Inflation Reduction Act

ABOUT THE INFLATION REDUCTION ACT

Clean energy in the U.S. has largely been incentivized by tax credits like the Investment Tax Credit (ITC). These are financial incentives that reduce the cost of your project by lowering your tax obligations. Before the IRA passed, tax credits were available only to taxable entities. That left nonprofits, churches, and schools out of the equation. These entities could go solar via a third-party ownership arrangement such as a subscription model or power purchase agreement (PPA), but they couldn’t directly take advantage of the ITC.

That’s all changed with the direct pay feature of the IRA. There are still some nonprofits that prefer third-party ownership options, but for the first time ever, direct pay allows nonprofits to receive a payment that’s equal to the full value of tax credits when they build qualifying clean energy projects through a refundable tax credit.

What’s more, the IRA added various bonuses to the 30% tax credit that can potentially raise the credit as high as 70%. While those cases are rare, it is often possible to go beyond the base 30% credit.

If you purchase your solar with cash or a loan, you can take advantage of direct pay — directly! In that case, you’ll need to file for direct pay. If you use a third-party financing option like CollectiveSun’s Solar Power Agreement, we’ll handle the tax credit and pass savings along to your organization.