Clean Electricity Investment Tax Credits for Tax-Exempt Entities

What does this funding get me?

If you install solar, wind, geothermal power, or battery storage on property belonging to your tax-exempt organization, you can get 30-70% of the price back as a “direct pay” or “elective pay” tax credit.

Note: the rules are different for commercial businesses (learn more here)

Am I eligible?

Local governments, nonprofit organizations, and other tax-exempt entities are eligible for a 30% investment tax credit (ITC). 

Additional credits of up to 40% depend on whether your project is located in an “energy community” or low-income community, and on the percentage domestic content in the materials used in the project.  

If your project is over 1 megawatt, there are additional wage and apprenticeship requirements. 

See below for more detail on these provisions.

How can I access the money?

For the first time, the IRA makes it possible for tax-exempt organizations like local governments to receive clean energy tax credits as “direct pay” or “elective pay” (that is, in cash), even though they don’t owe Federal taxes.

Depending on your project, you will receive 30-70% of the cost of the equipment. The credits and bonus credits are: 

  • 30% base credit for projects under 1 megawatt (for a project over 1 MW, the base credit is reduced to 6% if it does not meet prevailing wage and apprenticeship requirements)
  • 10% bonus for projects located in an “energy community” (2% if project is > 1 MW and does not satisfy wage/apprenticeship requirements) 
  • 10% bonus for projects with minimum domestic content (2% if project is > 1 MW and does not satisfy wage/apprenticeship requirements)
  • Low-income credits: 10% bonus for projects < 5 MW located in a low-income community or on Federally-recognized Tribal land OR 20% bonus for projects < 5 MW that are part of a qualified low-income residential project or otherwise provide financial benefit to low-income people. 

The 10% or 20% low-income credits are not guaranteed, because quantity is limited to 1.8 gigawatts per year through 2033. Therefore, unlike all the other credits, you must apply for them before putting the project in service. After being approved, you have 4 years to install the project.

Detailed procedures and updates on the low-income credits can be found on the Department of Energy and IRS websites. Check this DOE dashboard to see how much of the available capacity for the current year remains available in each category. Certain amounts are set aside for projects that meet additional ownership or geographic criteria (generally, projects owned by tax-exempt entities or located in disadvantaged communities). More info on the additional selection criteria can be found in this August 2023 IRS guidance.

Although any business or nonprofit installing a project in a low-income area can apply for this bonus credit, it is low-wealth entities who most benefit since they might not otherwise have the funds to complete their projects.

You must pre-register with IRS

Whether or not you are applying for the low-income bonus credits, you must register with the IRS to notify them you will be claiming direct pay credits. You will be given a registration number that you will use to claim the credits when you file your IRS return for the year in which you installed the equipment. Register here and learn more about the registration process in this IRS user guide. If you have trouble registering, you can request help by sending an email to: irs.elective.payment.or.transfer.of.credit@irs.gov (note this is only for technical questions regarding the preregistration tool, not for tax questions).

What is the timeline?

These tax credits are available through 2033, and will then gradually phase out (to 22.5% in 2034, 15% in 2035, and 0% in 2036). However, if national emissions reduction targets are not met by 2033, the credits may be extended. All credits are claimed on your tax return for the year in which your equipment becomes operational. 

What other incentives could I use to help me accomplish my goals?

There may be new, low-interest loans developed to help cover the upfront cost of renewable energy systems until you receive the direct pay credit from the IRS. We will update this website with any information about such loans. 

Leasing solar instead of purchasing could help reduce the upfront cost. The companies approved as solar lessors in North Carolina are listed here.

Most organizations installing renewable energy systems for their own use will elect to take this investment tax credit (ITC), but another option is the production tax credit (PTC) that pays a credit over 10 years based not on the cost of the system but on the kilowatt-hour output. Learn more here.

Check the Database of State Incentives for Renewables & Efficiency (DSIRE) for additional incentives that may be offered by your state, local government, or utility, as well as important federal, state, and local policies. For questions regarding DSIRE, contact Justin Lindemann (NC Clean Energy Technology Center) at jplindem@ncsu.edu.

Where can I get more information?

Testimonials

Learn how Rebuilding Broken Places Community Development Corporation and Greenleaf Christian Church in Goldsboro went solar in 2023 using the Clean Electricity Investment Tax Credit. Watch the video.

See this testimonial and more on our Testimonials page.