Tax Incentives: Saving Commercial Buildings Money and Emissions ft. Abby Massey (TaxTaker)

Taxes. Not exactly everyone’s favorite topic.

Tax incentives, however, can be very interesting, especially when it comes to saving money, energy and subsequent emissions in the commercial building space.

And today we have an absolute expert in this space, Abby Massey, to walk us through what these opportunities look like.

Abby is the Vice President of Energy Incentives at TaxTaker, a specialty tax incentives consulting firm headquartered in Austin, TX. Abby has her B.S. in Civil Engineering from Purdue University and is a Professional Engineer licensed in 47 states. As a LEED Accredited Professional, Abby is dedicated to sustainable building practices. Prior to tax consulting, Abby spent almost a decade specializing in commercial building design. Her experience now includes optimizing energy incentives for clients by leveraging her in-depth understanding of the Inflation Reduction Act and programs centered around real estate, energy efficiency, and the built environment. 

In this episode, we dive into the potential of tax incentives for businesses and individuals looking to implement energy-efficient practices, the types of incentives available, and Abby debunks a few common misconceptions about the space.

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[Host: Lauren Scott] I'm really excited for today's episode because we are springtime and with spring we often think of maybe not our favorite time of year, which is tax season, but today we have someone on the show who can definitely make this season a little bit more enjoyable, especially for those who are trying to work in the environmental impacts. Please so with that I would like to welcome Abby to the show.

[Guest: Abby Massey] Yes. Thanks, Lauren. Good to be here.

So I've noticed something over the past few years, and I will absolutely include myself in this camp: that when we talk about financial terms of any kind, we're almost hesitant to ask the basics because we feel like somehow we're supposed to know all of these different terms. So I'm going to take us all the way back to the very, very basic for today's conversation, which is: what is a tax incentive?

Sure. So, tax incentives are credits and deductions that are put into legislation in the actual IRS code to help incentivize certain actions. So, in particular, the incentives that I specialize in are incentives around energy efficiency, building sciences, real estate or renewable property.

And so that would be, let's say we are back at tax season. What would that look like? Is that a credit that someone could get back after or are they saving it at the source? Like where does that credit come in?

So, let's take one of the energy efficiency credits, for example: if you were to meet the requirements of this credit, essentially what a tax credit does is it reduces your taxes due when you file. So, if you were to place a project into service, maybe in your 2023 tax year, then you would then get a credit for that amount from whatever taxes you're owed. Now a deduction works a little bit differently. Deduction reduces your tax liability. So, whatever your ordinary business income is, that would be taxed, we would then reduce that down by a tax deduction, and both become helpful right there. They work a little bit differently, but both can reduce what you pay in taxes.

That's super helpful. And you were mentioning that you're specifically kind of in that energy space. For someone who's not deep in the space, how big or what is the scale of that industry? When we're talking about tax incentives, it could be specific to the US or maybe North America, but just for us to wrap our brains around as to how big of a market opportunity that really is.

There are so many tax incentives that are available. If you're familiar, the Inflation Reduction Act was passed in 2022 and it enhanced a whole lot of incentives centered around energy and real estate. They estimate that because of the Inflation Reduction Act, which is in place for another about 10 years, they expect there to be about 400 billion dollars of tax savings just around the energy efficiency space. There's other tax incentives available for many other things, but in specific, that bill alone is quite a bit of value to go back into the US economy.

That's super exciting. I didn't quite realize is that it was at that scale, so that is really exciting. And now that we've laid that groundwork at perhaps more of a market level, I would love to hear more about your work at TaxTaker and specifically, you know who are your customers on the day to day? Is it more on the corporate side as individuals? What does that look like?

Sure. So TaxTaker is a tax consulting firm. So, we partner with CPA's to help them with some of these very niche tax incentives. I'm the vice president of energy incentives and I'm actually professional engineer by background, so not a financial person. And the reason why that makes sense is because some of these incentives are very engineering technical in nature. So I provide all of that support so that a CPA can then put that on the return and understand exactly what's going on from the industries side of things, explaining how this renewable property works or the energy efficiency property works and then can easily translate that for a tax return. 

The types of clients that I work with are all sizes, so we work with some big corporations who have maybe large ESG goals and so that they can tie these incentives in with those. But even small companies or business owners who want to implement an energy efficient project, maybe install renewable property, we can help those folks as well. And as you can imagine, for a smaller business owner, some of these incentives can be really impactful.

And you mentioned that your organization includes both: what I think of as more the classic role that I would picture (accountants), but then you also have folks like yourself who are engineers. And you guys come together and you're able to explore state and federal level tax incentives, correct? What does that look like in your day-to-day then?

Yeah. So we do a ton of education and consulting upfront during projects. What that looks like is understanding the scope. Maybe somebody has an idea of what they want to implement and want to know what's available. So we educate, again, corporations, maybe small business owners, even design teams or contractors who are interested in helping their clients pursue some of these incentives. Once we educate, then we can help them understand, OK what value is available? How can we help you while you design and construct this project? And then at the back end, that's when we do the majority of our work to actually calculate the tax deduction, finalize that and then prepare the paperwork. So, it's a mix between actual doing the work and then consulting with all sorts of parties to help them understand even what's available, what incentives might even play together, like what federal incentives and state incentives could you take on the same project.

I love that collaborative approach, and I'd imagine that has such a positive impact. When we are talking about change management, certainly there are two approaches that we can take (and this is more at a psychological level I think, than necessarily just business), but you can take a carrot or you can take a stick approach. And so for the carrot, it's really encouraging behavior by rewarding it and then the stick is either encouraging specific behavior to avoid a penalty or penalizing bad behavior. So you have a little bit of those two approaches. 

With your work, it's definitely on that carrot side, which I love and I think it is maybe part of the narrative that's been missing when we're talking about having a positive environmental impact. So, what advantages do you think come with having that positive, that carrot approach? And then are there any limitations or bottlenecks that you also experience as part of that approach?

Yeah, that's a great question, Lauren. So, what I see being great about the incentive space is that we are helping building owners, companies, organizations actually implement these projects that may have been a budget hurdle before. Maybe they had a wish list that just exceeded what they can actually afford. These incentives can make those projects possible. So, understanding what's available and being able to pursue them may mean including more energy efficient equipment into their project that they originally wanted, but maybe couldn't have if they weren't going to look at these incentives. And so, I see that as a better needle mover of getting folks actually bought in to doing energy efficient projects and moving them forward quickly. 

I do understand the regulatory approach, but usually building owners are going to do the bare minimum, right? They're going to meet it at the bare minimum and that's it. So I see this is a great way of getting everybody involved and pushing towards these energy efficient renewable type projects more quickly, which is I think a great thing for the country, especially if we're going to charge towards, you know, having certain net zero or decarbonization goals in the future.

And as this is a world that maybe people are less familiar with, do you feel like there's maybe any kind of misconception that you would want to clarify on today's episode just to help clear the air for people to better understand what you're trying to do?

Yeah, there's a few. So, the first is that a firm like ours is a tax consulting firm, we're meant to partner with your CPA. And the reason why your CPA might not be educating you about these incentives is because they come with a ton of rules and regulations, they have a lot of technical things that require engineers to do the work on their behalf. So, we're meant to be a compliment. And there are reasons why your CPA's might not be talking about this as much, because it's not a part of the tax code that they're quite as familiar with. So don't be afraid to bring in another consultant. I mean, talk with your CPA. It's meant to be a partnership to help you pursue these incentives. 

But the other part that I think is a common misconception is that these are very hard to obtain. They really are not. They're pretty easy as long as you have a consultant who understands what needs to happen for you to be able to claim these incentives. So, get some education, talk to some folks in the space. These I think that will help everyone understand that these programs are meant to be used and that there's a lot of value tied to them.

 Maybe one misconception too and I'll be the one to admit - I think this is probably one I have -that I'd be nervous about going too far down a path perhaps during an election period or things like that. Does a change of administration necessarily have an impact on tax incentives which you mentioned for example the Inflation Reduction Act actually over a window of 10 years? Which is longer than most administrations. So what would that look like if you do have a change, whether it's at the state or federal level?

Yes, I get this question a lot and we are in an election year, so this is something that is top of mind for everybody. So the nice thing about some of these tax incentives, especially in the energy efficiency space, is that they're bipartisan supported. On one hand, you've got tax incentive, tax breaks for corporations or building owners. On the other hand, it's an energy efficiency type target, right? So we've got some bipartisan support there. Often times though, I do remind my clients or prospects that I'm speaking with that this is a law. The Inflation Reduction Act incentives, the way they're structured now are in place through the end of 2032. So, these rules will stay in place for a long time. If there was going to be a change, they would have to go through the same legislative approval process as any other bill or law. So, we would have to have approval from, you know, your House, your Senate, final sign off from the President. So, if we did see changes, we would all see them way ahead of actually being put into place. So, there should be no surprises here.

And you mentioned earlier that your customers range in all sizes. For listeners of The Resilience Report, we have entrepreneurs and then we also have business leaders with small to medium and even larger size organizations. But let's say this is something new for them, especially we're thinking maybe the small medium sized entrepreneurs. What would be the first step of kind of pursuing different tax incentives that are available to them?

I always tell everyone that education is key. These incentives, like I said, are complex and we often get guidance issued from the IRS even after these rules have been rolled out. So there might be guidance that helps us understand exactly how the IRS wants to implement it. They might have some clarification on rules. So not only is it complex, it changes. And so I think what's really important for anybody who's looking into these is: find some resources that are helpful, that can get you some of that initial education. Now, I don't think anybody needs to go read the IRS code. I'm sure you have plenty of other things to worry about, but find resources like the Department of Energy, they put on webinars all the time. The US GBC also puts on a lot of webinars and then companies like ours that focus on some of these specialty incentives. 

I post a lot on LinkedIn of important little facts tidbits. Maybe new guidance that's issued so that my network can stay in the know on what's going on in these incentives. And I think that's the easiest first step to take, so that when you're ready to take on a project, you have some folks to reach out, you understand basic rules about what these programs are and how they fit in, and you can start making choices on your projects that fit within the tax incentive space.

That education is key, and thank you for all that you do, generally for sharing the digestible content because I have tried to read a number of these and it's kind of legalese. It's hard to absorb. So, to have that higher level overview is certainly appreciated. So, thank you for all that you do there.

Of course, I'm always happy to do it. I know that everybody feels a little bit bombarded by the IRS code and so I'm happy to always put it in layman's terms for everybody.

And then on top of that, are you working on any projects in particular that you're really excited about and that you can share publicly? I know sometimes we have to be a little delicate about what we can share before things launch, but I would love to hear what you're working on that wakes you up and makes you excited in the morning right now.

Sure, sure. So we have a couple of projects right now that we're working with both nonprofits and with actual tax paying building owners. So right now, we're helping a designer pursue a tax deduction for doing an LED upgrade in a large hospital organization, and all parties are excited. The designers excited, the hospital organizations excited, and the results are looking really good. For that study, it looks like there's been significant energy efficiency upgrades because of the LED lighting. So that's a great project. 

Another one that we're working on is for a developer who is in the residential multifamily space: they're actually able to stack on several incentives together and are going to come out a few million in cash benefit as a result of their new construction project, which had some energy efficiency features included in it. So, we're very excited for both of those clients that we're working on right now as well as all of our other clients, but those two projects stick out as really great success stories that are implementing these new rules on the Inflation Reduction Act, which is wonderful.

And it's neat, too, that they're from such different vertical markets and they're able to pursue the same, I guess, end goal, that energy efficiency so that's great. And you mentioned doing a transition in your own career to where you are now from where you had more of that engineering background, which you're able to still pull from when you were doing that switch and maybe happened even earlier on. Was there a specific moment where you knew you wanted to be involved in at least some way sustainability within your professional journey?

Yes, I've always been interested. So, my original career was as a structural designer. I worked for an all-disciplines architecture firm and designed all sorts of commercial buildings. It was very early on that I was interested in the LEED program. I got my LEED accreditation and I just always been interested in the sustainability and energy efficiency space, even early on in my design career. So, what was really interesting is as my career evolved, I realized I really enjoyed working with clients. I liked consulting. And so this very niche space of tax incentives gave me everything that I like: I'm very passionate about the building industry, I get to still talk with people about their projects, I get to go see them, but then I also get to consult on the energy efficiency, how they can obtain some of these incentives as an incentive for that project. So, it's a great mix of everything I enjoy doing. I get to talk to a lot of other passionate people about sustainability too, so that's always fun.

Well, actually on that note, I do want to say every time I've seen you and you know, Abby and I have crossed paths on a number of different trade shows and events, and every time I've seen you, you're always so up and happy to be talking with everybody. How do you maintain that energy? Because definitely being in this space especially, I'm sure when you're dealing with different incentives that are very kind of over those long time frames, how do you keep your energy up so that you can keep on coming back to recommit to the work?

That's such a good question. I mean it's a great time being at all of the conferences and shows that are available for the construction and design space, but also for the sustainability and energy efficiency space. You're right, Lauren. We've seen each other a couple of times, which has been wonderful. And I really enjoyed talking to all the industry folks, but I think the most important thing is the balance of work and life. Even though I'm very passionate about work, I really like what I do. Work can be rewarding at times and it can be pretty difficult at times, so maintaining balance, making sure I'm resting, not spending all my time on the road is important for me because I have had a fulltime job and that's exhausting. But that that keeps me in the space keeps me energized and helpful and able to serve my clients better by having a little bit more of that balance as a first thought for my approach.

I completely echo that that going to see people is important, but not always being on the road is also important. If we do have listeners who are maybe thinking of a transition and admittedly in talking with a number of our listeners and hearing their feedback, a lot of people felt this transition maybe around the 2020 period of, you know, the pandemic and reevaluating getting involved more in values based organizations. If they're thinking of doing that transition, whether specifically to what you do or more just kind of aligning with your value set, do you have any tips or tricks that you would share with our audience?

Yeah, I think you know, everybody has maybe a desire or an idea of what they want their career to be. Maybe they are thinking I want to be in the sustainability space. And so, your first thought might be a sustainability consultant or whatever pops into your mind, maybe a designer. I think it's important to assess yourself what brings you joy in work. What are your interests and passions? Because there are so many different roles that you might not be thinking about in the industry that you want to serve. So, understanding what energizes you, where your skill set lies, and then kind of exploring in that industry what the different careers are will help you pinpoint, I think, why are you would best serve that industry and that space and hopefully really enjoy at the same time.

Well, I'm sure our listeners are going to want to hear more from you and from TaxTaker. If they do want to dive in a little bit deeper, where would you recommend they check out and I do want to make sure that they also check out your LinkedIn because the content you share is fantastic. So where would be those best starting places?

Yes. So, as you mentioned, LinkedIn is a great space. You can find me there. Abby Massey is my full name. TaxTaker.com is our website and we have all sorts of information there. We talk about the incentives that we provide which include Section 179D, cross segregation, Section 45L and the investment tax credit for renewable properties so you can find some information there. Plus we have a ton of content. So, there's all sorts of blog posts, guides, one page summaries about the incentives that we provide that you can download. And of course you can always reach out to us through the website to schedule a call if you'd like to learn more.

I really appreciate that. Maybe just one question popped into my mind too: I think TaxTaker and your work has really covered the US market. If we have listeners (and I know we do) in other markets maybe Canada or the UK, where would be the best place for them to check out? Can they still go to TaxTaker or maybe do you have other recommendations that they can just Google? What are the keywords that they're typing in to look up locally?

So, we have partners in the other areas of the world who help provide services for tax incentives as well. So, if you can't find someone, you're welcome to reach out to us. We can connect you with some of our industry partners that we know in Canada, other parts of the world. But yes, Googling “energy efficiency incentives” for Canada or whatever place that you are located is a great way to find other consultants similar to TaxTaker that can assist and there are plenty of them out there that specialize in this space.

I really appreciate it. Thank you so much; thank you for joining us today, making maybe a more complex topic, a little bit more accessible. I really appreciate it. And we do like to end every episode with the same question, which is what do you think it will take for businesses and leaders to be resilient going forward?

Such a good question. I think that for any businesses, it's important that leadership set the vision and mission for everybody else to follow it. Resiliency is important and if you've got a strong leader who is setting that vision and getting the leadership team on board to charge towards that goal, I think you'll see a lot of success. So, you know, I'm interested to see how that all fits into the energy efficiency space in the next few years. I think people are really starting to shift their minds and I'm excited to see where the industry goes.

Well, I'm so happy you're part of that conversation, certainly in guiding all of us. So, thank you, Abby. It's been such a joy talking to you today.

It's been great, Lauren. Thanks so much for having me and I hope we talk soon.