- Carbon reduction/energy efficiency
Transcription:
David Erdman (00:10):
And welcome to breakout session number three on the IRA and tax credit incentives. We have a lot of material to cover in 40 minutes, so we will get going. First, I'd like to have my fellow panelists introduce themselves and highlight what they do in respect to the IRA process as how they help out clients or go through the process themselves. So I'll start with Carol.
Carol L. Lew (00:34):
Hi, I'm Carol Lew. I'm a Partner with Stradling Yocca. I'm a Specialist in the Tax Law. I am currently serving on the IRS's Electronic Tax Advisory Committee, which provides a report to Congress with respect to tax administration. And I previously chaired the IRS's IRSAC committee, which provides a wide range of tax advice to the IRS Commissioner. With respect to the IRA, I currently represent state and local governments with respect to the tax issues that come up with respect to tax credits and applying and filing for those tax credits.
Dennis Kauffman (01:19):
Good afternoon. My name is Dennis Kauffman. I'm the Assistant City Manager and CFO for the City of Roseville, California. And I'm here to give you experience from an issuer standpoint. We filed our tax return this year for the first time, and we're waiting patiently for the IRS to send us a very large check. And so I'm here to share a little bit about our experience.
David Erdman (01:42):
Thank you. And my name's Dave Erdman. I'm a Managing Director of Baker Tilly Municipal Advisors. We help our clients go through the process with the planning, authorization, execution, and receipt of the funds. We are a registered municipal advisor and can help our communities in serving that role in receiving these tax credits. Before joining Baker Till Municipal Advisors, I was a longtime bureaucrat at the state of Wisconsin. So understand from an issue's perspective that sometimes pursuing these tax credits sounds easy, but you also have to balance that with the process that exists through bureaucracy. So with that, we'll get going. For those that have not heard about the IRA and the tax credits, the Inflation Reduction Act is something that was authorized in August of 2022. It's a huge program and it has changed how a lot of communities can focus on energy projects. And the key thing we're going to highlight today is just the tax credits.
(02:38):
There's 70 different tax credits and different programs underneath the Inflation Reduction Act. If we were going to cover all those, we would need 40 hours rather than 40 minutes. So really just going to focus in on the tax credit part of it that most communities like Dennis are aware of and are planning for and receiving credits here shortly. So we have some questions. We'll have a dialogue here. We have some time at the end for questions from the audience. If you hear something you want to discuss it as we're going around here, feel free to jump up and go to the microphone. As you've heard from prior people, you can see us, it's hard to see you do to the lights. So definitely stand up and go to the microphone if you have a question. We'd greatly appreciate that. So the first question, as I mentioned, the IRA has celebrated a second anniversary since it was passed in August of 2022. Generally want the panelists just to discuss away from the details of the direct pay, tax, credit, preregistration and actual filing process. But in general, what in the IRA has worked well and what hasn't worked well? And Carol, I think we'll start with you.
Carol L. Lew (03:43):
Okay. So I'm going to give you a little bit of my experience with representing state and local government over the last few years with respect to the IRA. It is deceptively simple. It's a very complex set of internal revenue code provisions, but I can't overstate this enough for state, local government. This is free money. You should be taking advantage of it, applying for it, doing things to make sure you qualify for it. Otherwise you're just leaving cash on the table. A couple of things that we've discovered over the last couple years. So the program had a little bit of a slow rollout out state local government was aware of this, but has been finding its way as to what that they would do in connection with green projects and what types of things would they be able to do to avail themselves of tax credits.
(04:52):
So oftentimes I would encounter over the last few years, state and local governments that had already begun the process because for a large capital facility, there's a long lead time on most of those projects. Suddenly they'd hear, for example, wait a second, maybe that biogas project that I've been working on for the last several years, having it be designed, in fact, I may have just entered into a contract already. I just heard it might be a subject to an IRA tax credit. And what we're discovering is because of the rollout of this, this is not an infrequent occurrence. So some of the issues we've discovered is that the contracts might've already been let. We may need to go back into the contracts, have a discussion with the vendors in certain provisions into the contract, which are necessary to comply with internal revenue code requirements and analyze the project, A project that has already been through many, many different phases through design, for example.
(06:07):
So that's one issue. So contracts may need to be amended. Another thing you'll discover about this area is Congress wanted to do certain things with respect to green energy. They inserted things in to affect behavior. So two of the areas that they did this with, one we call the PWA requirements, they want state and local government. If you're going to get one of these tax credits, which can be quite big, it could be 30% of your project, 40% of your project, perhaps 50% of your project, imagine that getting a tax credit with respect to it, they want you to use prevailing wage and higher, a certain number of registered, a print of apprentices from a registered apprenticeship program. So one of the first things I started hearing when we got into this area was, oh, that's not a problem with state and local government. In California, we always pay prevailing wage, but there are federal restrictions on prevailing wage.
(07:15):
This is sam.gov. This needs to be looked at by a professional. It isn't necessarily just state law prevailing wage. Another thing I discovered was state local government is used to using apprentices in their program, but once again, this is a federal provision. There are federal detailed requirements on this, it needs to be looked at. And so what happens is we have to insert provisions into the contracts for the provision of the facility. Generally there's some things like EV vehicles you don't, but you have to put that into the contract and go through the requirements with your vendor. So in the last couple years, we were seeing a lot of contracts that had old language state law restrictions but didn't have the federal restrictions, which differ from state law. Pause do okay, other things. State and local government is now having to adjust itself to being a taxpayer, a brand new concept.
(08:29):
I was talking to Dennis about this. I've never been heard of being a taxpayer before, but as a taxpayer, you have to do things like select a tax year, which is relevant to you. You also need to back up what you're doing. You have to meet certain internal revenue code provisions because you may be getting a lot of money. Some of these tax credits I've seen, they could range from several hundred thousand dollars relating to a city perhaps that's buying a whole bunch of EV vehicles, putting in some charging stations to 30, 40, $50 million for certain types of facilities that qualify. For example, under the investment tax credit, when you file a tax return with the federal government asking for this type of money, you have to make sure you've backed it up with documentation about meeting various tax code restrictions. So you may be having to go and get appraisals.
(09:37):
For example, if party your facility is building on and improving an existing facility because of tax code restrictions, you may need to hire consultants. We've got David here because the standard in this area, which has come out of areas where we were dealing with for-profit corporations, large businesses, is that you need to have backup as to what you've spent on your particular facilities that you're applying for your credit. And it's complex. So most of the time you need some sort of an accountant type certificate to look and make sure, yes, checked you really did spend that money. Yes, it was for the right things. Going through your invoices and making sure that we're only counting the right costs. Very, very important to have your backup being that state local government is now a taxpayer, but they're getting the money.
(10:48):
A very key concept in this area that we've seen is that's new to state local government is the concept of beginning of construction. I can't tell you enough how important this concept beginning of construction is. Okay, state local government is used to beginning construction, but this is a tax law term of art. It has a very specific meaning and it is extremely important in this area. Why is it important? It's because this area is so complex. What Congress did is they put rules in place that certain types of credit are only available if you begin construction term of art at certain specific points in time. Other restrictions start phasing out or phasing in depending upon when you begin construction. So let's talk a little bit about that because this is new for state local government and it's very important. Let me give you an example of how important this is.
(11:58):
After 2024, the end of this year, there's a number of tax credits that you won't be able to avail yourself of unless you began construction before December 31st. So you've got to make sure if you're trying to get these credits, and some of them are very, very big, that you've actually met the code test for this beginning of construction means you've either spent 5% of the cost of your facility and there's detailed rules on what spend means in this context, or you've begun physical work of a substantial nature. Another term of art. Now we don't have enough time to go into detail about all of these code provisions, but these terms have very specific meaning. And if you have to meet one of these beginning construction deadlines, let's say by the end of this year, for example, biogas facilities and fuel cells roll off, we won't be able to get those unless the Internal Revenue Service interprets some code provisions that are going to become useful to us in the next year.
(13:24):
So you don't want to be stuck by not doing certain things and losing a substantial sum of money. Another key concept, you are now as a state and local government, A taxpayer. A taxpayer with an EIN, okay, you've been using that EIN for payroll, things like that. But now it has a different meaning when you apply for these credits, the IRS pays a lot of attention to your EIN. So you've got scope out everything that as a state local government you're doing with respect to these credits. What we're finding with large cities, for example, there'll be one group thinking about credits and applying with the IRS looking at certain issues. Let's say EV vehicles or charging stations. Then there'll be another department of the city that perhaps is looking at something else. State local government can be quite large with many employees. There has to be a coordination for applying for these credits. That's another thing that we've discovered. And a state local government, when you do apply, you have to know what kind of tax returns you have been filing, whether it's excise tax returns, payroll tax returns, 80 38 for our tax exempt bond financing. So there's been a little bit of getting used to in this area.
David Erdman (15:03):
Very good summary. Dennis, any thoughts from you as to what has worked well, what hasn't worked well since the IRA began in August of 2022?
Dennis Kauffman (15:12):
I've been sharing with a lot of finance folks at local governments that everyone should be looking into these tax credits because they're available for electric vehicles and just about every local government is buying electric vehicles. But the biggest thing for me that comes to mind when you talk about what's not going well is how complex it's, there's so many categories of credits that I think a lot of us in local government feel overwhelmed, and there's not great simplified information about what types of credits are out there, what are the timeframes related to them. And because of that, I think a lot of people are blinded by it. But I think what has gone well for us is the network of professionals that we work with on bond deals in other areas of our finance function. That has helped us through this process. And for us, we were very lucky.
(16:08):
We had planned a project for many years, a regional wastewater treatment plant expansion project, and we had started construction back in 2020 and completed construction in June of 2023. And so we had a project that has financing sources that were a mix of tax exempt bonds, but also federal and state funding sources, including loans. And because of the funding sources, we had to follow a lot of those federal rules and a lot of the prevailing wage rules. And so we were very fortunate that most of the compliance requirements we had met, we did have to go back and amend some contracts to make sure that we picked up the remaining requirements. But I think the process, working with consultants, working with our attorneys, because when we became aware that the project that we had just completed was eligible as a biogas project, and the reason it was eligible is because this wastewater treatment plant expansion project, we took the biogas from that project.
(17:13):
We used it to generate energy at our treatment plant, and we used that gas to fuel our fleet of garbage trucks. And so that project was planned to do all of that before we knew the tax credits were even available. So we had financed the whole thing, funded the whole thing with grants and loans and come to find out it was eligible for these credits. And we were hearing from some consultants an estimated dollar amount of how much credits might be available to us, and we were shocked. Free money, like you said. It actually actually turned out after working with professionals to be a lot larger sum of money that we were eligible for, once we became aware that our project might be eligible, I reached out to our bond attorneys at Jones Hall and they had an attorney in their firm who had worked on these clean energy credits with other industries before the IRA was passed, and they had gotten up to speed on the credit process for governments that the IRS was still in the process of rolling out, and they walked us through it. Carol talked about how you have to go back and check all of your records and go through all of your costs. Our lawyers recommended that we hire a national CPA firm that does a lot of this work, and they produce for us a cost segregation report.
(18:40):
They went through all of our project costs, working with our project manager and determined invoice by invoice, what costs would be eligible, what costs would not be eligible. And so just the whole process worked really well because we had a team of professionals to help us through the process.
David Erdman (18:59):
Yeah, no, thank you. And from my perspective, it is free money. You need to stress that. And as for what things worked well, I think there was a lot of good communication with draft rules to the finalization of the process. A lot of good feedback came from issuer groups and other consulting groups, professional service groups as to how to maybe make the rules and final rules better for the program that worked well. What didn't work well, we've mentioned a couple times here is the complexities. It is a complex program. I think one thing we're seeing already is that a government may have a project and say, oh, I went through this process. They get the tax credit this year. That process isn't going to likely work next year or two years because there's different provisions of the rule that changes with each year. So it's going to require some good planning, some good understanding of all the requirements as you go through projects.
(19:50):
And it's just not like a Xerox carbon that you can do the same thing for every project over the 10 years of the IRA. So it is complex, but there are professional services providers such as Carol and my firm that actually have developed outreach to help communities and public sector entities go through this process. From our firm perspective, these tax credits are not new. I mean, they're new for the public sector, but a lot of these tax credits, as Dennis mentioned through his law firm, have been around for 20 years. So a lot of firms do understand some of the complexities of his tax credits. It's just now applying it to the public sector and some of the rules and expectations and processes that we have to go through. So yeah, free money is the key buzzword to walk out of this session with. Now, speaking of free money and the actual process to receive the funds, we're at a point in time now where entities are following the forms that are needed in order to receive the funds. There's a pre-registration process. I think a lot of people that have had projects that have been substantially complete are very deep into that. Dennis, if you could maybe just start out and from the process you went through, things that you've learned that you can pass on to others.
Dennis Kauffman (20:59):
Yeah. Well, first of all, I would say start early. Whether you have a project that's in the middle of its life cycle or something that you are planning, there's so much to learn about this process because as governments, we are not used to being called taxpayers and filing income tax returns. And the first step in the process was pre-registration and the IRS had recently rolled that process out for us. And so it did involve identifying our tax year and providing a lot of information and being able to successfully preregister through the treasury department's new process. It worked well finally, but that was all new and it took time. And with some of these requirements, there are deadlines, and so you need to make sure you're working with your consultants with plenty of advance planning to make sure that you're meeting those deadlines for the pre-registration process and then filing the tax returns, getting your team of consultants on board early enough in the project and understanding what everybody's roles are, I think would be really important.
(22:10):
And then you both talked about the importance of collaboration within the government. We had this project run by one of our utility departments, and so working with that department and the project manager and some of the engineers over that project helped us early on. And then when the CPA firm got into the segregation report and figuring out which costs were eligible, we had several meetings with that project manager who maintained all the documentation to comply with all of the original funding sources. And with her help, our cost segregation report came together to support the credit that we were ultimately able to apply for. Then the final part about filing a tax return, we work for a government agency. I went to my boss, the city manager, and said, I need you to sign our income tax return. And he looked at me very funny, and so you have to prepare people for new processes, and this was new for us.
Carol L. Lew (23:16):
So talk a little bit about this pre-registration and then filing the tax return from the perspective of state and local government and what's going on right now in the country with respect to this. Okay, so just to peel back the curtain here a little bit, the pre-registration process is the IRS did I think a pretty good job at setting up a portal state and local government has to get into it a little bit to help out doing this pre-registration. It's really not that bad. It's nothing that anyone should be afraid of, but you do need to go through it with a professional. There's a few bumps and kinks to the IRS's system for pre-registration. As I said, one of the ones was just figuring out as a state local governmental unit, what returns you've already filed because you can get locked up in the system if you don't know the answer to that question or put the wrong question down own.
(24:23):
But the process is fairly simple, and the IRS has actually been pretty good about generating timely the registration number. So let's just talk about time. One thing I didn't talk earlier about was this concept of placed in service. Very key here. Along with that, beginning of construction, you have a tax year. The items of property that qualify that you place in service during that tax year, that's what triggers you getting a credit. So you have to keep track of this. So you have to select a tax year. A lot of state local governments are selecting a calendar year as their tax year, but you can select a fiscal year too.
(25:10):
Whenever you place in service that tax year, you have till the 15th day of the fifth month to file a tax return with the federal government. If you don't do that, you lose the credit. So really important to engage somebody to help you through this process so you don't lose it if you don't file things on time. You have to pre-register under the IRS portal allowing the IRS enough time to give you your registration numbers to be able to file your tax returns by that 15th day. If you're a calendar your taxpayer, that generally means you're going to be filing the tax return by May 15th this year, because the process was so new, the IRS gave everybody an automatic without having to file for an extension six month extension. That was for calendar year taxpayers. That's November 15th of this year for the 2023 year. You got to make sure you, this is new for state and local government.
(26:12):
You got to make sure you don't miss these deadlines because there's no special process to go back and collect the credit. If you miss the deadline, you have to send things by certified mail to make sure that the return is postmarked. This is like you're a corporate taxpayer filing things. I mean, there's some tricks here to this that have to be filed or you could wind up losing your credit, which is a substantial amount of money. The other thing that's difficult and interrupted me, but this last year, taxpayers state local government could file on paper. The IRS doesn't like paper filings very much because it causes employees to have to review things in service centers. There's more of a potential for errors takes longer. During the pandemic, there were a bunch of tax returns that were filed on paper that were built up because the IRSA tremendous amount of problems for several years.
(27:19):
So they don't like it, but they've allowed state local government to file on paper. But that's going to end. So you'll eventually have to file for these credits through an electronic process. So once again, very important to engage somebody who knows what they're doing in this area with respect to the portal, getting the registration numbers because you can get locked out of that system and filing tax returns correctly. And there's a potential 20% penalty if you apply for things and you're not qualified for them. So while this is an area with a lot of free money, it's something you should take seriously. When you hear Internal Revenue service, we always have to take that seriously and comply with the rules.
David Erdman (28:15):
All good points. And the key thing I think is planning. We started about planning the process for the begin construction, making a plan as to what tax year your substantial completion placed in services is going to happen and know what those deadlines are. That's a key thing. GFOA, the National League of Cities has both put out some guidance as to the IRA, the tax credit, this process, but every project's a little bit different. And having the resources that you can quickly go to get some additional help, some additional resources for unique projects is very important. What we are finding out is that more and more people now are talking about this, where people are coming forward to us saying, Hey, I have a project. I should be able to get a tax credit. Again, we've kind of reached near the end of that extended deadline that at some point here, unfortunately, and that could be one of the problems of the program, is just that the information has been slow getting out due to some of the delays in getting the regulations finalized. But there are certain deadline dates that are pretty strong that once you mess that deadline date, you're going to be able to look.
Carol L. Lew (29:17):
The other thing I would say in this area is just as for state and local government, this has been a process to get used to. And think about it, you might have projects that have been placed in service in 2023. That means in 2024 by the appropriate deadline, which this year for a calendar, your taxpayer would be November 15th, you file your tax return. But 2024, now you may also have projects, which means January you're going to have to be thinking again, oh my goodness, I've got to get back on that portal, get registration numbers and file tax returns for the projects placed in service in 2024. So state and local government is having to get used to this process of filing tax returns over and over again to avoid not leaving money on the table. On the IRS's side, they've had to get used to this process.
(30:19):
So Congress gave to the IRS a horrendously complicated set of code provisions. It's so bad that just take the investment tax credit, which includes facilities like biogas, which we talked about, which those very common off of a wastewater treatment plant, fuel cells, solar, very common in California, the best with the backup batteries, EV charging stations in low income areas, EV cars, just to name a few. There's even provisions for nuclear power plants. Okay. Broad range of green credits. The IRS has had to come up with guidance over the last couple years. It seems like almost every week there's something new that comes out in this area. Just to give you an idea of the complexity, just to deal with what Congress has given to the Internal Revenue Service. At the same time, they're having to now process these tax returns. So people like Dennis has sent them in.
(31:33):
They may be on paper because the software community hadn't had a chance to develop the electronic filing to deal with state local government at the appropriate time. Everybody has had to catch up in this process. The IRS service centers have had little bits of hiccup. They may have gotten some of those paper filed returns and bounced some of them inappropriately. But I will say one thing about it that the IRS has devoted a lot of resources to this area. They want to have the program be a success. They have helplines. There's email addresses, and so a little bit of patience right now to get your money, but they are working on it.
David Erdman (32:24):
Okay. We have about 10 minutes left. We'll try to sneak a couple other questions in and pivoting from some of the details of the IRA and the tax credits, just future planning of capital projects, and how do you plan for maybe sustainability, resiliency, anything that you've seen with your clients or yourself, Dennis, as to how you've changed because of the IRA and the tax credits that are out there?
Dennis Kauffman (32:50):
I know for us as we're looking at our capital improvement program, particularly our facilities, looking at any energy efficiency projects that maybe we may not have even considered until realizing that we have this potential funding source that might cover the incremental costs of doing something that is better for the environment.
Carol L. Lew (33:14):
Yeah, I've encountered state and local government that may have been considering and planning on doing a particular type of project and then discovering that this particular project did qualify for tax credits. So maybe 30, 40% getting a credit. And that has allowed them to perhaps accelerate or actually make the decision to go with a larger capacity that they really wanted, but they had been forced to scale back because of funding. So I've definitely seen that.
David Erdman (33:55):
And I think from my perspective, when the IRA first came out, I mean a lot of us went through the Build America bonds and the sequestration of the tax subsidy that we were supposed to get from those Babs that were issued in 2009, 2010. There's that hesitation or that concern that, Hey, this IRA has promised me some tax credits. How do I know I'm going to still get those? And there's tax credits that are direct pay and production tax credits that are paid off over a period of of time addressing that concern and planning for that. I mean, I think a lot of people have indicated that the way this is written, the tax credits shouldn't be subject to sequestration. But obviously when we issued Babs in 2009, 2010, we weren't planning on sequestration back then. So that's one thing I know that is in the back of people's minds.
(34:40):
As for how my clients have changed their planning process, we help some clients, again, with sustainability and resiliency, ESG, and we've seen a lot of people looking at the inflation reduction act to say, Hey, I want to do some more sustainable projects in my community. Solar, putting solar on top of park shelters, putting solars on top of jails, fire stations, et cetera, is a way for them to help finance some of their sustainability and resiliency efforts is planning for receipt of those tax credits in order to help leverage their plans and sustainability and resiliency. So got five minutes left. I don't want to open it up for questions to the audience here, but the last question I have is the IRA is a 10 year program. We're at year two, so we have eight years in front of us. Just any questions or concerns that panelists have about the future of the IRA?
Carol L. Lew (35:31):
One of the things I would say is after the end of next year, there's going to be some sort of tax reform. Right now in Congress, staff is working on both sides on analyzing various tax provisions, the individual income tax rates, those provisions along with assault provision are going to expire. That's going to necessitate some sort of tax bill regardless of who the administration is. When people in Congress start looking at tax reform, oftentimes they look at programs that provide money. And so there's always a danger that they might try to cut back on things like green energy programs, depending upon who's in Congress, the administration, what the priorities are, what other things that Congress wants to do. So that's the only thing I would say right now about that a little up in the air. But some of these provisions over time, when you look at them, for example, the investment tax credit, which is very important for state, local government as far as providing larger sums of money for facilities that start construction after a certain point in about another year, you have to comply with domestic content, so you're not going to get the credit.
(37:12):
So domestic content restrictions for certain things like solar, those have been hard to comply with. So these provisions are very, very helpful right now. But there's a little bit of a question mark about what will we have in the next year, two, three years, four years, with respect to this program.
Dennis Kauffman (37:42):
I would just add to that that we live in California and there are always new mandates coming that affect the types of projects we have to do. And these tax credits could be part of the funding sources for projects that we see in the next decade based on new mandates.
David Erdman (38:01):
Yeah, no, I agree with Carol. I think the biggest concern that I have is just the funding next year's discussions on the tax bill. I mean, we've heard a couple of times at this conference already, the concern about losing tax exemption as a result of these discussions on the tax bill tax exemption, this game changing program that provides free money for energy projects IIJA and the funds that remaining for that. I mean, where does the United States Congress and whoever's elected to be president, where do they stop looking at governments in order to finance some of the changes that are needed in order to finance the 2025 tax issues?
(38:39):
Hopefully smarter people will prevail and we won't lose everything that's been thrown on the table here. But as for particulars on the IRA, I mean the one thing I also hope happens is you've heard a lot here about process and dates and so forth. Hopefully after governments go through a couple of these projects, they get into a pretty good sequence where they know how to plan, they know how to understand the program, they know how to position their project to best take advantage of those task credits, and they know how to execute, and hopefully it'll be a sequence they'll get used to successfully for the length of the program. So with that, we have two minutes left for questions. I think we have questions before moving.
Audience Member 1 (39:24):
I was just going to ask a quick question. Could you just talk on the impacts of using tax exempt financing in relation to, or the impacts to the credit of using tax exempt financing on a project?
Carol L. Lew (39:35):
Okay, so that's the good news with this, you can definitely leverage tax and financing and grants. Talk a little bit about that too. But if you use tax exempt financing, and I'm generalizing here, the rules are complex, but there could potentially be a 15% deduction of your credit. It's not as bad as you think. So you basically calculate the whole credit and then you take 15% off of that. The reason Congress did that is they viewed it sort of like double dipping because you're both getting the benefits of the tax exempt interest rate and you're getting a credit, but it's actually a pretty good deal that Congress did this. This is a very favorable code provision that you only have a 15% deduction, which you could try to do for planning is determine where you're going to allocate the tax exempt bond proceeds as compared to all of your projects, and which ones are the ones that are subject to the credit, because usually it's not everything.
(40:40):
And see if you can avoid getting some of these deductions. So there's a lot of, I'm going to use the word game here, gamesmanship, but the credits build. There's stacking blocks if you satisfy different requirements. And then there's also phase outs and deductions if you do certain other things. And so that's why it's very important to go through this with professionals. So you get the biggest credit you possibly can. You also can get grants, believe it or not, but you've got to make sure the combination of the amount of grant money you get, plus your total amount of your credit, can't exceed the overall cost of your facility that's subject to the credit. Okay. So there's lots of ways to combine things here that Congress have given us. It's very favorable.
David Erdman (41:32):
I think early discussion with your professional service team, especially bond council in that area, is important. As we highlighted that you're not going to get this tax credit until the actual project's placed in the service. So most likely you've gone through and done some long-term financing already for that and how you can apply that tax credit proceeds. Sometimes different bond council firms have different opinions on. So it's important to include your bond council firm upfront as you're looking at that. One more question. We're past time, but we'll never say no to questions.
Audience Member 2 (42:01):
Sure. So this is a question for Dennis. A number of the issuers that we work with who are looking at projects that are already complete that has an impact on the tax year that they choose. Were you able to choose your fiscal year as your tax year? Did you choose a different tax year as a result of looking back and if it was different than your fiscal year? Have there been any issues that you've encountered as a result of that that are worth talking about?
Dennis Kauffman (42:24):
No. We have a June 30th fiscal year and we selected a calendar year and it did not cause us any issues. No problems. Good question.
Carol L. Lew (42:34):
That's a great question. A lot of state and local government have selected calendar years because the tax credit started for facilities placed in service January 1 of 23. So to pick up everything, they might want it to maximize it and do a calendar year, but it's a really important question to discuss the pros and cons with your advisor.
David Erdman (43:06):
Well, thank you everybody for spending this afternoon with us to talk about the IRA and tax credits. Yes, thank you.