Direct Pay Overview (June 2024)

CompeteRI Oct 22, 2024

Leveraging Direct Pay in New England

Claiming Direct Pay for Non-Profits and Communities

Samantha Jacoby
Deputy Director of Federal Tax Policy, Center on Budget and Policy Priorities
June 11, 2024

Disclaimer

This presentation provides an overview of Treasury/IRS guidance and Inflation Reduction Act tax credits and is intended for general informational purposes only and does not constitute legal or tax advice.
Please refer to Treasury/IRS guidance for more detailed information.

Overview

Background on Inflation Reduction Act tax credits and direct pay
Process for claiming credits through direct pay

Example Projects and Tax Credits

Solar roofs on non-profit-owned buildings that lower the cost of energy
- Investment tax credit covers 30% of project costs
- With bonus credits, can cover up to 70% of costs
Electric vehicle fleets to replace aging gas-powered vehicle fleets
- EV credit covers up to 30% of commercial vehicle cost (up to $7500 for small vehicles, $40,000 for large vehicles)
- 30% credit for charging infrastructure, up to $100,000

Direct Pay Background

Direct pay allows non-profits, governments, agencies, and other tax-exempt entities to access the full value of tax credits via a tax refund
Program is uncapped, available for 10 years
No competitive application process
Requires entities (1) to pre-register projects with the IRS and (2) to file a tax return

Sample Timeline: Using Direct Pay to Receive Solar Tax Credits

Putting It Together: Financing Local Clean Energy Projects

Time lag from project development to receive of direct pay tax refund 🡪 projects will require bridge financing
Credit stacking with other financing tools, e.g., grants and forgivable loans up to 100% of project costs
Using other IRA tools: Greenhouse Gas Reduction Fund, Solar for All
Existing green banks