The Inflation Reduction Act incentives reduce renewable energy costs for tax exempt organizations such as nonprofits, educational institutions, state & local governments and federal tribal organizations. 

Note: State recognized Tribes can access funding through the nonprofit IRA track.

The new Direct Pay program, also known as Elective Pay, allows organizations to receive the equivalent of renewable energy tax credits that businesses utilize for equipment placed in service on or after January 1, 2023.

• The Direct Pay option allows certain non-taxable entities to directly monetize certain tax credits for entities such as  state, local, and tribal governments, rural electric cooperatives, the Tennessee Valley Authority, and others to directly monetize tax credits including many renewable energy credits such as the ITC and the PTC. Applicable entities may elect to treat these tax credits as refundable payments of tax. Such entities are eligible to receive a direct payment from the IRS for any amount paid in excess of their tax liability for credits.

Elective Pay makes certain clean energy tax credits effectively refundable.

• With Elective Pay, an eligible ­entity (such as a local government) that qualifies for a clean-energy investment tax credit can notify the IRS of their intent to claim the credit and file an annual tax return to claim elective pay for the full value of the credit. The IRS would then pay the local government the value of the credit.

Tax Credit Monetization

Final Rules & Guidance For IRA Adders

(Official Dept. of Treasury Guidance)

The Inflation Reduction Act Section 48(e) offers new access to clean energy tax credits with an emphasis on reaching disadvantaged populations and communities with environmental justice concerns. Certain projects may be eligible for bonus payments if they meet certain environmental justice criteria. These adders can be stacked on top of incentives like the ITC - maximizing the presence of renewable energy sources in low-income areas.