Utility Dive
Summary
Many tax-exempt organizations are now eligible for a wide array of the Inflation Reduction Act’s tax credits through the U.S. Internal Revenue Service’s direct pay framework.
Also known as elective pay, the framework allows private nonprofits and government entities to receive clean and alternative energy tax credits through direct cash payments. The Environmental and Energy Study Institute notes that most entities would qualify for tax incentives of between 30% and 50% of a project’s total cost, depending on the project’s location and the extent to which domestically produced hardware is used. Previously, the credits were limited to organizations with federal tax liabilities, which could only claim credits to offset the taxes they owed.
Eligible tax-exempt organizations can also claim credits on small wind turbines, biogas generators, fuel cells and geothermal heat pumps through the Investment Tax Credit for Energy Property. Other forms of eligible energy infrastructure include battery storage systems, microgrid controllers and combined heat and power systems.
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