Welcome to the +18 new subscribers this week!
For everyone new, we share actionable market insights and portfolio updates so YOU can make better investment decisions and get an inside view at Tuttle Ventures.
The most storyworthy moment this week was the passage of the Inflation Reduction Act Tax.
Sweeping legislation like this affects you as an investor —no matter your political beliefs. (Full Text here)
Here are four key facts from the act that you should know:
Climate and Energy Provisions
$28,500 in up-front incentives to buy electric
IRS funding
Excise Tax on Stock Buybacks
#1 Climate and Energy Provisions
The bill provides $369 billion to the US renewable energy industry through a combination of tax credits available for energy projects and manufacturing credits.
Who benefits the most?
Tax Equity Investors.
How climate and energy provisions could impact your investments?
Tax equity is considered a passive investment, with an investor receiving a rate of return based on the acquisition of federal tax credits.
With tax equity investing, you're investing in a company that qualifies for those tax benefits.
This means foreign or domestic tax credits become an asset class on their own that you can buy.
The largest market share of tax equity investments have been in renewable energy like solar.
This bill opens up investment opportunities to a larger pool of opportunities: Battery Cells, Inverters, Wind, Manufacturing, and Trackers.
We have experience saving millions in taxes for clients by offsetting foreign taxes with tax credit incentives —specifically when I worked for a specialized Cross Border registered investment advisor in Arizona.
We have written about Tax Equity investing here, here, here, and here.
If you have a large tax bill at the end of the year and would like to schedule a time to learn more about tax equity investing- click on the link below:
#2 $28,500 in up-front incentives to buy electric
The bill offers:
$7,500 toward the purchase of a new electric vehicle or $4,000 toward the purchase of a used electric vehicle
30% off the cost of rooftop solar (average savings of $7,000)
$14,000 in rebates to switch over to electric appliances
Who benefits the most?
The Average Joe. Eligibility is capped so that these credits are not available to the wealthiest families—for example those earning more than $300,000 per year for new vehicles or $150,000 per year for used vehicles.
How the incentives to buy electric could impact your investments?
We think this is positive for public companies like Whirlpool WHR 0.00 and Ford F 0.00 .
Whirlpool has raised prices by as much as 12% this year in various markets to compensate for increased raw-material costs. This should help increase consumer demand to meet those increased costs.
Ford could stand to benefit by putting the U.S. back in the race as an electric vehicle leader.
#3 IRS funding
IRS enforcement funding will be increased by about $80 billion over the next 10 years.
Who benefits the most?
Enrolled Agents.
Enrolled Agents represent taxpayers before the Internal Revenue Service for tax issues that include audits, collections and appeals.
How the new IRS funding could impact your investments?
The chances of you being audited by the IRS have just gone up.
At Tuttle Ventures, we proactively partnered with YourTaxGeeks.com for clients to who need stress free tax solutions. Mention Tuttle Ventures for a pro-bono consultation.
#4 Excise Tax on Stock Buyback
This bill creates a 1% excise tax on the repurchase of stock by a publicly traded corporation.
Who benefits the most?
Dividend investors in qualified accounts.
To achieve tax parity with dividends, the stock buyback tax would actually need to be higher (in the neighborhood of 12%) in terms of revenue collection.
How this could impact your investments?
The new 1% levy on stock buybacks isn’t slated to go into effect until 2023, which means that there could be a flurry of repurchases before year-end.
That would be good for stocks short term.
After 2022, the new buyback tax may force companies to think twice about how they use cash to reward shareholders.
The new rule decreases the after-tax income of the corporation rather than the after-tax income of its shareholders.
Especially if you hold stocks in a retirement account, you would much prefer dividend distributions over buyback programs.
Final Word
There are many other aspects of the law that we did not mention.
We will continue to actively manage investments so that you can be a better investor.
Thank you for reading and I am grateful and humbled to be able to learn, grow and invest alongside you at Tuttle Ventures.
Don’t forget to follow Tuttle Ventures on Twitter, LinkedIn or Instagram.
Check out the website or some other work here.
Best,
Darin Tuttle, CFA
NOTE - This is not investment advice. Do your own due diligence. I make no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information contained in this report. Any assumptions, opinions and estimates expressed in this report constitute my judgment as of the date thereof and is subject to change without notice. Any projections contained in the report are based on a number of assumptions as to market conditions. There is no guarantee that projected outcomes will be achieved. Unless there is a signed Investment Management or Financial Planning Agreement by both parties, Tuttle Ventures is not acting as your financial advisor or in any fiduciary capacity.