What is direct pay?
With a mix of federal funding and tax credits, the Inflation Reduction Act includes a new mechanism called elective or direct pay for tax-exempt entities — local governments, tribal nations, 501(c)(3) organizations, religious 501(d) organizations, and rural energy cooperatives — to take advantage of many of the new clean energy tax incentives included in the law.
What is eligible for direct pay?
There are two ways direct pay will be most helpful for tax-exempt entities: electric vehicles and renewable energy systems. View the IRS full list of clean energy eligible tax credits [PDF]
January 2024 Update: The pre-registration portal is now open for tax-exempt entities to register their eligible projects for direct pay.
- The U.S. Treasury Department shared a press release in with links to helpful information.
- A Pre-Filing Registration Tool User Guide [PDF] is available for download.
June 2023 Update: IRS released guidance on elective pay, also known as direct pay, and transferability. They're working on implementing these options and will provide more information about how to claim these clean energy tax credits in late 2023.
March 2023 Update: Assistant Secretary for Tax Policy Lily Batchelder gave remarks on implementation of the Inflation Reduction Act, including direct pay guidance. Batchelder said the IRS is creating a prefiling process for organizations that will allow them to access direct pay. More to come!