Frequently Asked Questions

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Companies

In general, a company must use tax credits to offset passive income. However, a company can use tax credits to offset active income if the company is:

(1) a C-corporation with more than five shareholders; or 

(2) a C-corporation with five or fewer shareholders who own at least 50% of the equity and materially participate in the business.

Individuals

Individuals can purchase tax credits to offset passive income.

Note: Tax credits typically cannot be used to offset portfolio income from dividends or capital gains.

A buyer can prepare for its first deal by taking the steps below.

1) Determine A Target Deal Size: Since a US taxpayer is generally allowed to reduce its federal income tax liability in a year by no more than 75% by using tax credits, buyers should forecast their federal tax liability in the coming years to determine a range of tax credit values that the buyer would be comfortable purchasing. Unused tax credits can be carried forward for 22 years.

2) Evaluate Preferences: Buyers should begin to determine if they have a preference regarding considerations such as tax credit type (e.g. PTC or ITC) and project technology type (e.g. wind, solar, or biomass).

3) Form An Internal Deal Team: Many internal deal teams consist of a company's CFO and tax expert. Buyers should begin internally discussing the benefits and risks of tax credit transfer deals. Once a deal is underway, outside counsel and consultants will join the deal team to complete the transaction.

On April 25, 2024 the IRS released final regulations which can be found here.

By conducting confirmatory due diligence before purchasing the tax credits, a buyer decreases the likelihood that it will need to file an indemnity claim against the seller after the sale if the IRS disallows the tax credits or reduces their value following an audit. The indemnity claim process can result in disputes between buyers and sellers that requires significant time, energy, and costs from both parties before a resolution is reached. 

Our tax equity underwriting skillset allows us to assume both roles impactfully. Since each deal is unique, we are flexible regarding engagement scope and can identify a deal counterparty and/or act as the deal execution lead and underwriter for the client. 

We typically engage on deals that include a tax credit value of at least $3 million. There is no maximum deal size for our engagements.

An avid tennis player, Alex Gupta named the company after a situation that arises in the sport. In tennis, a "break point" is a receiving player's chance to outplay the server and win the game. Break Point Energy is a celebration of the clean energy that will be generated in the coming years to reduce the momentum of climate change and enable the United States to meet its goal of 100% carbon free power generation by 2035.