Principles
Make money
Doing meaningful work
With people you care deeply about [1]
Nevada Trusts
Pillars of NV Trusts
Tax Savings
ZERO state tax (income, corporate, capital gains, franchise, inventory, gift, inheritance…)
Dynasty trusts avoid estate and transfer taxes for 365 years
Strategy - startup shares moved into a NING trust are tax efficient at IPO
Asset Protection
Self settled spendthrift trusts (SSST/DAPT) with 2 year seasoning period
No exception creditors, not even ex-spouses
Strategy - combine NV trust and LLC to offer charging order protections
Privacy
No required filings or registration with the state or courts
Trust terms and beneficiary identities can be kept out of the public eye
Only grantor, trustee and beneficiaries can see assets, terms, or operations of trusts
Quiet (or silent) trusts are not disclosed to beneficiaries
Strategy - use trusts and LLCs to provide anonymity to aircraft owners
Flexibility
No residency requirement
Can appoint third party trust director in addition to NV trustee
May decant irrevocable trusts
Nonjudicial modification agreements
Directed trusts allows use of non-trustee investment advisors
Strategy - use Nevada resident to establish Nevada trustee for non-resident grantors
Private Family Trust Company
Establish a private company in Nevada to act as a family fiduciary
Can sit beside the family office in another state or foreign country
Maximum privacy offered because it does not have to be a chartered trust company with the state of NV
Provides all the benefits of Nevada’s favorable trust laws to persons and families outside Nevada
Provides more privacy, flexibility and control than a commercial trust company
Will reflect the family culture better than a commercial trust company
Allows more flexibility in investing than a commercial trust company
Family members can participate in the trust company
NING - Nevada Incomplete Nongrantor Trust
Provides asset protection and tax optimization
Nongrantor so it exists as separate tax entity
Can shift income from grantor to trust possibly reducing Federal taxes (in certain times)
Incomplete gift removes assets from grantors estate but does not incur gift taxes nor use of gift tax exemptions
Zero capital gains tax in NV is tax efficient in cases such as the exit from a business
Settlor retains great control over trust terms, beneficiaries, or even termination of trust
Of course, no state taxes
Supporting Material
Nevada Chapter 163 - Trusts
Nevada Chapter 166 - Spendthrift Trusts
Nevada Chapter 669a - Family Trust Companies
Reading
Oshins State Rankings
NV Family Trust Companies
Reasons to Start a Private Family Trust Company
How to Reduce Your Tax Burden from a Business Sale (NING)
IRS Private Letter Ruling 201310002 – NING Trust
Though CA has cracked down on NINGs this is still a good article applicable to high tax states
Advantages of Nevada Trusts
Using trusts in aviation
Investment Tax Credits
Effectively achieve a reduction in your Federal tax expense by purchasing $1 worth of investment tax credit (ITC) at a discount
e.g. purchase $1 tax credit for $0.90 and this offsets $1 in Federal taxes
Strategy - by purchasing an ITC for $0.90 one reduces their tax liability by $1
Solar developers receive credits for projects but these are stranded because the developer has no tax burden
The developer monetizes the credits by selling them to a taxpayer that can benefit
These tax credits are scheduled to sunset in 2033
If one is not applying this strategy, they are simply overpaying Federal taxes
Two methods to accomplish this:
Direct Transfer
Purchase discounted credits directly from developers
Returns are usually 12-15%
Benefit occurs in tax year purchase is made
Tax Equity
Invest in a partnership flip through our solar lease or tax equity funds
IRR can top 15% over a 5 year holding period
Returns heavily front loaded
Investor receives tax credits, depreciation, and cash flow from solar project on a K1
Who can benefit?
These are effectively passive losses, so
Any individual or entity with passive income/gains
C corporations (not subject to passive loss limitations)
Limited Partners in investments with income/gains
Real estate professionals
Persons or entities with REIT dividends
Persons or entities with rental income
Banking institutions
In some cases we can wrap the investment in a single member LLC and seek to apply the 100 hour rule
Generally, W2 earned income and personal portfolio gains are not good candidates
Exposures, Risks, Mitigations
Risks
5 year recapture period (but ITC vests 20% per year)
Fraud, sell ITC twice or project does not exist
Regulatory uncertainty, changes in laws
Creditworthiness of offtakers
Project timelines
Market conditions
Mitigations
Work with partners that have already produced clean K1s and credits from prior years
Projects generally provide two plus decades of contractual cashflow with low default
Have professionals such as Novogradac and Avisen on our side of the table:
Rob Bryant CPA and Jeremy Kalin JD
Ask for third party valuations or cost segs
Secure insurance for the solar project or ITCs
Site visits to verify projects
Timing of Investments
There is the notion of ITC vintage, they are aligned with the tax year
In cases of direct transfer, the credits must be sold before the developer files taxes
For tax equity, in order to satisfy at risk and partnership rules the investment must be made before the project is “placed in service”
There is a 3 year lookback (with refunds available) and a 22 year carry forward
Smart strategy would be to invest in credits quarterly instead of depositing taxes
Supporting Material
Federal Tax Code Section 48
Section 6418 of the Internal Revenue Code added by IRA 2022
IRS Forms 3800, 3468, and Schedule C will report the investment
IRS Guidance
Reading
Lenox Overview
Understand and Benefit from Solar Tax Incentives
Can Individuals Offset Federal Taxes Using ITCs
Renewable Energy Tax Equity Investments
About Renewable Energy Tax Credits
[1] Dalio, Ray. Principles. Simon & Schuster, 2017. p.22