September 9, 2024 • 33 mins
In this podcast episode, I welcome Jesse Raynes, managing partner of Inception Financial, to discuss the often misunderstood world of solar tax credits.
This episode provides valuable insights into an often-overlooked tax strategy, showcasing Jesse's innovative approach to helping clients reduce their tax liability using solar tax credits. It also highlights how financial advisors and CPAs can leverage this strategy to add value for their clients while addressing the growing demand for renewable energy solutions.
Jesse's Journey: From Actor to Solar Energy Expert
- Career Transitions: Jesse's eclectic background includes professional acting, managing high-end nightclubs and restaurants, and eventually entering the solar industry in 2008.
- SolarCity and Tesla Experience: Jesse spent several years at SolarCity, later acquired by Tesla, where he played a key role in growing the sales team from 14 to 1,000 professionals.
- Founding Inception Financial: After leaving Tesla, Jesse founded Inception Financial, driven by his personal experience in reducing his own tax liability using solar tax credits.
Solar Tax Credits: A Misunderstood Tax Strategy
- Understanding the Basics: Jesse explains that solar tax credits involve owning solar systems as a business through an LLC, generating both tax credits and depreciation benefits.
- Comparing to Other Strategies: He contrasts solar tax credits with real estate investments and 401(k) contributions, highlighting the unique advantages of this approach.
- Benefits for Clients: The strategy allows clients to redirect money that would otherwise go to the IRS into owning income-producing assets, while also reducing their tax liability.
Collaborating with Financial Advisors and CPAs
- Attractive Features: He discusses why family offices, wealth managers, and CPAs find this strategy appealing, including its codified nature and potential for client differentiation.
- Misconceptions Addressed: Jesse clarifies common misconceptions, such as the strategy being limited to personal home use or being part of a fund structure.
- Risk Mitigation: He explains how Inception Financial has structured their business to minimize risk for clients, even in the unlikely event of the company's dissolution.
Key Takeaways and Future Outlook
- Bipartisan Support: Jesse highlights the long-standing bipartisan support for solar tax credits, dating back to 1978, and their importance in addressing energy needs.
- Encouraging Exploration: He emphasizes the value of learning about this strategy, even for those who may ultimately decide not to pursue it.
- Personal Passion: Jesse shares his enthusiasm for his current role, combining his background in solar energy with the satisfaction of helping families save money.
About our Guest: Jesse Raynes, managing partner of Inception Financial.
You can learn more about his work at: https://www.inception.financial/about-us/
About Your Host: Paul G. McManus is an accomplished author and expert in helping financial professionals grow their businesses. With over eight years of experience working exclusively with financial professionals, Paul has helped his clients generate tens of millions of dollars in fees and commissions.
Claim your free audiobook copy at: www.theshortbookformula.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome everyone to another episode of the Million
Dollar Producer Show.
My name is Paul G McManus.
Today, my guest is Jesse Raines.
Jesse is the managing partnerof Inception Financial, where he
helps clients reduce their taxliability using solar tax
credits.
Welcome to the show.
Appreciate you having me.
(00:28):
It was good meeting you.
I believe it was in June.
We were both at the EliteGrowth in San Diego.
How was that event for you?
Was it productive?
Speaker 2 (00:34):
It was very productive and it was nice to
meet so many people that I hadbeen speaking to via Zoom or on
phone calls but actually seethem in person and develop a
greater sense of rapport, and Ialso found that many of the
other presentations by othersponsors was very unique and
interesting to learn aboutwhat's going on out there in the
financial services world.
Speaker 1 (00:53):
Yeah, definitely I enjoyed it.
It's always nice to have areason to get out to San Diego.
That was fun, but I found it tobe a very productive conference
as well.
I'm excited to talk to youtoday and we're gonna be talking
about solar credits andpreparing for today's session.
I was looking at your LinkedIn.
I'm curious.
It looks like you have abackground in working for both
SolarCity and Tesla, which are,of course, two Elon Musk
(01:17):
affiliated companies.
Now, personally, I know he'scontroversial for a lot of
people.
I'm a fan of his, but I've alsoread his books and I've heard
that he can be difficult to workfor.
But so, anything that you'recomfortable sharing with us, and
just your background in general, I'd love to hear what's your
professional background, how didyou get to where you are today,
and if you want to tie anythingabout those companies, that
would be great as well.
Speaker 2 (01:33):
Sure yeah, there are a few items there to tackle, so
I'll start first my backgroundvery eclectic background
actually.
I started out as a professionalactor in my younger days.
That's what brought me out toLos Angeles.
I had a very nice career formany years and then was looking
for something a little bit morestable, shall we say, and I'd
moved back to New York Citywhere I got involved in running
(01:55):
some very high-end nightclubsand restaurants.
That taught me a lot aboutprocess and entrepreneurship, of
course.
And then I came back toCalifornia and that's when I got
into the solar industry, andthis was in 2008.
So very early days I wasrecruited to go work for
SolarCity.
As you mentioned, elon Musk hadput up the seed capital and his
(02:15):
two cousins ran that company.
I reported to his cousin,lyndon when I first started.
He was the CEO and it was aphenomenal experience.
It was building out a business.
When I started I had 14 salesprofessionals reporting to me
from Santa Barbara down to SanDiego, out to Palm Springs, and
during my tenure there I got mysales team up to a thousand
sales professional covering theentire Western seaboard,
(02:37):
including Hawaii.
So massive growth, massivescale the things that I got to
learn, obviously, seeing acompany grow like that and be
involved in instrumentally inthe training programs, the
recruiting programs, all of oursoftware that we used for
quoting purposes, all the bestpractices we use to create an
(02:57):
exceptional client experience.
I was heavily involved in allof that and, of course, working
under an Elon Musk company atthe time he's not the Elon that
we know today.
Right, this is back in 2008.
And people knew that there wasthis crazy guy who was creating
some type of cool car that maybeArnold Schwarzenegger was going
to drive around, and I can tellyou he was as intense then as
(03:19):
he is today and he's just drivenby something different than
most people possess.
I think his brain is working soincredibly fast and thinking
such complex ways that it mustbe these are my words must be
frustrating to work with otherpeople who are probably 10, 15
paces behind him all the timeand having to catch people up.
And also, I think that he'sdriven by a profound sense of
(03:41):
protecting humanity.
I really I don't know thispersonally about him.
It's just conjecture on my part, but I do believe that is
driving force and he approachesevery day with an extreme sense.
At least this is the culture.
We had an extreme sense ofurgency every day to grow, to
get better, to improve and tojust move more volume and really
get more solar panels up onrooftops, get more electric
(04:03):
vehicles on the road andobviously we know about his
mission to go extra planetary.
I think that these are thingsthat you don't take lightly and
require massive focus and a lotof long hours.
Speaker 1 (04:14):
I recently read his, the biography of him, and I've
actually read a couple becauseI'm just fascinated by him and
just everything that you'resaying jives with what I've
heard, and so very interesting.
I'd love to go down the wholerabbit hole but I know we have
limited time, but that's a veryinteresting background that you
have.
So, if I heard you correctly,you started out as an actor,
moved into running nightclubsand then you got into SolarCity.
(04:35):
Were you also part of Tesla, orwere those companies just
joined?
Or what was your role at Tesla,if any?
Speaker 2 (04:41):
Yeah, so they were sister companies always.
And then SolarCity went publicin 2012.
So that was prettytransformational for me to see a
company go from a privatecompany to a publicly traded
company and the compliance andthings that change corporately
when that happens.
And then we were prepping a fewyears later to do the merger.
So I got to learn what it'slike for two publicly traded
(05:02):
companies, especially at thatsize, to officially merge, and
it was shortly after the merger,so that happened around 16,
going into 17.
So I did hang around for aboutsix months and Tesla just simply
acquired SolarCity and itbecame Tesla Energy and it's the
Tesla Energy that's there today.
A lot of the people that I workwith are still at that company
(05:22):
and a lot of the installationcrews are still working now at
Tesla.
It's just a different name onthe letterhead, if you will.
But shortly after that, themerger, I did leave and then
founded my company that I'm atnow Inception Financial.
Speaker 1 (05:35):
Fantastic, yeah.
So tell me what led you tofound Inception Financial.
I'm very impressed by yourbackground.
As you said, it's eclectic, butit seems like you have so many
amazing insights and experiencefrom just what you observed and
witnessed.
And so what was the passion ofmotivation behind starting
Inception Financial?
Speaker 2 (05:53):
Really, it started with solving my own tax.
I had a pretty big exit fromTesla.
It's always a good place tostart.
It is yeah, no, I mean my wife.
I'm very fortunate.
My time at SolarCity and Teslawas transformational,
professionally and financially,and, having exited Tesla with a
lot of Tesla stock, I needed ameans to cut my own tax
liability, and my wife is,fortunately, a high income
(06:16):
earner she's an executive atNetflix, and so between the two
of us, we were just paying likea crazy amount of taxes, and so
I was looking at ways I could dothis for myself, and I
connected with my now managingpartner and I've known him for
16 plus years and he's like hey,knucklehead, you should be
buying solar projects, youshould be getting credits and
depreciation and using this foryou and your wife.
(06:37):
And it was a real aha momentbecause I had done this for
years with these largeinstitutional banks.
Everything that we do has beendocumented and the structure in
place by counterparties likeMorgan Stanley, us Bank of
America, amazon, google, netflix, apple, the likes and I hired a
leading tax counsel and CPAfirms and got very comfortable
(07:00):
with me and my wife doing it,realized it's very simple and no
different than what these bankswere doing, except I could take
these credits and thedepreciation and I could use it
to offset all of my own personalincome at the household, and so
that's how it started.
And then, being the solarexpert in my community, I'm
surrounded by a lot of high networth entertainment executives
et cetera, and they wanted tolearn how they could do it for
(07:23):
themselves.
So I guided them through thatand it was at that time my
managing partner and I.
He'd basically come to me andsaid we have a white space here
and nobody is educating retailclients that they can even do
this.
They don't even know it exists,that's been around for 50 years
and how simple it is and ittakes a lot of time.
I'm talking I'm sure peoplelistening right now are all in
(07:45):
financial services working withretail clients, and we know that
takes a lot of time, a lot ofeducational components to it and
just getting people comfortableTime we had.
We weren't chasing a big exit.
We weren't trying to chase amultiple.
We weren't trying to grow fast.
We were creating a businessthat we're passionate about,
that was going to generate niceincome for us and something that
we really enjoy.
(08:05):
So now we've been doing thisgoing in our fifth year and
we've got over 120 clients thatwe have helped, I'm happy to say
, almost all of our clientsrepeat the strategy year over
year and we have literallyhelped our clients save millions
of dollars in taxes, literallyhelped our clients save millions
(08:26):
of dollars in taxes.
And now I think, with our trackrecord of almost half a decade,
it gives people a lot ofcomfort to know this is real,
because it sounds esoteric tostart, but it's actually
extraordinarily simple.
Speaker 1 (08:34):
I'm interested as a just as a consumer, right.
I'm looking at my tax bill andwhat I owe and I don't like it.
I don't know a lot about solartax credits other than the name.
Really Talk to me like I don'tknow anything, which I don't.
And just what is a solar taxcredit?
Who is it for?
What do you need to qualify?
How does it work?
Speaker 2 (08:55):
Yeah.
So what we do is we help ourclients, we sell them,
essentially solar systems thatare sitting on residential
rooftops all across the UnitedStates.
So this is not about gettingsolar for your house, although
you can do that.
This is about owning solarsystems as a business call it a
little side business through anLLC, and through the ownership
(09:19):
of those assets you generate taxcredits and also depreciation,
and it's that simple.
Those are the underlying taxbenefits that you can use to
help offset all of your incomesources.
So, regardless of who purchasesa solar system, everyone,
including individuals, isentitled to a minimum of 30% tax
credit.
(09:39):
So if the solar system costs$30,000, well, 30% tax credit
would yield you $9,000 incredits, and those credits are a
dollar per dollar credit.
So if you owed $9,000,effectively it would eliminate
that $9,000 payment.
That's the credit.
And then there's depreciation,and most of your listeners and
(10:00):
viewers are going to know whatdepreciation is.
Just like buying a jet orbuying a piece of capital
equipment heavy equipment, maybeleasing it out, as some people
do real estate, et cetera.
You can generate depreciation,while solar systems they qualify
for bonus depreciations oraccelerated depreciation at the
state, so you're always able todepreciate the asset within five
(10:25):
years okay, using the maker'sformula and it's those two
benefits that you are able togenerate, which gives you a
credit of what you would pay,and the depreciation lowers all
of your other forms of incomeand saves you money in your
taxes that way.
So it's just really those twobenefits and it's simply owning
(10:45):
the asset.
Now, of course, when you ownthis asset, you have a
contractual obligation with theproperty owner where the solar
system's installed, and theobligation is that you're going
to deliver power to thatproperty owner.
Most of your viewers andlisteners probably don't have
much experience in doing that,and that's where we come in.
So Inception Financial not onlysells the assets directly to
(11:08):
our clients' LLCs, but we alsosign a technical services
agreement and that ensures thatwe will make sure that all of
that power is being delivered tothe property owners.
If there's any type of warrantyitem, we take care of that
Items.
With the property owners, we dothat as well.
So think of us as also aproperty manager.
(11:29):
But instead of it being a realestate asset, it's simply a
solar asset.
What our clients are buying isnot brick and mortar, it's just
an asset that's on top of abrick and mortar asset.
They own that asset.
We ensure it delivers the powerand our clients benefit from
both the tax benefits and thenthe predictable income that is
associated with selling thatelectricity.
Speaker 1 (11:52):
So what I've heard and I'm following you for the
most part when you buy it one,you get an immediate tax
deduction I believe I heard yousay about 30%.
You also get depreciation overa five-year period on the asset.
But then the third piece, itsounds, is that now it's
actually an income-producingasset.
Is that correct?
Speaker 2 (12:11):
That's correct.
So there are various financingstructures in solar.
Most of them are all donethrough what's called a power
purchase agreement.
So, paul, your house, okay, youmay want to have solar, but you
may not want to buy that solarsystem.
So instead you would go with acompany that would own the solar
(12:34):
system but then would sell youthe electricity.
And they do that through apower purchase agreement.
It's what utility companieshave been using to buy their
power from independent powerplants for the last 100 years,
and at SolarCity we took thatconcept and brought it down to
the residential level andallowed all of the property
owners to buy electricity fromus at a reduced rate.
(12:58):
And what we did there is webundled up all of these assets
and we sold them off to MorganStanley and Bank of America and
all these other corporations ontheir balance sheet.
So we service the customer, butthen these banks took advantage
of the tax credits.
Here at Inception Financial,we're doing the same exact thing
, except instead of it going toMorgan Stanley, we are selling
(13:20):
it to retail clients, and thenwe are helping facilitate the
delivery of that electricity.
There's two forms of powerpurchase agreements.
The first is one in which youwould pay every single month for
the power that is beingdelivered by that solar system
that's installed in your rooftop.
Pretty simple right?
Just like how you're payingpower to the utility provider
(13:41):
today.
The other form is you couldprepay for all 20 years of your
electricity payments from thatsolar system up front in one
lump sum.
Now you're probably sittinghere going.
Why on earth would I do that?
Because you get a really largediscount and you lock in your
price for life.
So think of it, about buying oilfor your home if you live in a
(14:05):
cold weather climate, and it'salmost like buying an option on
that oil.
So you've locked it in but youprepay for it.
So for the rest of the next 20years, that's your cost.
A lot of property ownersactually have the cash to do,
and it is one of the smartest,most economical and most savvy
way to get electricity not justsolar electricity, but any form
(14:27):
of electricity, because it'salways going to be the least
expensive.
And with our strategy, that'swhat these property owners are
doing.
They're paying for all 20 yearsof those electricity payments
up front.
That income goes to our clientswho end up owning that asset.
And what our clients do is theyturn right around and they use
(14:47):
that upfront income to pay forthe majority of the installation
costs and then the balancethat's left over, they just pay
using dollars that would haveotherwise gone to the IRS.
So we're not competing withinvestable dollars.
We're not competing withsomeone selling Apple stock or
going into their savings.
(15:08):
We're taking dollars that areotherwise uninvestable, that are
going to the IRS, and sayingyou have a better option, use
those dollars to purchase theseassets.
You'll get a dollar for dollarcredit.
So, speaking broadly, you willnot owe that money to the IRS
because they'll give you acredit.
And then, on top of that,you're going to generate
(15:29):
depreciation, which is going tolower all of your forms of
income, whether it's W2 orbusiness income, or stocks and
bonds.
What have you?
So I know I said a lot there,but broadly speaking, that's how
the structure works.
Speaker 1 (15:43):
Broadly speaking, how would you compare that to, say,
investing in real estate?
It sounds like it has a lot ofsimilar properties to it.
I guess one thing is that myguess and I could be wrong is
that people that want to do thisare they more driven by the
idea of solar and wanting tosupport it, or is it just
strictly numbers investments,tax savings or a combination?
Speaker 2 (16:04):
Typically the latter.
Most everyone is making adecision based on economic value
.
I think the feel-goodattributes of producing clean
electricity may be a value add.
Everyone is doing this becauseit makes great economic sense.
The fundamental differencebetween a real estate investment
and this is with real estateyou have to come up with the
cash, so you have to either gointo your savings, you have to
(16:28):
divest another investment anduse that money now to reinvest
in real estate.
Here we're just simply takingthe dollars you're giving to the
IRS.
Let me use a W-2 employee likemy wife as an example.
We changed her withholdings, sothere's very little taxes
coming out of her paycheck.
So you can imagine that nextpaycheck we got was much larger.
(16:51):
We had all this surplus of cashand we took that surplus and we
used it to buy our solarsystems.
And then I used to pay my taxesquarterly and I stopped doing
that and I took that same moneythat I was earmarked to pay
those quarterlies and insteadbought my solar assets with it.
So for our household there'sbeen no impact to our cash flow.
(17:13):
We're simply redirecting thesame dollars that are going to
the IRS.
I can't do that with a realestate investment because if I
did that at the end of the year,I'd owe the IRS a massive bill
here, because I bought my assetsthat are solar and they
generate a credit.
The credit absolves me of thatpayment that I was otherwise
(17:35):
supposed to make.
So now I'm break even.
I'm good.
I still wrote a check, butinstead of giving to the IRS, I
used it to buy assets, and now Ialso have the benefit of all of
this depreciation, which iscreating an operating loss in my
LLC, and I take that loss and Iuse that to offset my business
(17:55):
income and my wife's W-2 income.
And therein lies the differencebetween any other strategy is
that real estate can be a taxefficient investment.
It's still an investment withinvestable dollars.
This is a strategy taking noninvestable dollars and using
them to buy an asset thatdelivers intrinsic value.
Speaker 1 (18:16):
Let's take it the other way.
For someone that, how would youcompare this, broadly speaking,
to someone, say, putting moneyinto a 401k or some other
tax-deferred vehicle like that?
Speaker 2 (18:26):
So that obviously, in my opinion, is one of the
smartest things that you can do,because you can take the money
that you would otherwise bepaying taxes on, put into a 401k
that reduces your overall grossincome.
And now you pay less in taxesand that can grow for you and
you're only going to pay taxeswhen you take it out.
Love that strategy and that'swhy our strategy is a compliment
(18:48):
to that, because there's only acertain amount you can do under
that.
And there's also definedbenefits plans and cash balance
plans right, those are othersmart things that I do, but I'm
capped at my amount.
At the end of the day, I stillhave to pay taxes, and the money
that I'm talking about that mywife and I use it's after all of
these other things that you'vementioned, including investing
(19:10):
in real estate and oil and gasand these other things.
We still have a tax bill, soit's that tax bill that we are
shaving off and using that moneyto buy the asset.
So it's a great compliment toall these other things that your
viewers and listeners may beutilizing already.
Speaker 1 (19:25):
Fantastic.
Thank you for that explanation.
That was very helpful for me asthe non-financial advisor.
That was very helpful probably,and hopefully it was useful to
our listeners as well, who aremostly financial advisors and
CPAs, and so I'd love to pivotfrom there.
And so how do you work with orcollaborate with financial
advisors or CPAs onopportunities for their clients
(19:49):
to take advantage of solar taxcredits?
Who's a good process look like,et cetera?
Speaker 2 (19:56):
Yeah, great question.
So we work with family offices,wealth managers and CPAs
routinely.
In fact, the bulk of ourbusiness is coming from those
types of relationships that wecurrently have in place.
When I started the business, Iwas reaching out to people close
to my network individuals andgetting referrals, but now the
business has grown where wespend very little time reaching
(20:17):
out to just retail clients.
Most of our time is spenttalking to CPAs, wealth managers
and family offices, and thereason that these organizations
like working with us is twofold.
First, most people are lookingfor a tax strategy that is
highly codified, well-documentedand risk adverse and I've seen
(20:38):
a lot of other similar taxstrategies out there, and they
come with their set ofchallenges, and this is the
strategy that I feel the mostcomfortable all the ones I've
ever seen, because it's beenbattle tested for 50 years.
This is not new.
It's new to a lot of yourlisteners, but it's not new to
the IRS.
This has been codified since1978, and we know depreciation
(21:01):
has been around for a heck of along time as well.
It's because of the codifiednature of this strategy that I
think so many of theseorganizations CPAs, family
offices, et cetera like workingwith us because it's very clear
what the code says and how youcan do this and there's not much
ambiguity to the structure.
The other reason I think theylike working with us is because
(21:22):
very few people know about thisand this is a tool in their
handbag where they can havedifferentiation against the
competition.
They can use this to mayberecruit in a higher net worth
family than they may have beenwith their current tools they
have today.
And then, of course, becausethis is a strategy that our
clients do year over year, mostof those families are going to
(21:43):
stay with that advisor, withthat office, because they know
they can rely on this strategy.
It's not like you can just makea few phone calls and substitute
Inception Financial withsomebody else, because, crazy as
this is going to sound, just ascrazy as it was when I moved
back to California in 2008 andgotten a solar, people are like
you can make a living at that.
This is just.
(22:05):
We're on the right side of timehere.
There's not really any othercompany doing it at scale.
Our secret sauce is in onething our relationships with the
contractors who want to dobusiness with us and use our
financial product in thehousehold.
The code's there.
It's been around for a longtime.
There's lots of other financingcompanies out there that do it.
(22:26):
Most are in a fund.
This is not a fund.
This is not a security.
And so because we've been ableto focus just on retail clients
and we have this deep network ofcontractors, that is where we
really shine, because we canscale this as high as we need to
go and because it's residential, it's smaller solar systems.
Some of our clients might need10 assets a year.
(22:49):
Some of our clients might needa thousand, when we can help
everybody in between.
So it's for these reasons thatit's predictable, it's scalable,
it's repeatable.
And, lastly, I'll say we makeit uber simple for our advisors
to do business with us, becauseat the end of the year we gift
wrap the reporting package tothe CPAs Really simple to file.
(23:10):
All of our forms are pre-filledout for them.
So the most amount of braindamage we go through with our
partners is this.
It's how does this esotericthing work?
Is it legitimate with the taxcode?
Once we get to the learningphase, everything's through
DocuSign and everything happensthrough our customer portal and
it's very easy to do businesswith us.
Speaker 1 (23:30):
Does it matter if there's a Democrat or a
Republican in office?
Does that create any headwinds,typically when it comes to the
tax credits and other things, oris it pretty stable either way?
Speaker 2 (23:39):
I would say let's look at history and say that
this tax credit has been inplace since 1978.
So it's withstood everyadministration since Nixon.
This is a type of credit thathas bipartisan support we've
seen, predominantly because it'senergy and I don't care
personally speaking.
I think we all could agree thatwhether it's fracking or oil or
gas or nuclear or coal or solaror wind, we need all forms of
(24:03):
energy sources right now,because some could say we have
an energy crisis in our nationand with the advent of AI, it's
only going to create more demand, not less demand.
And so when you look atcongressional endorsement for
credits and things of thatnature, it's usually around the
infrastructure of our nation andI think at the bedrock of that
(24:24):
infrastructure is energy.
So it's for those reasons thatwe feel supremely comfortable
that the credit will be in placeRight now.
It's codified out to 2032.
And we don't have much historyof the Congress unwinding things
like that.
So I think we're pretty solid.
Speaker 1 (24:40):
Is there any misconceptions that we haven't
talked about, that either theconsumer or the financial
advisor has when it comes tothis that you've come across, or
what are those commonmisconceptions that we haven't
yet spoken about?
Speaker 2 (24:50):
One big misconception is that this is for your house,
so I always like to remindpeople it's not.
Another misconception is thatit's a fund.
Always like to remind peopleit's not.
Another misconception is thatit's a fund.
This is not a fund and that'swhat makes it so elegant, so
that you can buy a few systemsand I can buy my systems, but
they're independent, right, wedon't commingle funds and that's
what allows each of our clientsto utilize this strategy
(25:13):
against both active and passiveincome.
And there's very few strategiesout there to offset that active
income and this is one of those, because of the inherent
structure, that are using it notbeing a fund.
There's lots of other solarstructures out there.
They're much more complicated,like the ones that banks do.
They require managing capitalaccounts and doing deficit
(25:33):
restoration obligations and lotsof crazy stuff.
So a lot of people, when theyfirst hear about investing solar
, their minds go there, becausethat's what most people know.
Very few people know about thesimple asset purchase and owning
these assets through an LLC ontheir own.
Speaker 1 (25:49):
And I just love how you broke down the contrast to,
say, real estate and then alsothe contrast to the 401k,
because I think those are twoassets that your average
consumer can wrap their headsaround and just see how this is
similar and different from bothof those.
I think that was very helpful,for myself at least, to better
understand it.
Is there any question that Ihaven't asked you about it that
(26:11):
you think is worth discussing?
Speaker 2 (26:13):
I would just say that the one question people may ask
is this all sounds great, itsounds a little too good to be
true.
And I would just say that theone question people may ask is
this all sounds great, it soundsa little too good to be true.
And I would say you're notwrong for thinking that way.
It's just you don't know aboutthis because you're not in the
industry.
But we can get, and I'mconfident every single CPA that
our clients work withsufficiently comfortable that
the structure is sound.
(26:35):
Whether or not there'scommercial risk that they're
willing to take is anothermatter, and I think the largest
commercial risk that someonemight be thinking they're taking
is great.
I love all this, I'd love to doit.
But what happens if InceptionFinancial goes out of business
and so we actually, through ourtechnical services agreement,
outsource all of that work tothe large companies that do this
(26:57):
for the big banks agreement,outsource all of that work to
the large companies that do thisfor the big banks, and there's
dozens of companies that offerthis service, and we do it as a
pass-through expensepredominantly because if we were
able to go out of business,we'd make enough money and we
just decide to close up shop.
First of all, our agreementsdon't allow us to do that.
We are obligated to find them areplacement.
The good news is, even if wetook off tomorrow and didn't
(27:18):
answer the phones, our clientscould simply go direct to the
subcontractors that we've hired,because they're household names
and the cost that we'recharging is just a pass-through
expense.
So they'd be paying the samething, essentially, just writing
the check to a differentorganization instead of
Inception Financial.
And we set it up that wayspecifically to give our clients
(27:39):
comfort to say you're not justrelying on Inception Financial,
but you've got backups andyou've got dozens of companies
that can be your propertymanager for your solar systems
in that unlikely event that weweren't here.
So we've really tried to thinkthrough every angle to make sure
that all of our clients feelcomfortable, that the structure
is sound and that theirinvestment is as risk adjusted
(27:59):
as it possibly can be.
Speaker 1 (28:01):
You find that it's typically more the financial
advisor or the CPA or someoneelse that brings these client
opportunities to you.
Speaker 2 (28:08):
I would say it's usually the financial advisors.
We do have some healthyrelationships with some CPAs and
it's interesting.
I think a lot of CPAs and thisis their job is to be extremely
risk adverse, and I think thatthey need to be.
Even maybe some characterizesome as being overly risk
adverse Because, at the end ofthe day, the CPA is just going
(28:29):
to inherit headaches if it goessouth and they're concerned
about an audit Speaking of whichwe don't have any history of
any of our clients and anyone weknow that's been doing this
ever being audited.
But that is an issue that CPAsthink about because it's more
work for them.
However, I will tell you thatthe top leading CPAs that we
work with they lean into thisstrategy heavily and I think
(28:50):
that speaks to the highlycodified nature and the fact
that they feel very comfortablethat they know that audits can
happen randomly and forsomething like this, I think
they would see it as veryroutine, that they have a strong
enough fact pattern.
They have all the things theyneed because it is so codified
that they're just simply notworried about it and they move a
lot of their clients into thestructure and I've really
(29:11):
learned that it's helped mechoose the CPA I'm working with,
by the way, because Iunderstand they're willing to
take the risk because they knowthe code so well, and I think
some of the other CPAs they justdon't understand the code.
Ergo, they're not willing totake that because they just
don't understand it.
Speaker 1 (29:26):
What are the chances of Elon Musk doing a favorable
tweet for you and getting 20?
Speaker 2 (29:32):
million views, probably slim to none.
I think that if I were going toask a favor from Elon, I'm not
sure it would be for my biz,because biz is doing really well
.
I think he would probably belike how do I get on to one of
the SpaceX capsules or somethingreally cool like that, right
Play my cards in that capacity.
There you go Very cool.
Speaker 1 (29:51):
I found this conversation for myself to be
very informative.
I personally work with a lot ofadvisors and CPAs and
specialists like yourself andit's always interesting to deep
dive because you know you canhear just solar tax credits.
Okay, I understand those threewords.
What is it?
I have no idea.
It goes back to themisconceptions, right?
I guess I need to put a solarthing on my roof.
I don't know.
So I think, so I think that wasvery helpful for myself and, by
(30:14):
extension, I hope our listenershad a chance to wrap their heads
around this and how this mightbe a strategy that may make
sense for them to bring to theirclients.
For someone that's listeningand wants to reach out and say a
financial advisor, CPA or thelike, and wants to reach out and
learn more about you or contactyou, what is the best way for
(30:37):
them to do so?
Speaker 2 (30:37):
We reached at Jesse.
That's J-E-S-E atinceptionfinancial.
Nothing on the end of that,it's just Jesse at
inceptionfinancial.
Speaker 1 (30:49):
Like people always assume that they have to add the
ending right.
Speaker 2 (30:52):
Yeah, there's com or net on there, no, or you can go
to our website, which isinceptionfinancial.
And I would just close and liketo say that I would suggest
everyone really lean in on this.
There's no downside in gettingthe information.
I've never had a single personever tell me that it wasn't a
great use of their time.
Now, not 100% of people decideto move forward for various
(31:16):
reasons, but every single personhas told me how much they
benefited and valued theinformation.
So I would suggest lean in.
There's a lot to learn, butonce you get it, it's very
simple and I think it's a verycompelling opportunity for a lot
of people.
Speaker 1 (31:29):
My final question and this goes back to your eclectic
background as an actor,nightclub owner and all these
different things that we talkedabout which career do you enjoy
the most, or did you enjoy themost, and why?
Speaker 2 (31:43):
Everyone's gonna hate me for saying this because
they're gonna it's sopredictable and they're gonna
think it's self serving.
But it is the truth and I thebusiness I'm in now is the
business that I am the mostpassionate and most excited
about, and I'll caveat that realquickly.
I know a lot of celebrities.
I live in Los Angeles, sothey're around and they're just
people like you and me and theyjust happen to be doing the
thing they love and they havenotoriety because they happen to
(32:04):
be on TV.
But that comes with its ownhost of challenges and it's not
that I necessarily feel bad forthem per se, but I definitely
see how much of a struggle it isand I feel grateful that I was
able to find my way to financialfreedom and other means where I
can maintain my anonymity.
I will say this I did go tograduate school for three years
(32:26):
where it was just all about thework.
I went to get my master of finearts in acting, and that was
just a three-year sabbatical, ifyou will at an amazing program
with amazing professors, andthat was three years where I
really just got to do the workfor fun and just my pure
enjoyment.
And I would say those are threeof the greatest years of my
life, but I'm very happy that Ichose not to make it my
(32:48):
profession.
But I look forward to doing itjust for fun again and I'm
getting ready to do somethinglike that, probably in the next
couple years.
But genuinely, this is where Iwanted to be, leveraging all my
experience from SolarCity andTesla and now being on the
financing side and also, I gottatell you like helping lots of
families save money.
There's a lot of pure enjoymentin that.
Speaker 1 (33:09):
I can relate, because it's oftentimes it's not like a
single path that leads you.
It's taking advantage of allthe things that you've done over
the past and merging them intosomething that you can tap into
all of them in differentcapacities, I think oftentimes
creates the most fulfillment.
Thank you for being a guesttoday on the Million Dollar
Producer Show.
Looking forward to sharing thiswith our audience.
Speaker 2 (33:30):
Thanks again for having me.
It's been a lot of fun.
I really appreciate it.
Bye for now, thank you.
Welcome everyone to another episode of the Million
Dollar Producer Show.
My name is Paul G McManus.
Today, my guest is Jesse Raines.
Jesse is the managing partnerof Inception Financial, where he
helps clients reduce their taxliability using solar tax
credits.
Welcome to the show.
Appreciate you having me.
(00:28):
It was good meeting you.
I believe it was in June.
We were both at the EliteGrowth in San Diego.
How was that event for you?
Was it productive?
Speaker 2 (00:34):
It was very productive and it was nice to
meet so many people that I hadbeen speaking to via Zoom or on
phone calls but actually seethem in person and develop a
greater sense of rapport, and Ialso found that many of the
other presentations by othersponsors was very unique and
interesting to learn aboutwhat's going on out there in the
financial services world.
Speaker 1 (00:53):
Yeah, definitely I enjoyed it.
It's always nice to have areason to get out to San Diego.
That was fun, but I found it tobe a very productive conference
as well.
I'm excited to talk to youtoday and we're gonna be talking
about solar credits andpreparing for today's session.
I was looking at your LinkedIn.
I'm curious.
It looks like you have abackground in working for both
SolarCity and Tesla, which are,of course, two Elon Musk
(01:17):
affiliated companies.
Now, personally, I know he'scontroversial for a lot of
people.
I'm a fan of his, but I've alsoread his books and I've heard
that he can be difficult to workfor.
But so, anything that you'recomfortable sharing with us, and
just your background in general, I'd love to hear what's your
professional background, how didyou get to where you are today,
and if you want to tie anythingabout those companies, that
would be great as well.
Speaker 2 (01:33):
Sure yeah, there are a few items there to tackle, so
I'll start first my backgroundvery eclectic background
actually.
I started out as a professionalactor in my younger days.
That's what brought me out toLos Angeles.
I had a very nice career formany years and then was looking
for something a little bit morestable, shall we say, and I'd
moved back to New York Citywhere I got involved in running
(01:55):
some very high-end nightclubsand restaurants.
That taught me a lot aboutprocess and entrepreneurship, of
course.
And then I came back toCalifornia and that's when I got
into the solar industry, andthis was in 2008.
So very early days I wasrecruited to go work for
SolarCity.
As you mentioned, elon Musk hadput up the seed capital and his
(02:15):
two cousins ran that company.
I reported to his cousin,lyndon when I first started.
He was the CEO and it was aphenomenal experience.
It was building out a business.
When I started I had 14 salesprofessionals reporting to me
from Santa Barbara down to SanDiego, out to Palm Springs, and
during my tenure there I got mysales team up to a thousand
sales professional covering theentire Western seaboard,
(02:37):
including Hawaii.
So massive growth, massivescale the things that I got to
learn, obviously, seeing acompany grow like that and be
involved in instrumentally inthe training programs, the
recruiting programs, all of oursoftware that we used for
quoting purposes, all the bestpractices we use to create an
(02:57):
exceptional client experience.
I was heavily involved in allof that and, of course, working
under an Elon Musk company atthe time he's not the Elon that
we know today.
Right, this is back in 2008.
And people knew that there wasthis crazy guy who was creating
some type of cool car that maybeArnold Schwarzenegger was going
to drive around, and I can tellyou he was as intense then as
(03:19):
he is today and he's just drivenby something different than
most people possess.
I think his brain is working soincredibly fast and thinking
such complex ways that it mustbe these are my words must be
frustrating to work with otherpeople who are probably 10, 15
paces behind him all the timeand having to catch people up.
And also, I think that he'sdriven by a profound sense of
(03:41):
protecting humanity.
I really I don't know thispersonally about him.
It's just conjecture on my part, but I do believe that is
driving force and he approachesevery day with an extreme sense.
At least this is the culture.
We had an extreme sense ofurgency every day to grow, to
get better, to improve and tojust move more volume and really
get more solar panels up onrooftops, get more electric
(04:03):
vehicles on the road andobviously we know about his
mission to go extra planetary.
I think that these are thingsthat you don't take lightly and
require massive focus and a lotof long hours.
Speaker 1 (04:14):
I recently read his, the biography of him, and I've
actually read a couple becauseI'm just fascinated by him and
just everything that you'resaying jives with what I've
heard, and so very interesting.
I'd love to go down the wholerabbit hole but I know we have
limited time, but that's a veryinteresting background that you
have.
So, if I heard you correctly,you started out as an actor,
moved into running nightclubsand then you got into SolarCity.
(04:35):
Were you also part of Tesla, orwere those companies just
joined?
Or what was your role at Tesla,if any?
Speaker 2 (04:41):
Yeah, so they were sister companies always.
And then SolarCity went publicin 2012.
So that was prettytransformational for me to see a
company go from a privatecompany to a publicly traded
company and the compliance andthings that change corporately
when that happens.
And then we were prepping a fewyears later to do the merger.
So I got to learn what it'slike for two publicly traded
(05:02):
companies, especially at thatsize, to officially merge, and
it was shortly after the merger,so that happened around 16,
going into 17.
So I did hang around for aboutsix months and Tesla just simply
acquired SolarCity and itbecame Tesla Energy and it's the
Tesla Energy that's there today.
A lot of the people that I workwith are still at that company
(05:22):
and a lot of the installationcrews are still working now at
Tesla.
It's just a different name onthe letterhead, if you will.
But shortly after that, themerger, I did leave and then
founded my company that I'm atnow Inception Financial.
Speaker 1 (05:35):
Fantastic, yeah.
So tell me what led you tofound Inception Financial.
I'm very impressed by yourbackground.
As you said, it's eclectic, butit seems like you have so many
amazing insights and experiencefrom just what you observed and
witnessed.
And so what was the passion ofmotivation behind starting
Inception Financial?
Speaker 2 (05:53):
Really, it started with solving my own tax.
I had a pretty big exit fromTesla.
It's always a good place tostart.
It is yeah, no, I mean my wife.
I'm very fortunate.
My time at SolarCity and Teslawas transformational,
professionally and financially,and, having exited Tesla with a
lot of Tesla stock, I needed ameans to cut my own tax
liability, and my wife is,fortunately, a high income
(06:16):
earner she's an executive atNetflix, and so between the two
of us, we were just paying likea crazy amount of taxes, and so
I was looking at ways I could dothis for myself, and I
connected with my now managingpartner and I've known him for
16 plus years and he's like hey,knucklehead, you should be
buying solar projects, youshould be getting credits and
depreciation and using this foryou and your wife.
(06:37):
And it was a real aha momentbecause I had done this for
years with these largeinstitutional banks.
Everything that we do has beendocumented and the structure in
place by counterparties likeMorgan Stanley, us Bank of
America, amazon, google, netflix, apple, the likes and I hired a
leading tax counsel and CPAfirms and got very comfortable
(07:00):
with me and my wife doing it,realized it's very simple and no
different than what these bankswere doing, except I could take
these credits and thedepreciation and I could use it
to offset all of my own personalincome at the household, and so
that's how it started.
And then, being the solarexpert in my community, I'm
surrounded by a lot of high networth entertainment executives
et cetera, and they wanted tolearn how they could do it for
(07:23):
themselves.
So I guided them through thatand it was at that time my
managing partner and I.
He'd basically come to me andsaid we have a white space here
and nobody is educating retailclients that they can even do
this.
They don't even know it exists,that's been around for 50 years
and how simple it is and ittakes a lot of time.
I'm talking I'm sure peoplelistening right now are all in
(07:45):
financial services working withretail clients, and we know that
takes a lot of time, a lot ofeducational components to it and
just getting people comfortableTime we had.
We weren't chasing a big exit.
We weren't trying to chase amultiple.
We weren't trying to grow fast.
We were creating a businessthat we're passionate about,
that was going to generate niceincome for us and something that
we really enjoy.
(08:05):
So now we've been doing thisgoing in our fifth year and
we've got over 120 clients thatwe have helped, I'm happy to say
, almost all of our clientsrepeat the strategy year over
year and we have literallyhelped our clients save millions
of dollars in taxes, literallyhelped our clients save millions
(08:26):
of dollars in taxes.
And now I think, with our trackrecord of almost half a decade,
it gives people a lot ofcomfort to know this is real,
because it sounds esoteric tostart, but it's actually
extraordinarily simple.
Speaker 1 (08:34):
I'm interested as a just as a consumer, right.
I'm looking at my tax bill andwhat I owe and I don't like it.
I don't know a lot about solartax credits other than the name.
Really Talk to me like I don'tknow anything, which I don't.
And just what is a solar taxcredit?
Who is it for?
What do you need to qualify?
How does it work?
Speaker 2 (08:55):
Yeah.
So what we do is we help ourclients, we sell them,
essentially solar systems thatare sitting on residential
rooftops all across the UnitedStates.
So this is not about gettingsolar for your house, although
you can do that.
This is about owning solarsystems as a business call it a
little side business through anLLC, and through the ownership
(09:19):
of those assets you generate taxcredits and also depreciation,
and it's that simple.
Those are the underlying taxbenefits that you can use to
help offset all of your incomesources.
So, regardless of who purchasesa solar system, everyone,
including individuals, isentitled to a minimum of 30% tax
credit.
(09:39):
So if the solar system costs$30,000, well, 30% tax credit
would yield you $9,000 incredits, and those credits are a
dollar per dollar credit.
So if you owed $9,000,effectively it would eliminate
that $9,000 payment.
That's the credit.
And then there's depreciation,and most of your listeners and
(10:00):
viewers are going to know whatdepreciation is.
Just like buying a jet orbuying a piece of capital
equipment heavy equipment, maybeleasing it out, as some people
do real estate, et cetera.
You can generate depreciation,while solar systems they qualify
for bonus depreciations oraccelerated depreciation at the
state, so you're always able todepreciate the asset within five
(10:25):
years okay, using the maker'sformula and it's those two
benefits that you are able togenerate, which gives you a
credit of what you would pay,and the depreciation lowers all
of your other forms of incomeand saves you money in your
taxes that way.
So it's just really those twobenefits and it's simply owning
(10:45):
the asset.
Now, of course, when you ownthis asset, you have a
contractual obligation with theproperty owner where the solar
system's installed, and theobligation is that you're going
to deliver power to thatproperty owner.
Most of your viewers andlisteners probably don't have
much experience in doing that,and that's where we come in.
So Inception Financial not onlysells the assets directly to
(11:08):
our clients' LLCs, but we alsosign a technical services
agreement and that ensures thatwe will make sure that all of
that power is being delivered tothe property owners.
If there's any type of warrantyitem, we take care of that
Items.
With the property owners, we dothat as well.
So think of us as also aproperty manager.
(11:29):
But instead of it being a realestate asset, it's simply a
solar asset.
What our clients are buying isnot brick and mortar, it's just
an asset that's on top of abrick and mortar asset.
They own that asset.
We ensure it delivers the powerand our clients benefit from
both the tax benefits and thenthe predictable income that is
associated with selling thatelectricity.
Speaker 1 (11:52):
So what I've heard and I'm following you for the
most part when you buy it one,you get an immediate tax
deduction I believe I heard yousay about 30%.
You also get depreciation overa five-year period on the asset.
But then the third piece, itsounds, is that now it's
actually an income-producingasset.
Is that correct?
Speaker 2 (12:11):
That's correct.
So there are various financingstructures in solar.
Most of them are all donethrough what's called a power
purchase agreement.
So, paul, your house, okay, youmay want to have solar, but you
may not want to buy that solarsystem.
So instead you would go with acompany that would own the solar
(12:34):
system but then would sell youthe electricity.
And they do that through apower purchase agreement.
It's what utility companieshave been using to buy their
power from independent powerplants for the last 100 years,
and at SolarCity we took thatconcept and brought it down to
the residential level andallowed all of the property
owners to buy electricity fromus at a reduced rate.
(12:58):
And what we did there is webundled up all of these assets
and we sold them off to MorganStanley and Bank of America and
all these other corporations ontheir balance sheet.
So we service the customer, butthen these banks took advantage
of the tax credits.
Here at Inception Financial,we're doing the same exact thing
, except instead of it going toMorgan Stanley, we are selling
(13:20):
it to retail clients, and thenwe are helping facilitate the
delivery of that electricity.
There's two forms of powerpurchase agreements.
The first is one in which youwould pay every single month for
the power that is beingdelivered by that solar system
that's installed in your rooftop.
Pretty simple right?
Just like how you're payingpower to the utility provider
(13:41):
today.
The other form is you couldprepay for all 20 years of your
electricity payments from thatsolar system up front in one
lump sum.
Now you're probably sittinghere going.
Why on earth would I do that?
Because you get a really largediscount and you lock in your
price for life.
So think of it, about buying oilfor your home if you live in a
(14:05):
cold weather climate, and it'salmost like buying an option on
that oil.
So you've locked it in but youprepay for it.
So for the rest of the next 20years, that's your cost.
A lot of property ownersactually have the cash to do,
and it is one of the smartest,most economical and most savvy
way to get electricity not justsolar electricity, but any form
(14:27):
of electricity, because it'salways going to be the least
expensive.
And with our strategy, that'swhat these property owners are
doing.
They're paying for all 20 yearsof those electricity payments
up front.
That income goes to our clientswho end up owning that asset.
And what our clients do is theyturn right around and they use
(14:47):
that upfront income to pay forthe majority of the installation
costs and then the balancethat's left over, they just pay
using dollars that would haveotherwise gone to the IRS.
So we're not competing withinvestable dollars.
We're not competing withsomeone selling Apple stock or
going into their savings.
(15:08):
We're taking dollars that areotherwise uninvestable, that are
going to the IRS, and sayingyou have a better option, use
those dollars to purchase theseassets.
You'll get a dollar for dollarcredit.
So, speaking broadly, you willnot owe that money to the IRS
because they'll give you acredit.
And then, on top of that,you're going to generate
(15:29):
depreciation, which is going tolower all of your forms of
income, whether it's W2 orbusiness income, or stocks and
bonds.
What have you?
So I know I said a lot there,but broadly speaking, that's how
the structure works.
Speaker 1 (15:43):
Broadly speaking, how would you compare that to, say,
investing in real estate?
It sounds like it has a lot ofsimilar properties to it.
I guess one thing is that myguess and I could be wrong is
that people that want to do thisare they more driven by the
idea of solar and wanting tosupport it, or is it just
strictly numbers investments,tax savings or a combination?
Speaker 2 (16:04):
Typically the latter.
Most everyone is making adecision based on economic value
.
I think the feel-goodattributes of producing clean
electricity may be a value add.
Everyone is doing this becauseit makes great economic sense.
The fundamental differencebetween a real estate investment
and this is with real estateyou have to come up with the
cash, so you have to either gointo your savings, you have to
(16:28):
divest another investment anduse that money now to reinvest
in real estate.
Here we're just simply takingthe dollars you're giving to the
IRS.
Let me use a W-2 employee likemy wife as an example.
We changed her withholdings, sothere's very little taxes
coming out of her paycheck.
So you can imagine that nextpaycheck we got was much larger.
(16:51):
We had all this surplus of cashand we took that surplus and we
used it to buy our solarsystems.
And then I used to pay my taxesquarterly and I stopped doing
that and I took that same moneythat I was earmarked to pay
those quarterlies and insteadbought my solar assets with it.
So for our household there'sbeen no impact to our cash flow.
(17:13):
We're simply redirecting thesame dollars that are going to
the IRS.
I can't do that with a realestate investment because if I
did that at the end of the year,I'd owe the IRS a massive bill
here, because I bought my assetsthat are solar and they
generate a credit.
The credit absolves me of thatpayment that I was otherwise
(17:35):
supposed to make.
So now I'm break even.
I'm good.
I still wrote a check, butinstead of giving to the IRS, I
used it to buy assets, and now Ialso have the benefit of all of
this depreciation, which iscreating an operating loss in my
LLC, and I take that loss and Iuse that to offset my business
(17:55):
income and my wife's W-2 income.
And therein lies the differencebetween any other strategy is
that real estate can be a taxefficient investment.
It's still an investment withinvestable dollars.
This is a strategy taking noninvestable dollars and using
them to buy an asset thatdelivers intrinsic value.
Speaker 1 (18:16):
Let's take it the other way.
For someone that, how would youcompare this, broadly speaking,
to someone, say, putting moneyinto a 401k or some other
tax-deferred vehicle like that?
Speaker 2 (18:26):
So that obviously, in my opinion, is one of the
smartest things that you can do,because you can take the money
that you would otherwise bepaying taxes on, put into a 401k
that reduces your overall grossincome.
And now you pay less in taxesand that can grow for you and
you're only going to pay taxeswhen you take it out.
Love that strategy and that'swhy our strategy is a compliment
(18:48):
to that, because there's only acertain amount you can do under
that.
And there's also definedbenefits plans and cash balance
plans right, those are othersmart things that I do, but I'm
capped at my amount.
At the end of the day, I stillhave to pay taxes, and the money
that I'm talking about that mywife and I use it's after all of
these other things that you'vementioned, including investing
(19:10):
in real estate and oil and gasand these other things.
We still have a tax bill, soit's that tax bill that we are
shaving off and using that moneyto buy the asset.
So it's a great compliment toall these other things that your
viewers and listeners may beutilizing already.
Speaker 1 (19:25):
Fantastic.
Thank you for that explanation.
That was very helpful for me asthe non-financial advisor.
That was very helpful probably,and hopefully it was useful to
our listeners as well, who aremostly financial advisors and
CPAs, and so I'd love to pivotfrom there.
And so how do you work with orcollaborate with financial
advisors or CPAs onopportunities for their clients
(19:49):
to take advantage of solar taxcredits?
Who's a good process look like,et cetera?
Speaker 2 (19:56):
Yeah, great question.
So we work with family offices,wealth managers and CPAs
routinely.
In fact, the bulk of ourbusiness is coming from those
types of relationships that wecurrently have in place.
When I started the business, Iwas reaching out to people close
to my network individuals andgetting referrals, but now the
business has grown where wespend very little time reaching
(20:17):
out to just retail clients.
Most of our time is spenttalking to CPAs, wealth managers
and family offices, and thereason that these organizations
like working with us is twofold.
First, most people are lookingfor a tax strategy that is
highly codified, well-documentedand risk adverse and I've seen
(20:38):
a lot of other similar taxstrategies out there, and they
come with their set ofchallenges, and this is the
strategy that I feel the mostcomfortable all the ones I've
ever seen, because it's beenbattle tested for 50 years.
This is not new.
It's new to a lot of yourlisteners, but it's not new to
the IRS.
This has been codified since1978, and we know depreciation
(21:01):
has been around for a heck of along time as well.
It's because of the codifiednature of this strategy that I
think so many of theseorganizations CPAs, family
offices, et cetera like workingwith us because it's very clear
what the code says and how youcan do this and there's not much
ambiguity to the structure.
The other reason I think theylike working with us is because
(21:22):
very few people know about thisand this is a tool in their
handbag where they can havedifferentiation against the
competition.
They can use this to mayberecruit in a higher net worth
family than they may have beenwith their current tools they
have today.
And then, of course, becausethis is a strategy that our
clients do year over year, mostof those families are going to
(21:43):
stay with that advisor, withthat office, because they know
they can rely on this strategy.
It's not like you can just makea few phone calls and substitute
Inception Financial withsomebody else, because, crazy as
this is going to sound, just ascrazy as it was when I moved
back to California in 2008 andgotten a solar, people are like
you can make a living at that.
This is just.
(22:05):
We're on the right side of timehere.
There's not really any othercompany doing it at scale.
Our secret sauce is in onething our relationships with the
contractors who want to dobusiness with us and use our
financial product in thehousehold.
The code's there.
It's been around for a longtime.
There's lots of other financingcompanies out there that do it.
(22:26):
Most are in a fund.
This is not a fund.
This is not a security.
And so because we've been ableto focus just on retail clients
and we have this deep network ofcontractors, that is where we
really shine, because we canscale this as high as we need to
go and because it's residential, it's smaller solar systems.
Some of our clients might need10 assets a year.
(22:49):
Some of our clients might needa thousand, when we can help
everybody in between.
So it's for these reasons thatit's predictable, it's scalable,
it's repeatable.
And, lastly, I'll say we makeit uber simple for our advisors
to do business with us, becauseat the end of the year we gift
wrap the reporting package tothe CPAs Really simple to file.
(23:10):
All of our forms are pre-filledout for them.
So the most amount of braindamage we go through with our
partners is this.
It's how does this esotericthing work?
Is it legitimate with the taxcode?
Once we get to the learningphase, everything's through
DocuSign and everything happensthrough our customer portal and
it's very easy to do businesswith us.
Speaker 1 (23:30):
Does it matter if there's a Democrat or a
Republican in office?
Does that create any headwinds,typically when it comes to the
tax credits and other things, oris it pretty stable either way?
Speaker 2 (23:39):
I would say let's look at history and say that
this tax credit has been inplace since 1978.
So it's withstood everyadministration since Nixon.
This is a type of credit thathas bipartisan support we've
seen, predominantly because it'senergy and I don't care
personally speaking.
I think we all could agree thatwhether it's fracking or oil or
gas or nuclear or coal or solaror wind, we need all forms of
(24:03):
energy sources right now,because some could say we have
an energy crisis in our nationand with the advent of AI, it's
only going to create more demand, not less demand.
And so when you look atcongressional endorsement for
credits and things of thatnature, it's usually around the
infrastructure of our nation andI think at the bedrock of that
(24:24):
infrastructure is energy.
So it's for those reasons thatwe feel supremely comfortable
that the credit will be in placeRight now.
It's codified out to 2032.
And we don't have much historyof the Congress unwinding things
like that.
So I think we're pretty solid.
Speaker 1 (24:40):
Is there any misconceptions that we haven't
talked about, that either theconsumer or the financial
advisor has when it comes tothis that you've come across, or
what are those commonmisconceptions that we haven't
yet spoken about?
Speaker 2 (24:50):
One big misconception is that this is for your house,
so I always like to remindpeople it's not.
Another misconception is thatit's a fund.
Always like to remind peopleit's not.
Another misconception is thatit's a fund.
This is not a fund and that'swhat makes it so elegant, so
that you can buy a few systemsand I can buy my systems, but
they're independent, right, wedon't commingle funds and that's
what allows each of our clientsto utilize this strategy
(25:13):
against both active and passiveincome.
And there's very few strategiesout there to offset that active
income and this is one of those, because of the inherent
structure, that are using it notbeing a fund.
There's lots of other solarstructures out there.
They're much more complicated,like the ones that banks do.
They require managing capitalaccounts and doing deficit
(25:33):
restoration obligations and lotsof crazy stuff.
So a lot of people, when theyfirst hear about investing solar
, their minds go there, becausethat's what most people know.
Very few people know about thesimple asset purchase and owning
these assets through an LLC ontheir own.
Speaker 1 (25:49):
And I just love how you broke down the contrast to,
say, real estate and then alsothe contrast to the 401k,
because I think those are twoassets that your average
consumer can wrap their headsaround and just see how this is
similar and different from bothof those.
I think that was very helpful,for myself at least, to better
understand it.
Is there any question that Ihaven't asked you about it that
(26:11):
you think is worth discussing?
Speaker 2 (26:13):
I would just say that the one question people may ask
is this all sounds great, itsounds a little too good to be
true.
And I would just say that theone question people may ask is
this all sounds great, it soundsa little too good to be true.
And I would say you're notwrong for thinking that way.
It's just you don't know aboutthis because you're not in the
industry.
But we can get, and I'mconfident every single CPA that
our clients work withsufficiently comfortable that
the structure is sound.
(26:35):
Whether or not there'scommercial risk that they're
willing to take is anothermatter, and I think the largest
commercial risk that someonemight be thinking they're taking
is great.
I love all this, I'd love to doit.
But what happens if InceptionFinancial goes out of business
and so we actually, through ourtechnical services agreement,
outsource all of that work tothe large companies that do this
(26:57):
for the big banks agreement,outsource all of that work to
the large companies that do thisfor the big banks, and there's
dozens of companies that offerthis service, and we do it as a
pass-through expensepredominantly because if we were
able to go out of business,we'd make enough money and we
just decide to close up shop.
First of all, our agreementsdon't allow us to do that.
We are obligated to find them areplacement.
The good news is, even if wetook off tomorrow and didn't
(27:18):
answer the phones, our clientscould simply go direct to the
subcontractors that we've hired,because they're household names
and the cost that we'recharging is just a pass-through
expense.
So they'd be paying the samething, essentially, just writing
the check to a differentorganization instead of
Inception Financial.
And we set it up that wayspecifically to give our clients
(27:39):
comfort to say you're not justrelying on Inception Financial,
but you've got backups andyou've got dozens of companies
that can be your propertymanager for your solar systems
in that unlikely event that weweren't here.
So we've really tried to thinkthrough every angle to make sure
that all of our clients feelcomfortable, that the structure
is sound and that theirinvestment is as risk adjusted
(27:59):
as it possibly can be.
Speaker 1 (28:01):
You find that it's typically more the financial
advisor or the CPA or someoneelse that brings these client
opportunities to you.
Speaker 2 (28:08):
I would say it's usually the financial advisors.
We do have some healthyrelationships with some CPAs and
it's interesting.
I think a lot of CPAs and thisis their job is to be extremely
risk adverse, and I think thatthey need to be.
Even maybe some characterizesome as being overly risk
adverse Because, at the end ofthe day, the CPA is just going
(28:29):
to inherit headaches if it goessouth and they're concerned
about an audit Speaking of whichwe don't have any history of
any of our clients and anyone weknow that's been doing this
ever being audited.
But that is an issue that CPAsthink about because it's more
work for them.
However, I will tell you thatthe top leading CPAs that we
work with they lean into thisstrategy heavily and I think
(28:50):
that speaks to the highlycodified nature and the fact
that they feel very comfortablethat they know that audits can
happen randomly and forsomething like this, I think
they would see it as veryroutine, that they have a strong
enough fact pattern.
They have all the things theyneed because it is so codified
that they're just simply notworried about it and they move a
lot of their clients into thestructure and I've really
(29:11):
learned that it's helped mechoose the CPA I'm working with,
by the way, because Iunderstand they're willing to
take the risk because they knowthe code so well, and I think
some of the other CPAs they justdon't understand the code.
Ergo, they're not willing totake that because they just
don't understand it.
Speaker 1 (29:26):
What are the chances of Elon Musk doing a favorable
tweet for you and getting 20?
Speaker 2 (29:32):
million views, probably slim to none.
I think that if I were going toask a favor from Elon, I'm not
sure it would be for my biz,because biz is doing really well
.
I think he would probably belike how do I get on to one of
the SpaceX capsules or somethingreally cool like that, right
Play my cards in that capacity.
There you go Very cool.
Speaker 1 (29:51):
I found this conversation for myself to be
very informative.
I personally work with a lot ofadvisors and CPAs and
specialists like yourself andit's always interesting to deep
dive because you know you canhear just solar tax credits.
Okay, I understand those threewords.
What is it?
I have no idea.
It goes back to themisconceptions, right?
I guess I need to put a solarthing on my roof.
I don't know.
So I think, so I think that wasvery helpful for myself and, by
(30:14):
extension, I hope our listenershad a chance to wrap their heads
around this and how this mightbe a strategy that may make
sense for them to bring to theirclients.
For someone that's listeningand wants to reach out and say a
financial advisor, CPA or thelike, and wants to reach out and
learn more about you or contactyou, what is the best way for
(30:37):
them to do so?
Speaker 2 (30:37):
We reached at Jesse.
That's J-E-S-E atinceptionfinancial.
Nothing on the end of that,it's just Jesse at
inceptionfinancial.
Speaker 1 (30:49):
Like people always assume that they have to add the
ending right.
Speaker 2 (30:52):
Yeah, there's com or net on there, no, or you can go
to our website, which isinceptionfinancial.
And I would just close and liketo say that I would suggest
everyone really lean in on this.
There's no downside in gettingthe information.
I've never had a single personever tell me that it wasn't a
great use of their time.
Now, not 100% of people decideto move forward for various
(31:16):
reasons, but every single personhas told me how much they
benefited and valued theinformation.
So I would suggest lean in.
There's a lot to learn, butonce you get it, it's very
simple and I think it's a verycompelling opportunity for a lot
of people.
Speaker 1 (31:29):
My final question and this goes back to your eclectic
background as an actor,nightclub owner and all these
different things that we talkedabout which career do you enjoy
the most, or did you enjoy themost, and why?
Speaker 2 (31:43):
Everyone's gonna hate me for saying this because
they're gonna it's sopredictable and they're gonna
think it's self serving.
But it is the truth and I thebusiness I'm in now is the
business that I am the mostpassionate and most excited
about, and I'll caveat that realquickly.
I know a lot of celebrities.
I live in Los Angeles, sothey're around and they're just
people like you and me and theyjust happen to be doing the
thing they love and they havenotoriety because they happen to
(32:04):
be on TV.
But that comes with its ownhost of challenges and it's not
that I necessarily feel bad forthem per se, but I definitely
see how much of a struggle it isand I feel grateful that I was
able to find my way to financialfreedom and other means where I
can maintain my anonymity.
I will say this I did go tograduate school for three years
(32:26):
where it was just all about thework.
I went to get my master of finearts in acting, and that was
just a three-year sabbatical, ifyou will at an amazing program
with amazing professors, andthat was three years where I
really just got to do the workfor fun and just my pure
enjoyment.
And I would say those are threeof the greatest years of my
life, but I'm very happy that Ichose not to make it my
(32:48):
profession.
But I look forward to doing itjust for fun again and I'm
getting ready to do somethinglike that, probably in the next
couple years.
But genuinely, this is where Iwanted to be, leveraging all my
experience from SolarCity andTesla and now being on the
financing side and also, I gottatell you like helping lots of
families save money.
There's a lot of pure enjoymentin that.
Speaker 1 (33:09):
I can relate, because it's oftentimes it's not like a
single path that leads you.
It's taking advantage of allthe things that you've done over
the past and merging them intosomething that you can tap into
all of them in differentcapacities, I think oftentimes
creates the most fulfillment.
Thank you for being a guesttoday on the Million Dollar
Producer Show.
Looking forward to sharing thiswith our audience.
Speaker 2 (33:30):
Thanks again for having me.
It's been a lot of fun.
I really appreciate it.
Bye for now, thank you.
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