Inflation Reduction Act – Elective Pay
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Grant Summary
Download the PDF here.
Agency
U.S. Internal Revenue Service (IRS)
Category
Environmental Tax Credits
Eligible Applicants
Per the IRS, eligible applicants include tax-exempt organizations, States, and political subdivisions such as local governments, Indian tribal governments, Alaska Native Corporations, the Tennessee Valley Authority, rural electric co-operatives, U.S. territories and their political subdivisions, and agencies and instrumentalities of state, local, tribal, and U.S. territorial governments.
Total IRA Funding
N/A. Total Elective pay-eligible tax credits are uncapped.
Overview
The Inflation Reduction Act of 2022 (IRA) provides elective pay (often called “direct pay”) provisions for clean energy technologies. Tax-exempt and government entities will be able to receive a payment equal to the full value of tax credits for qualifying clean energy projects, including work to expand EVs/EV charging, clean energy generation, and housing/commercial building efficiency.
FY24 Grant Funding
N/A
Match Requirements
N/A. Elective pay reimburses eligible applicants for a portion of their investment in clean energy. The credit amount varies by tax provision.
Key Dates
Tax-exempt entities and governments must first pre-register with the Internal Revenue Service (IRS) no earlier than the start of the year in which they intend to earn the credit and at least 120 days before the due date for that year’s tax return.
The deadline to file a tax return is typically 4.5 months after the end of the filing entity’s tax year. This is May 15 for most tax-exempt and governmental entities. Pre-registering and filing a tax return are prerequisites for receiving payment.
Key Funding Criteria
Criteria for receiving funding vary by tax provision.
Opportunities for Climate and Racial Wealth Equity
Additional tax credits, also called bonuses, are available for qualifying energy projects. Several tax credits increase by 10 percent or percentage points if projects are located in energy communities.
Eligible Activities
Tax-exempt and government entities can use elective pay for twelve tax credits provided by the IRA. These tax provisions address energy generation and carbon capture, manufacturing, vehicles, and fuels. Eligible projects include clean energy generation, battery storage, community solar projects, electric vehicle (EV) charging infrastructure, and purchasing clean vehicles for state or municipal fleets. Criteria for receiving funding vary by tax provision.