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March 20, 2024
Making investments in clean energy can deliver economic and environmental benefits to nonprofits and other tax-exempt entities as well as the communities they serve. For example, energy costs are the second-highest operational expense for many nonprofits. Installing clean energy upgrades, such as solar panels and battery storage systems, in facilities operated by nonprofits helps these organizations save money by lowering monthly utility bills and cutting waste in operations. This promotes sustainability and helps advance their core mission.
The Inflation Reduction Act of 2022 (IRA) (P.L. 117-169) reauthorized and expanded a wide array of clean energy tax credits through 2033 and allowed, for the first time, tax-exempt entities to directly access those tax credits through a process called “direct pay” (or “elective pay”). Qualifying entities can now receive a direct payment from the Internal Revenue Service (IRS) in lieu of a tax credit—a “game changer” that puts clean energy in reach for many organizations.
Tax-exempt organizations, including nonprofits, state and local governments and their agencies, school districts, churches, tribal governments, rural electric cooperatives, and municipal utilities are eligible for direct pay.
Tax-exempt entities can now monetize 12 different tax credits. For many nonprofits, these could be the most important:
Author: Miguel Yañez-Barnuevo
Graphics: Aaron Vincent Facundo
Editors: Daniel Bresette, Amaury Laporte