FACTSHEET: Direct Pay, Supporting Decarbonization of Higher Ed Buildings
Through the Inflation Reduction Act of 2022, clean energy tax credits for technologies such as solar, geothermal and EV charging are now accessible to public colleges and universities and other tax-exempt entities. This is possible through what is known as direct pay, also known as elective pay, where public institutions and other tax-exempt entities can get reimbursed up to 50 percent for the cost of clean energy projects once projects are completed.
In simple terms, direct pay is a mechanism that lets tax-exempt entities, including public colleges and universities, recoup a significant portion of the cost of a clean energy project as a reimbursement from the IRS. Historically, it wasn’t possible for public institutions and other tax-exempt entities to take advantage of clean energy tax credits. Now, thanks to the Inflation Reduction Act and the novel inclusion of direct pay, public (and other tax-exempt) colleges and universities can receive the full value of a clean energy tax credit as cash payment once a project is placed in service.