Direct Pay / Elective Pay Provisions in the IRA
Tax exempt entities, such as local governments, Tribes, nonprofits, schools and community organizations, qualify for tax credits as a direct payment from the government for certain eligible clean energy upgrades.
These tax-exempt entities can now take advantage of opportunities to electrify their vehicle fleets, install electric vehicle charging infrastructure, invest in solar and energy storage, or implement other green technologies. To learn if you’re organization’s potential, planned, or completed project is eligible for tax credits, visit the Clean Energy Navigator today.
However, some of the federal funding available for clean energy projects is now inaccessible due to federal funding freezes pausing the disbursement of funds. If you are unable to access funding previously allocated to your organization, you can contact Lawyers for Good Government for support. In addition, for the latest on the status of funding for clean energy projects, see the Environmental Defense Fund’s Inflation Reduction Act Tracker.
What are Elective Pay Provisions in the IRA?
Thanks to the clean energy plan’s “elective pay” (often called “direct pay”) provisions, tax-exempt and governmental entities can, for the first time, receive a payment equal to the full value of tax credits for building qualifying clean energy projects.
Unlike competitive grant and loan programs in which applicants may not receive an award, direct pay allows entities to get their payment if they meet the requirements for both direct pay and the underlying tax credit.
View the list of available clean energy tax credits here. In addition, you can visit the Progressive Caucus Center to access tools and resources that support your organization’s application for elective pay provisions.
How Can My Organization Leverage Elective Pay Tax Credits?
- Identify the project and the credit you want to pursue.
- Complete your project, place it into service, and determine the corresponding tax year.
- Determine when your tax return will be due.
- Complete pre-filing registration with the IRS before your tax return is due.
- Once you receive a valid registration number, file your tax return by the due date, including extensions.
- Receive your elective payment.
Additional Resources
Impact of clean energy funding
Impact of clean energy funding
Federal Funding for Tribes
The Menominee Indian Tribe of Wisconsin built solar and battery backups for elder homes in 2024, partnering with Sun Bear Industries to use funds from the IRA to install this clean energy technology.
Watch this video to learn more about how Tribes can leverage clean energy tax credits to reduce costs and pollution on Tribal lands.
How Cities Can Make the Most of Climate Federal Benefits
The Local Energy Rules Podcast is a biweekly podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. In this episode, the hosts discuss how cities can use federal funding dollars to advance local goals and encourage their residents to do the same. This funding is still available to local governments through direct pay programs.
Madison Food Pantry Plans to Use its Anticipated Direct Pay Earnings to Bolster Their Community Programs
Direct Pay credits for the 2025 tax year will allow The River Food Pantry to receive direct payments from the IRS covering a percentage of each renewable project’s cost once operational. These include 30% for solar, geothermal and an EV forklift, plus a 10% bonus for solar projects in low-income communities.
Learn more about the project at RENEW Wisconsin’s blog here.
Additional Resources
Impact of clean energy funding
Impact of clean energy funding
Federal Funding for Tribes
The Menominee Indian Tribe of Wisconsin built solar and battery backups for elder homes in 2024, partnering with Sun Bear Industries to use funds from the IRA to install this clean energy technology.
Watch this video to learn more about how Tribes can leverage clean energy tax credits to reduce costs and pollution on Tribal lands.
How Cities Can Make the Most of Climate Federal Benefits
The Local Energy Rules Podcast is a biweekly podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. In this episode, the hosts discuss how cities can use federal funding dollars to advance local goals and encourage their residents to do the same. This funding is still available to local governments through direct pay programs.
Madison Food Pantry Plans to Use its Anticipated Direct Pay Earnings to Bolster Their Community Programs
Direct Pay credits for the 2025 tax year will allow The River Food Pantry to receive direct payments from the IRS covering a percentage of each renewable project’s cost once operational. These include 30% for solar, geothermal and an EV forklift, plus a 10% bonus for solar projects in low-income communities.
Learn more about the project at RENEW Wisconsin’s blog here.
