FACTSHEET: Direct Pay, Supporting Decarbonization of Our Public Schools
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 schools and other tax-exempt entities. This is possible through what is known as direct pay, where public schools 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 (also known as elective pay) is a mechanism that lets tax-exempt entities, including school districts, to recoup a significant portion of the cost of a clean energy project as a reimbursement from the IRS. Historically, it wasn’t possible for schools 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) schools can receive the full value of a clean energy tax credit as cash payment once a project is placed in service.