The Inflation Reduction Act expanded the availability of clean energy tax credits so that tax-exempt entities like public and non-profit hospitals can receive “direct pay” (also known as “elective pay”). In simple terms, direct pay allows such entities to recoup a significant portion of a clean energy project’s cost as a tax-free cash payment from the U.S. Internal Revenue Service (IRS) for the taxable year in which the project is placed in service. Historically, because these tax credits were used to reduce entities’ tax liability, tax-exempt entities like non-profit hospitals and local governments have not been able to take advantage of them. Now, thanks to the Inflation Reduction Act’s creation of direct pay, these entities can receive the full value of the tax credit as cash payment.
Benefits of Clean Energy Projects
- Realize enormous energy savings and redirect them to other budgetary needs
- Reduce carbon emissions meeting local and national climate goals
- Create a reliable energy grid for emergencies and back-up power
- Provide electric vehicle (EV) charging as a staff benefit
Relevant Projects Eligible for “Direct Pay” Tax Credits
- Battery storage
- EV charging
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