Spotlight on: Michelle Sadeghy, Director, energy tax credits & incentives, Kaufman Rossin

In an interview with Invest:, Michelle Sadeghy, tax credits and incentives manager at Kaufman Rossin, discussed the rationale behind expanding the tax credits and incentives practice at the firm, the opportunities behind the push for sustainability, energy efficiency, and resiliency nationwide as well as in Palm Beach, and the differing talent pool firms are beginning to leverage. Sadeghy talked about challenges, the macro landscape, and the outlook over the next two to three years for Kaufman Rossin and Palm Beach County as a whole.

Can you tell us about the rationale behind the firm’s tax credit and incentives practice expansion?

Kaufman Rossin’s tax credits and incentives practice has been serving clients for many years. The expansion of the practice, over time, has had two drivers: new or improved credits and incentives, and our mission to serve our clients. For example, we help clients claim the R&D tax credit, complete cost segregation studies to generate cash flow, or conduct reverse sales tax audits to make sure they haven’t overpaid.

The Inflation Reduction Act of 2022 enhanced the 179D Energy Efficient Commercial Building Deduction, a tax deduction incentivizing the investment in energy efficient commercial buildings that has been accessible for about a decade, but was consistently expiring. There wasn’t a lot of security in its future for teams and developers to get acquainted with the deduction and go after it. That changed with the Inflation Reduction Act when it was permanently codified and put into the tax code, so now we know that its future is secure.

The Inflation Reduction Act was a catalyst in getting more people to pay attention to these credits and deductions, aligning with the government’s intent to promote sustainability and tackle climate change. This is the biggest investment in climate in history by the federal government. These credits and deductions are tackling the built environment, which accounts for about 39% of greenhouse gas emissions. They codified 179D and made adjustments to ensure there is more money on the table. The 45L tax credit is another provision revamped by the Inflation Reduction Act which will deliver real benefits for the right type of project.

This practice has come to the forefront at Kaufman Rossin because the partner in charge of the entire credits and incentives team was seeing increased demand and opportunity to help our clients. Unlike others, we like the idea of being able to tackle this specialized area in-house versus having to bring in a third party or subcontractor. With the Inflation Reduction Act, you have to get involved early in the design of buildings and act as a consultant to these projects to ensure they qualify for the deductions. By doing so, you’re making incremental changes to their projects to make them more energy efficient.

What are the overall opportunities for firms such as Kaufman Rossin toward sustainability, energy efficiency, and resilience?

Kaufman Rossin has been around for sixty years and is the top independent accounting and consulting firm in the state. The reputation we’ve built with clients, especially in real estate, positions Kaufman Rossin to be a leader within this space. That foundation of trust means we can help our real estate clients create a better product. Coming in at an earlier stage allows us to help them create a better built environment in the South Florida region, which will tie in nicely to goals around energy efficiency and sustainability.

While there are many other providers offering this service, many of them are boutique firms that are only doing these credits and incentives. Without a full-service firm standing behind them, they aren’t able to serve the client’s broader needs.

How are CPA firms developing talent beyond traditional accounting and finance backgrounds?

CPA firms generally start with compliance services, add and expand consulting capabilities, and become true advisors. Tax credits and incentives is one of the areas we’ve expanded as we’ve become our clients’ consultants, in the financial space and beyond

Our services go way beyond traditional accounting and finance services, and not just in the area of energy tax credits. A few examples include our cybersecurity consulting, financial investigations, and regulatory consulting for banks and fintech companies. As we’ve developed these services, we’ve tapped into larger talent pools, hiring certified anti-money laundering specialists, programmers, certified fraud examiners, former law enforcement officials, and more. We’ve also taken advantage of technology to hire the most qualified candidates from around the country and around the world.

As a mechanical engineer, I bring in expertise on the design and construction of the built environment. It’s very niche. What I am doing is not going to apply to all our clients at Kaufman Rossin; it makes our real estate division stronger. It allows us to be true advisors. For me, this is exciting because I came from a world where I was strictly a design consultant. I was only working with architects and engineers to optimize their design – it was not for tax credits but other purposes such as funding, Green Building Certification, or the jurisdiction for which they were building it. Now in the world of tax, where design has formerly been an afterthought, the Inflation Reduction Act has brought design and environmental concerns to the forefront.

In the city of Miami or Miami Beach, for example, they require you have a Green Building Certification on your project. If you already need to hire a consultant to go after a Green Building Certification, you might as well align yourself with these tax credits and get these on the back end.

What challenges are your clients facing overall and how is Kaufman Rossin assisting them in mitigating the impact?

Like all businesses, our clients are facing some real challenges today. Let’s talk about three: attracting talent, protecting data, and maximizing tax strategy.

In areas like talent acquisition and changing customer profiles, the kind of work we’re doing with energy tax credits helps clients build the environmentally conscious reputation that customers and potential employees (particularly in younger generations) are looking to align with.

Cybersecurity is a real threat to any business, and our professionals help with information security risk assessments, assisting with business continuity planning, conducting phishing training and testing, developing systems of internal controls, and conducting full-scale compliance programs.

Another challenge is navigating the ever-evolving landscape of guidance from the IRS. Whether for energy tax credits, international tax concerns, or questions about where multi-state businesses need to file, interpreting tax law is a challenge we help clients manage.

How is the current macro landscape impacting your clients and how have they shifted their preferences, priorities, and concerns?

In real estate, the past year was tighter in terms of development in South Florida. Because financing has become increasingly harder to come by, developers are looking for more creative solutions to finance their projects. There are some creative green financing solutions available that require some documentation to prove they are adhering to certain certifications or codes. When money was free and projects were popping up overnight, it was more difficult to make the case for some of these green financing solutions. Now, people are listening more due to the more restricted financing environment.

In South Florida, there is a need to act on resilience with sea levels rising and flooding. People are trying to tackle the resilience of their buildings proactively as they see how expensive it is to tackle retroactively. Sometimes resilience strategies can align nicely with energy efficiency. I hope that it continues to evolve moving forward.

What is your outlook for the next two to three years at Kaufman Rossin and the Tri-County area?

In our real estate practice, we will continue to evolve and prioritize energy efficient tax credits and incentives for our commercial projects. I see us stepping into the consultant role more and more to help ensure projects are qualifying for these incentives without having to do anything retroactively. We want to align those credits and incentives with local requirements and Green Building Certifications. I see us serving as a green building consultant to these projects and capitalizing on the efficiencies.

In South Florida, we are behind the rest of the nation in terms of our energy codes and the enforcement of them, but it is changing. The resiliency offices in Broward, Miami-Dade and Palm Beach County are tackling it slowly. The city of Boca Raton Green Building Ordinance is looking to mimic others in the nation. I see the market continuing to catch up over the next three years. These niche services will become a key element at Kaufman Rossin.

Read the full article on Capital Analytics Associates.

Michelle Sadeghy is a Energy Tax Credits & Incentives Director at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.