Hello, and welcome to The Unique CPA with your host, Randy Crabtree. We are committed to creating a thriving community of accounting professionals who are physically and mentally healthy, fulfilled, and energized by their work. Our ultimate goal is to elevate the reputation of the accounting profession and vastly improve the lives of those in it. The Unique CPA is brought to you by Tri-Merit, the specialty tax professionals.
Today on The Unique CPA Podcast, we're diving into something that's both impactful and inspiring: how not-for-profit organizations are tapping into renewable energy tax incentives to fund projects that strengthen communities. My guest, Barry Devine, has spent over 20 years in the specialty tax incentive space from R&D tax credits to 179D, 45L Cost Segregation, and the often maligned, but it was fun while it lasted, Employee Retention Credit.
Barry and I did a, uh, a podcast on this back in 21. He and I got super excited on this. Had a lot of fun. Well, until, uh, some bad apples came in and started, uh, ruining the reputation of the play retention credit. But now Barry's spending his time focusing on the renewable energy tax credits.
And honestly, we'll talk about this, but about, and I'm probably stealing this thunder, but about 60% of our clients that have been taking advantage of the renewable energy tax credit have been nonprofits. And that's why we're gonna discuss this today. And besides digging into this, I'm hoping we have a little fun around along the way before I let Barry speak.
He and I actually just recorded a webinar today on a similar topic, and in the intro, I, I talked about how I met Barry in, uh September of 2006, so we're almost 19 years ago, Barry, we joke that Barry was working in the mail room at an R&D tax credit company, a place that I went and spent a few months at before I decided to start Tri-Merit. But I've known Barry quite a while and we joke, not even a joke, Barry taught me everything I know about RD tax credit, Barry. Welcome back to the show.
Thank you for having me back, Randy. And I think, I think they're actually both true. We were talking about RD and I was working in the mail room, so there you go. Here I am 19 years later. Um, and, uh, but I actually, to get serious for a minute, I remember. Back then being super impressed because you were working full-time and working on your master's, I think full-time at the same time. Yeah. MBA. Yeah. That's crazy.
Um, yeah, that was, that was interesting 'cause I was gonna, in the MBA program going for operations management, project management, so learning about budget and operating levels and supply chain and all this stuff. And then. Going and walking the manufacturing floor for my RD clients. So it was, uh, it was definitely a whole new world back then for me and learning quickly. So that, I mean, it's been a fun industry, I think. You probably believe so. Yes. But I've, I'm old. I've been around.
I just turned 63 on Friday. I've been around a while. I've done quite a few things, but I don't think I've ever had more fun than I have had in the, uh, niche business of, of specialty tax. I wanna go back to employee retention credit for a second, because you and I, yeah, we pretty much started that program from scratch, the service line, and I would say you probably did, because I remember talking about it and I was getting super excited about it.
I was educating on it, but I didn't think we had the ability to do it in house. And you were adamant about the fact. Mm-hmm. That this has to be done in-house. We cannot outsource this. And I remember the conversation was, well, if you wanna do it, build out the credit model and we'll get it going. And I think that was a Friday, and by Monday I think you had the program up and running. So I did. Yeah. And the reason I brought that up is because that was super exciting.
And I remember one of the very, and you probably remember this, one of the very first clients we ever worked on. Was a nonprofit. Mm-hmm. And it was an organization that supported individuals with autism and they were like completely shut down during the pandemic, and I don't remember the numbers, but I think it was two to $300,000 that we were able to put back into this organization through the employer retention credit that they would then be able to help to invest back in, to help these kids.
It was that. I literally cried when we did. Yeah. I just got goosebumps remembering that client. And you know, you wanna take care of your clients. And then even now, if there's any audits or anything else, that's why bring it in-house is really the only way to go. If you're gonna offer audit representation, do it right. Be the leaders in the industry, you know, be the ones actually following the laws. And so now we're still helping those clients to make sure they're where they need to be.
But just funny saying, Hey, build this in-house. So we had ERC and all the knowhow and the in and like bring it in-house and how to do it. Now the ERC kind of going to RETC, renewable energy tax credit. It's a lot of the same administrative work. And then again, reaching those in clients. Man, I did get goosebumps when you mentioned that one. 'cause that was a pretty awesome way to start that program. And I, I swear, I think that might have been our first call. Yeah, it was.
And, and you and me and Danny. I think were all on that call. And I remember the, the two women, I can like picture them right now. Yep. On that zoom call that we had. And so the reason I brought that up is because now. That passion that you showed there is flowing through into the renewable energy Again, where you said, you told me, but I said at the beginning, 60% of what we've been doing is that for nonprofits.
So let's talk about the, you know, hey, this whole journey, you've had R&D and all these different services and what's changed now? What's new? So how did you get super excited about renewable energy and then how did that delve into the nonprofit space? I didn't really think about it until you mentioned ERC, because ERC was probably the stepping stone or the precursor to actually even think about doing renewable energy tax credits and the renewable energy space.
I was thinking it's the first time I dealt with not-for-profits, but now that you remind me, we had a lot of not-for-profits with with ERC, so. It's not really that new, but I mean to back up a little bit, right? Yeah. Like we've both made our careers on the RD tax credit, right? My beloved, like I love the RD tax credit. My favorite story is that my very first study I flew to San Diego, had no idea where I was going or what I was doing, right?
I got hired to work in the mail room, don't forget, and like we sew up at Taylor Guitars and Bob Taylor comes out and is like, Hey, you want a tourist? See how these guitars are made? Like. So for the last, you know, 20 years of seeing how things are made, what's new product, a process, helping a mom and pop shop save money on taxes to hire more people, going into like helping startups, like that was the feel good side of the RD tax credit. And then of course the ERC transition.
With helping the individuals that support autism and then R&D. Unfortunately, the 1 74 amortization had taken a hit and being in a tough spot, it was just time to shift and open up our service offerings and look for more. So that was the end of 2022 when the Inflation Reduction Act was signed. Not that I like, read all 900 pages immediately, but pretty much started looking into it and said, okay, this is going to have the same.
Path for the for-profits, of course, with being able to sell it, but also the not-for-profits to be able to take advantage to have cheaper energy or free energy or off the grid in order to meet their other goals. And maybe we can be a part of that. So I think that's. How that started. Yeah. Well, let's dig into that a little bit because there's been incentives out there in the past, even before the inflation reduction Act, but it, from a nonprofit standpoint, the incentives didn't exist.
I mean, you're, they're not a tax paying entity. It's not something that they could use a tax credit. How all of a sudden are we talking about tax credits? Yeah, with the nonprofit entity. Yeah. So we, we promised not to get technical on this call, so if I say 64, 17, you can just stop me, but like basically the power of the inflation reduction act was what you call maybe the last mile or the utilization of the tax credit. So on the RD side, right, you've always had to be a taxable entity.
To offset your tax or you don't use it, or they created it for, if you're a qualified small business, you can offset your payroll tax. So the monetization or the usability has always been a bit of an issue. So what the Inflation Reduction Act said was, you know, there's gonna be two paths. If you're a for-profit company, you're a taxpayer, you got two options, use the credit. Sell it to an unknown party.
If you're a not-for-profit entity, which they call applicable entities, which are also municipalities, tribal, you know, governments, government, instrumentalities of government, and any not-for-profit. If you fall under what they call applicable entity, it's refundable. It's literally, they call it elective pay, but it is a check back from the government for investment in renewable energy. Now all of a sudden, a not-for-profit.
Yep. For the first time probably is looking at these type of projects because the return on investment has shrunk so much because these credits can be. And now I'm getting technical. Yeah, but these credits can be anywhere from, what is it? It's 6% to as high as 70% of the in cost invested. 70%. Yeah. That's a percentage of the qualified capital spend too. Yep. Which is like all of your costs. So very lucrative credits.
Yeah. And then the benefit is not only just, hey, you know, hey, I just spent a million dollars and hey, I qualified for a 50% credit. I get $500,000 back. Okay, well I'm still out of pocket 500 grand, right? Well, yeah. And now as a nonprofit, I'm not gonna deduct that. It's not the preschool or anything, but the benefit is now.
I don't have energy costs going forward and that return on investment for these energy costs is probably shrunk to a point in time where, I mean, what do you think in that scenario? You know, five years you have more than break even, or what do you think? I mean, do you have an idea? Yeah, no, I mean, it depends on what technology they put in, how much energy it's producing. Yeah. How much. Their energy usage is, but like if you go geothermal is a very, it's a fantastic technology to use.
It's a low maintenance cost going forward. And heats and cools are building basically for free, just to boil it down. So if they're putting solar, it just depends on, you know, how many panels where they put it. But yeah, they can go off grid and lower. Operating costs.
So I think the Inflation reduction Act and you know, I mean there has been a lot of the last 25 years there's been a lot of changes in environmental legislation and tax credits and solar credits and, but they've just really never penciled out with some of these, like you were just saying, the ROI that. 20 years, 10 years, 15 years. So now if you're getting 30 to 50% paid back in the year, you install it, just shortens it down to a couple of years.
And then the not-for-profit goes the operational expenses. Drop either significantly or to zero. All right. All right. So, so I mentioned earlier, which probably could have been confusing, that we got a credit anywhere from six to as high as 70%. So what, you know, people may be listening to us go, okay, well yeah, 6%, I'm not gonna get excited about that. So, right. So what is really the, the way we get to a higher credit.
Yeah, so I mean six six is the minimum tax credit and a lot of people, if they say, oh, I get an ITC, which just very quickly, ITC is the investment tax credit, meaning I install this year. I want my credit right now, there is something called a PTC Production Tax Credit, which means I'm gonna generate electricity and sell it. And get a credit every year over the next 10 years. So most of what we're talking about are the ITC investment tax credit.
So in the industry you're gonna hear, oh, they're 30% tax credits. They are 30% tax credits if you started before a certain date, or if you're under one megawatt, you're 30% tax credit. Or if you meet what's called prevailing wage and apprenticeship requirements. So if you're over one megawatt and don't meet the prevailing wage, it's a 6% credit. But generally, we're talking about 30% credits. Anything under one megawatt is standard 30%, so we're starting at a baseline at 30% for most taxpayers.
For most taxpayers. Well, okay, and then, so then we said 70. So what are these kickers? What are these add-ons that we should know? Yeah, yeah, they're called, they're bonus adder or bonus credits, and there's three of them that are, the first one is called domestic content, right? So domestic manufacturing supply chain. We wanna support domestic manufacturing, right? We know from covid like the. Supply chain's not great, right? We, we saw it inaction.
So what we wanna do is a bipartisan, it just, they go a lot of different ways, but everybody wants domestic content, domestic manufacturing, domestic jobs. So the first one. It's 40% or there's some rules around it, but if the componentry of your project meet the domestic content requirements, you get a 10% adder and it's 10% of the whole qualified basis. So if you have a million dollars, 30% credit, it's not 10% of the credit. It's 10% of the cost. So now we're at 40%.
Yeah. So a million dollars, you have a $300,000 credit, now you have a $400,000 credit. Got it. The second one is if you're an energy community where you're located, if you're a brownfield, you know, coal mine closure, metropolitans, statistical areas, there's a few requirements. But if you're in an energy community, it's another 10, so now you're at five. That's the 50%, $500,000 credit. And then the third one is called low income community, in which you can get 10 or 20% depending on.
Where you're located and the type of organization, so that would go from 50, 60 to 70, so that would be the max credit of 70%, so extremely lucrative credits. And again, not just the credit, but now your energy cost are yes, either gone to zero or significantly shrunk. So you're continuing then to recoup this cost. So, you know, we talked about at the beginning. Okay, so that's the mechanics. We did do a little technical but not bad. We talked about the mechanics of it a little bit.
The 70% you had mentioned that it's the cost investment in the project and investment tax credit, ITC. But at the beginning we said, yeah, this has been rewarding too. 'cause we're helping nonprofits, we're seeing them doing some really cool things. And I know you have some pretty cool stories Yeah. Of nonprofits that you've seen us help so far. You wanna go into those? I do. I do. They're a little bit all over the board, but like.
Just the big pictures, like we work with churches, schools, municipalities, community centers, housing authority, so there's a lot of different areas we work with. Like for example, just before, the big example I wanna say is like a church in Texas who put up solar and. No idea what a 990 or 990-T is, or a tax credit. So just so over the moon that we're gonna help 'em get this credit and walk them through the whole process.
So church, solar panels and Tri-Merit has a value in that process, so that's really good. One of the examples I did wanna highlight was. The technology is geothermal and it's the Boys and Girls Club of Dane County in Wisconsin. And so they put in the multimillion dollar geothermal. So it's a geothermal heat pump, right? This is where you bore holes, drill into the ground, use the heat in the cool, in the winter, in the summer, and.
You can heat and cool your building basically for free using Wow, the temperature of the earth, right? So it's a tried and true technology. It's really good. But when we got into it, they also like, they just needed help with like, we don't know what qualifies, what do you mean there's a tax cut? How does all this work? So we did all the technical calculation and then come to find out like, look clean Wisconsin is like just a little. Coalition that helps not-for-profits install renewable energy.
So they did a highlight of this project and when you start looking at it, the Boys and Girls Club added a youth program. It's like a training center. They, they call it the training center for the next generation of trades people. So all the young kids are coming in and learning tools of the trade and about the industry. And what they did is they put a really big window. Into the mechanical room of the geothermal.
So these kids are learning and you just, you look through the window and I mean, there's pipes and tubes and pumps and Wow. You know, they're learning what it might be like to be architect, construction engineer, consultant. Maybe one or two of them will be interested in being a CPA and you know, like, hey, they don't have any numbers in there, but like they can just kind of see how this works and this tube goes into the ground and when it's cold, it grabs the heat. When it's hot, it cools.
And so it was just awesome because meeting with the Boys and Girls Club. They have a mission and for this new facility, their mission is training the next generation and having a community where youth can go and learn and like they don't know about tax credit. So to come in and just be that one part, you know, one cog in the wheel to make it all happen with the engineer and the construction and boys and girls club can now go do their mission and have this happen.
So it was, it was just kind of touching to see that, you know, we're at least part of that community in a, in a small way. Nice. Yeah, that's, it is rewarding. Yeah. And that's pretty cool. Yeah, I got a big smile, that's for sure. Yeah. One other example, just like a whole kind of different scenario, but there's a hospital up in Minnesota and they have this like really big operation, so there's a lot of like waste heat.
So they did a, like a combined heat and power system, which combined heat and power qualifies as well. So they're taking waste, heat, steam, and generating electricity, and they're actually selling it at a discount to the hospital next to them. So just like some of these renewable energy, you know, the technologies are like, well, you have a lot of heat leaving your building. Well, we can just.
Turn that into energy and plug it into your neighbor and like, so it's really kind of cool like seeing how a lot of these things work. And again, we're just one piece of the puzzle to come in and say, I can help you maximize your tax credit, walk you through the filing process, offer you audit representation in case the IRS ask questions. We're here. So again, it's just like similar to, you know, our R&D beloved RD tax credit. You get to see how. Engineering Right.
Can actually change the world for good. So, you know, it feels good to be part of it. Alright, so I've gotta bring this up. You know we're sitting here right now expecting a new tax bill sometime in 2025. Yeah. We're not sure what's gonna happen. We did see some executive orders come out earlier in the year where. It looked like maybe it was having an impact on these credits. I don't think it really is, but so where do we sit legislative wise? Where do we sit credit wise?
Is there, hey, we're all systems go? Yeah. Or, or what's happening right now? Yeah, so a few different answers for that. The first one is just to clarify that the ITCs, we talked about it, ITCs, PTCs. The elective paying the transferability, they're all tax code, right? They're all statutory, so they're there. So if you're moving dirt and you're placing in service this year, you're more than likely going to be good. Okay? Right. It to be something prospectively, hopefully.
So on that statutory side, we don't know what it'll take an act of Congress to change it. So. Maybe not. We don't know. On the funding side, right, the appropriations, the discretionary spending, a lot of that is on hold and under review. So we don't know. A lot of it is allocated, A lot of it's not. It's just hard to know right now and we'll see going forward. But I mean, the new administration's policy, like maybe they don't like climate change and greenhouse gas.
And this other stuff, but they do like energy, right? It's an all energy policy. They want the most affordable and fastest energy they can get of all forms. So I don't wanna say that I'm trolling Chris Wright, the head of DOE, but I, I do watch every time he speaks, I listen because I follow him on YouTube, which he's doing a great job, but he's from Colorado. He's a Colorado guy. And so one of the things.
We do or we look for, is like we do geothermal technology and we've gotten really good at calculating geothermal and. And like if you go to the DOE'S website and you go under geothermal, they have a geothermal office that just says, this is all the great things about geothermal. Not 'cause we drill into the ground, which is, you know, but like there's, like, for example, there's companies that are taking old oil rigs, right? And just converting them to geothermal energy pumps.
So they're trying to just repurpose, refurbish. So, I mean, I think. Since it's an all energy policy, a lot of the climate twist will go away, but I don't see the ITCs really going away. There might be a change, and also it's been kind of loosely I. Estimated that 75 to 80% of the growth or dollars from the Inflation reduction Act are in red states from the last election.
So there's gonna be constituents and people in, you know, there's gonna be big companies saying something and a lot of small businesses saying something, and the new administration's gonna listen, and I think it's gonna be good. So, yeah, that's what I'm hearing too. I think this will stay in maybe some small changes here and there, but there's a lot of money being invested. Yes, yes. In this at this point, that isn't being invested because there's some incentives as well.
Other reasons too, but out there. Yeah. So we don't know for sure where things are going, but things sound like a positive standpoint. There's money being invested, like we just said, but. There's some cool things going on out there too. I know you mentioned something to me about geothermal. You just talked about geothermal and some like collegiate competition around geothermal. What's that all about?
Yeah, so I mean really it's kind of bridging the gap between like, hey, here's, here's technology and then here's legislation, and then like here's maybe the the taxpayer ultimate user and like how do all these things come together? How do we actually install geothermal? So one of, there was a 2024 geothermal collegiate competition in. There's like a, you know, award money for first, second, third place, but Yep.
When I was reading it, what I found really interesting about it was there was two different competition tracks. One is the technical track, right? These teams, these colleges and the students that are learning about the technology and the resource assessment and the design and the geothermal system and all of that other stuff. But then the other track was called the policy track, which I thought was really interesting.
You know, so it's, it, I mean, it's focused on, you know, the analysis like for the regulatory environment, the economic assessment, workforce development analysis. Wow. Like when you, so even looking at the inflation reduction act, and I mean bipartisan support on workforce every, everybody's looking to create jobs, but just getting like, okay, here's a piece of legislation and here is some technology. Here's the colleges that want to compete on design, and then how does that get implemented?
Not only from a technology resource stance, but who's gonna build it? Where's it gonna go? How are we gonna get it? Is there a tax credit for that? Like, you know, and like how do we get buy-in? How do communities resource people? How do you. The workforce development was interesting because with the Inflation Reduction Act, one of the other programs we did was the 48 Cap C, the Advanced Manufacturing Energy Program.
And under it, you know, the applications required a big workforce development plan, so we also got to learn a lot about, okay. If you're gonna ask the government for this money and you're gonna go build this facility that's going to add to the supply chain. We like all of that, but we're gonna give you money if we know you're gonna find the people, hire the people, train the people, have them work under prevailing wage and apprenticeship requirements.
And so just seeing the implementation of it is also very cool on how that works. So that was very interesting. I thought just from. Why not get these students involved? They love the technology, they love the design of it, but soon as they graduate college and leave that bubble and get in the real world, guess what? Then they're gonna have to learn the politics of getting your, you know, geothermal unit.
You know, you gotta, you got the environmental agencies, you got the state regulators, you got permitting, like all these other things. And then the workforce community with the buy-in. So it's. It's been cool learning about all this other stuff too. Yep. Lot of intertwined things going intertwined. Yep, for sure. Alright, so obviously yes, everything, we see this whole intertwining of government and education and workforce and everything that you just mentioned out there.
Now being the Unique CPA Podcast, obviously we have people on the accounting, tax and accounting fields listening to this. What if they're, you know, thinking. Uh, I don't know what I'm supposed to do. Am I, do I need reach out to my nonprofits? How do I know if they're doing something? What's next steps? Should I have people? Yeah. You know, what's advice would you give to the advisors out there then?
Yeah. Well, interestingly enough, in all of our CPA channel partners, for the last 20 years, we've been knocking on the door of the tax department, right? So the not-for-profit and the audit side. They don't get Barry calling them after every tax season, but the main thing is one, if, I mean, if they can ask the question of. What are you doing? You don't really have to know what qualifies for renewable energy, but any improvement.
Yes, like any project they're working on, just pretend it qualifies because you bring it in and more than likely it will. But just asking, because like you've said, you don't always do tax planning with a not-for-profit entity, right? Right. Oh yeah. So one is having that first conversation, but. I would say the next steps, the most critical steps are timing. What is the placed in service date of the actual asset of the renewable energy asset? And then what is the tax return deadline?
Because when it comes to elective pay, you can't amend, you have to do it on open return. Wow. Okay. And yeah, and the government gave a six month extension, and that ended at the end of 2024. So if you do hear of a project. Immediate thing is when is it they call a PTO permission to operate or PIS placed in service? Like, when is this? You know, when's, when's it turned on? Turned on. Alright. That whenever it's turned on, it starts generating renewable energy is the date.
And then so that next year end. Is when they'll have to file the 990-T. So that would be the most critical. Yep. So just be aware of it. Yep. Talk to 'em, see if they're doing anything. Don't even ask if they're doing a renewable energy project. Are you doing any improvements on your property? Right. Because then we can see if they're renewable. Okay. So, so. If anybody is curious, wants to know more, has a question, where's the best place for them to reach out to you on LinkedIn? X?
Yeah. Not Facebook, but I guess I'm dating myself there. I am open for any phone call or discussion or even I, we just had a question the other day from a CPA that just, you know, the 3468 to 3800 to 990-T, something wasn't jiving and, and I we're just like, I. Said Nick. Nick is our CFO for the listeners, you know, Nick and I have just helped him with that answer and it just helped us learn more also right about right.
You know, like, don't forget now I can pass this on as the knowledge of getting there. So for us, I guess she reminded me that we did have some, you know, experience with not-for-profits, but still a lot of, a lot of these things are a little bit new. Because of, you know, some, there's lot not-for-profits that don't file 990s at all. So what do they do? Right? They can pick a year end and they need a 990-T.
So any questions anyone has, we would love to answer 'em or get in front of any either technical issue or administrative issue as well, just to help us get better. Yep. And at the Tri-Merit website there's contact information, uh mm-hmm to reach out. And so that'll get routed to Barry or the correct person if there is any questions. Barry, I don't wanna end the, the podcast without doing my normal question at the end of each podcast.
And you probably answered this before since you are a repeat guest. But hey, I can tell you're super passionate about tax credits and incentives. I've known this for almost 19 years now. But when you're not out working, doing this, what is your outside of work passions? What do you enjoy doing? Well, when it's snowing, I'm normally not in the office.
Um, I think, you know, that I, yes, love to ski, but also now that it's thawing out my actual, I could, my fishing pole is right here next to my desk. Uh. But any, anything in the mountains is where you'll find me. If it's snowing or a beautiful day, I'm more than likely skiing or in the river. So, all right. That's what, and is it a fly fishing rod next to you? It is a fly fishing rod. It's, that's what I figured. Nine foot five weight For anyone that knows. What that means.
That's what the standard Colorado tool is at nine five. Nice. We're recording on May 6th. I think this will be released pretty quick, so I will let people know that Barry will be speaking at Bridging the Gap conference. Yep. Talking about renewal, but energy tax credits. It is in Colorado, Denver, so maybe he'll even bring his nine foot five or whatever you just called it. Yeah. Fly Run. Yep. Then you could show other people that.
So, and if anybody wants any information on Bridging the Gap, it's BTG conference.com. We'll put that in the show notes. We'll have a great time there, and Barry will be one of our featured speakers in our tax track at the conference. So, Barry, thank you so much for, uh. The information you shared and the passion you showed on this, uh, renewable energy for nonprofits discussion. Yeah. Thank you so much for having me again, Randy. Thank you for joining us today on the unique CPA.
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