about a couple different ways that risks are out there and it can be mitigated, but ultimately, you know, good diligence and working with quality counterparties helps to go a long way in terms of understanding how those risks get assessed

00:27:53.349 --> 00:28:00.549
and what let's put some bookends on. If you're an installer, let's say a CNI installer that self develops.

00:28:01.960 --> 00:28:17.980
What is the lower end of a of a project size or amount of ITC that is worth considering trying to transfer in a marketplace?

00:28:20.319 --> 00:29:28.059
It all goes to the price. I mean, I think for$100,000 credits. We think that, you know, those can't typically justify insurance, that those can probably be sold for around 75 cents on the dollar at the that that's what ends up in the seller's pocket. So is that, you know, $75,000 worth it, if you don't have any other way to monetize this credit, or maybe you can use the credit next year if you're going to be profitable. So those are kind of the ways that people would evaluate this. And then, as you you know, creep up towards a million dollars. You're getting into the mid 80s range in terms of, you know, dollars that you'd get paid for the credit, maybe upper 80s, depending on, you know, really good quality transactions, so under $100,000 it's pretty tough to do, but I think if you're willing to, you know, deal with all the fixed price and fees and stuff that need to go in to ultimately make This credit, make the buyers comfortable that this credit is is legitimate, then I think anything can be transferred.

00:29:28.059 --> 00:29:49.029
It's it's not that painful. From the seller's perspective, there's not that much they have to do other than provide, you know, documentation. But a lot of times, they're dealing with buyers who don't understand solar and can't assess these risks, and they need to rely on third party experts or insurance companies to ultimately underwrite it for them, which that that's where a lot of the costs tend to come in.

00:29:50.079 --> 00:29:58.809
I mean, I would think that a platform like conductor helps alleviate that and expedites the process, does it? Not? I.

00:29:58.809 --> 00:30:01.480
Yeah, we're trying.

00:29:58.809 --> 00:32:04.720
Tim, yeah. I mean, that's, that's our that's our goal as well. We, you know, we really focus on a couple of things. We try to provide a really clear and tech supportive process to make that efficient and transparent for people we are willing to support early on in the deal. We know a lot of the CNI contractors that that we work with on a regular basis, they are out talking to customers, and they need to provide, they need to provide a number on this tax credit transfer to these customers in order to sell the deal. And so that's hard to get people to engage today in terms of what that pricing will be. And we're, you know, we've had enough conversations and experience to really give them guidance that we feel comfortable, that we can deliver on for them, so that way, their reputation isn't at stake with the customer. We, you know, help to couple other ways, like something we've seen a couple times, Tim is we've seen a contractor build a project for a customer, and that contractor is profitable, and they actually are buying the credit. Buying the credit back from their customer. And what both of those parties want is somebody to just kind of oversee the deal and be a trusted third party that can provide the documentation help them make sure they're not putting in any footfalls to do that, but that's been another place that we've gotten pulled into a couple times by contractors who are looking to buy the credits back from a customer they already built the project on, and they've gotten agreed upon price and everything. They just need some support and professionalism in terms of making that happen. So those, those are a couple of ways where we're always working with, you know, trying to find cost effective experts to help do some of these activities that the buyers need in order to get comfortable with the credits and so trying to find, you know, work with an attorney who can write an opinion, opposed to having to go down the insurance route that is able to help give some buyers comfort on some of these smaller deals. So that's just a high level overview of some of the things we're doing, trying to make this efficient and effective for

00:32:04.720 --> 00:32:36.279
people, but basically, we solar professionals, as things stand today, should absolutely lean into the ITC, no matter the scenario now, whether it's for Profit, non profit, tax liability, no tax liability, because this transfer makes it like somebody can use the tax credits if it's, if it's a sizable project, I mean, medium scale, C and I right and up, yeah,

00:32:36.609 --> 00:32:39.789
yeah, absolutely.

00:32:36.609 --> 00:32:39.789
It's, should be leaning into it.

00:32:39.789 --> 00:33:24.130
There's options, right? It's now we're talking about degrees of refinement of how efficient, you know, this, this, the project can be, but there's a, there's a pathway forward to it. Now, I'll caveat that Tim with, you know, still a company that looks like they're going to go bankrupt in two years isn't going to be able to sell their credit, because everyone's going to be worried about the credit getting recaptured, so there's still some counterparty quality that needs to exist. You don't need a 20 year PPA here, but you need confidence that you'll be around for five years. So I think that's important, but people should be leaning into it. It's a great tool and a really nice feature for small and medium sized CNI projects.

00:33:24.430 --> 00:33:28.900
So is audited, having audited financials an absolute must?

00:33:29.289 --> 00:34:04.809
No, no, no, definitely not. I mean, ideally you want audited financials, but a lot of these small and medium sized CNI companies don't have them. So then you're looking at, do you have, like, are they professional financials, or are you getting an Excel sheet from, you know, somebody in the company? So trying to understand what level their financials are, usually, you can also augment that with tax returns and understand, you know what, what they've reported to the government. And you know their schedules in there that report their assets and liabilities.

00:34:00.819 --> 00:34:17.199
So, yeah. I mean, these are, these are degrees of comfort that you know ultimately go the buyers in terms of how confident they feel about a recapture event happening eventually. So all things we can assess but audited aren't, aren't a must by any means

00:34:18.010 --> 00:34:25.360
cool. Well, in our last couple of minutes mark, what else should our listeners know about the ITC transfer that we may not have touched on so far?

00:34:27.849 --> 00:34:55.090
It's a good question. Tim, I think we've touched on most of it. To be honest, there's obviously a lot more depth we can go into, but I don't think that that really makes sense here. Happy to talk with anyone who's interested in selling a tax credit. I know Tim, it came to me a number of people think that if they haven't sold the tax credit by the end of 2024 they can't sell it because that was the year the project was placed in service.

00:34:52.239 --> 00:35:15.550
So in the same year it was placed in service, that's not the case, right? You You have up until you file your tax return or. And as the entity who is who owns and controls that system to sell the tax credit. And so for, you know, most corporates, they have a March 15 deadline. Most of them extend to September 15.

00:35:11.650 --> 00:36:11.500
And so generally, for projects that were built and turned on in 2024 you have until, you know, mid September to sell those tax credits to somebody, and you need to do so with somebody who is going to buy those tax credits and is also hasn't filed for their tax return yet. So I think that's probably the biggest thing that people should be aware of. The other one is, while this isn't super complicated of a transaction, it does take time. You can't agree to sell your tax credit and get paid. You know, a week after cod happens, you have to go through a process to register with the IRS, which back in mid or kind of q3 q4 of 2024, this was taking like, eight weeks. You can't file for that until it's turned on. Then you have to wait eight weeks for the IRS to give you a registration number, and only then can you actually, you know, transfer your tax credits and get paid. So those are the two things I think, that'll we haven't touched on that are worth the listeners knowing.

00:36:12.760 --> 00:36:40.539
Great. Well, check out all of our content at cleanpowerhour.com, like I said, I'll put a link to our most recent interview in those in this week's show notes, and give us a rating and review on Apple and Spotify. Please right now give us a four star rating and review on Apple or Spotify. Tell a friend about the show and reach out to me on LinkedIn. I love hearing from my listeners.

00:36:37.119 --> 00:36:44.980
You can also contact me through the website, cleanpowerhour.com, Mark, how can our listeners find you?

00:36:46.000 --> 00:37:04.619
You can find me at most conferences, and you can find me through email. Mark, M, A, R, C, at conductor, dot solar or reach out to our website. And that's probably the the best way you can find me in Cincinnati, Ohio, if you happen to be happening in my neck of the woods too.

00:37:05.519 --> 00:37:19.440
Yeah, I'll see you hopefully in Boston at re plus northeast. This will this interview will drop prior to that. So looking forward to that. And with that, I'm Tim Montague, let's grow solar and storage. Thanks so much. Mark Palmer, Thanks, Tim. You.

Demystifying Solar Tax Credit Transfers with Marc Palmer, Conductor Solar | EP258

Listen On

Recent Episodes