To: Board of Supervisors
From: Monica Nino, County Administrator
Report Title: Approve and Authorize a Contract with Macias Gini & O'Connell, LLP for Inflation Reduction Act (IRA) Direct Pay Tax Credit Accounting and Consulting Services
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE and AUTHORIZE the County Administrator, or designee, to execute a contract with Macias Gini & O’Connell, LLP for Inflation Reduction Act (IRA) accounting and consulting services in an amount not to exceed $50,000 for the period January 1, 2025 through December 31, 2025, subject to approval by County Counsel.
FISCAL IMPACT:
Up to $50,000. Costs related to this contract will be paid from the funding sources for projects eligible for IRA tax credits. For example, costs related to claiming electric vehicle tax credits would be paid from the Fleet Internal Services Fund (ISF) because the Fleet ISF would be the recipient of any IRA tax credit revenue generated from this contract.
BACKGROUND:
On April 24, 2023, the County issued a solicitation for external audit services related to the County’s financial statements and the federal Single Audit Act. Proposals were due from interested firms on May 12, 2023, and the County received two proposals from qualified, public-sector accounting firms: Macias Gini & O'Connell, LLP and Eide Bailly, LLP. Following receipt of the proposals, the County convened a review panel on May 17, 2023 to review each proposal and make a recommendation for contract award to the Board of Supervisors. The review panel used a consensus based, forced ranking approach to evaluate the proposals, and recommended Macias Gini & O'Connell, LLP (MGO) to be granted the contract award by the Board of Supervisors for a three-year period with two optional one-year extensions. The contract period, including optional extensions, is not to exceed five-years, at which point it will be necessary to proceed with a new RFP process for the next contract cycle.
The Inflation Reduction Act created an “elective pay” (often referred to as “direct pay”) tax credit structure for tax-exempt and governmental entities for the construction or acquisition of clean energy projects. Specifically, there are twelve different provisions in the IRA for direct pay tax credits, including for clean energy generation through solar, wind and battery storage projects, building community solar projects that bring clean energy to neighborhood families, installing electric vehicle charging infrastructure and purchasing clean energy vehicles for local government vehicle fleets.
The County Administrator’s Office convened a multi-departmental team to determine the viability of claiming certain clean energy projects and purchases over fiscal year 2023/24 to maximize the benefits of the IRA direct pay program for the County. As part of that effort, MGO was consulted to determine whether consulting assistance could be provided to the County to effectuate the claims for the tax credits since they require filing of tax returns to generate payment. As a governmental entity, the County does not file tax returns for regular business practices. MGO has a practice area specializing in IRA clean energy credits and is able to assist the County with this project.
Based on the work of County departments and the assistance of MGO, for fiscal year 2023/24 it is estimated that the County can claim $250,000 in tax credits pursuant to the IRA. MGO estimates that the cost to the County to file the returns to be $50,000, including one-time pre-filing registration costs to establish the County account for clean energy filings with the Internal Revenue Service (IRS). Below is a breakdown of the estimated costs
Today’s action requests that the Board authorize the County Administrator to establish a contract with MGO to assist with claiming of IRA tax credits for fiscal year 2023/24. It is unknown what the future of this program will be after the incoming Federal Administrator takes office, so no future action is recommended at this time. The County Administrator’s Office will continue to monitor the status of this program to determine if tax credits are available for fiscal year 2024/25 and make a subsequent determination at that time for consideration by the Board.
CONSEQUENCE OF NEGATIVE ACTION:
Should the proposed action not be approved by the Board of Supervisors, the County will not be able claim up to $250,000 in IRA clean energy tax credits.