The Inflation Reduction Act introduced and expanded tax credits for clean energy technologies, providing unprecedented policy certainty and opportunity for entities that manufacture, install, and produce clean energy over the next decade. In addition to providing incentives to spur private-sector investment, the Inflation Reduction Act includes game-changing new provisions that will enable tax-exempt and governmental entities—such as states, local governments, Tribes, territories, and nonprofits—to take an active role in building the clean energy economy, lowering costs for working families, and advancing environmental justice.
Direct pay offers several benefits for eligible entities, including:
- Increased investment in clean energy: Direct pay can make it easier for eligible entities to afford clean energy projects, which can lead to increased investment in clean energy technologies.
- Lower costs for working families: Direct pay can help lower energy costs for working families by making clean energy more affordable.
- Advancement of environmental justice: Direct pay can help to advance environmental justice by ensuring that clean energy benefits are accessible to all communities, including low-income and minority communities.
- Economic opportunity: Direct pay can create jobs and economic opportunity by stimulating the growth of the clean energy industry.
Direct pay is available to a wide range of entities, including:
- State, local, and territorial governments
- Tribal and Native entities
- Rural energy cooperatives
- Other tax-exempt entities, such as 501(c)(3) organizations and religious or apostolic 501(d) organizations
To apply for direct pay, eligible entities need to follow these steps:
- Identify the project and the credit you want to pursue.
- Complete your project, place it into service, and determine the corresponding tax year.
- Determine when your tax return will be due.
- Complete pre-filing registration with the IRS before your tax return is due.
- Once you receive a valid registration number, file your tax return by the due date, including extensions.
- Receive your direct payment.
