The Inflation Reduction Act (IRA) has transformed clean energy investment in the United States by expanding tax credits, revolutionizing opportunities for nonprofits, municipalities, and other tax-exempt organizations.

Unlocking Clean Energy Potential with IRA Incentives: Before the IRA, tax-exempt entities faced hurdles in accessing clean energy benefits, relying on third-party arrangements like power purchase agreements. The IRA introduced "direct pay" options, making clean energy investment more accessible and cost-effective for organizations of all sizes.

Exploring Direct Pay Mechanisms for Clean Energy Projects: Direct pay allows tax-exempt entities to receive payments from the IRS equivalent to the value of clean energy tax credits, offsetting project costs. This mechanism streamlines energy consumption, reallocating savings towards core missions while supporting local clean energy initiatives. Clean energy projects commissioned post-2022 may be eligible for direct pay benefits.

Who Qualifies for Direct Pay? Eligible entities include nonprofit organizations, governmental bodies, tribal governments, rural electric cooperatives, and educational institutions.

What Clean Energy Technologies Are Eligible? There are 12 IRA tax provisions that are eligible for direct pay, including investments in manufacturing, clean vehicles, renewable energy generation, and more, incentivizing investment in solar, wind, and electric vehicles. These credits make direct ownership of clean energy systems a viable investment, offering substantial financial benefits.

Navigating the Direct Pay Application Process: To access direct pay benefits, organizations must ensure project eligibility, comply with requirements, and register with the IRS. Tax returns must be filed by the deadline, triggering direct payment upon IRS processing. For more information, please visit the IRS elective pay FAQ.

Empowering Communities with IRA Benefits: Tax-exempt organizations play a crucial role in advocating IRA benefits to residents and businesses. Through rebates and incentives, communities can embrace clean energy, supported by regional clean energy hubs providing personalized assistance. By leveraging IRA incentives, tax-exempt entities can lead the transition to clean energy, driving sustainability and economic growth.

For up-to-date information and guidance on the clean energy tax credits available under the IRA that are applicable credits for elective pay, please visit IRS.gov/cleanenergy