Elective payments make solar more affordable for nonprofits
Elective Payments Make Solar More Affordable for Nonprofits
For nonprofit organizations, energy costs typically rank near the top for operational expenses, with studies indicating they can be as high as the second-largest expense each year. Saving money by moving to renewable energy – such as solar – allows the organization to use those savings to further its mission, increasing its impact on the community it serves.
How the Inflation Reduction Act Helps Nonprofits Go Solar
What many nonprofits may not know is that, thanks to the Inflation Reduction Act (IRA), a federal law enacted in 2022, even though they don’t pay taxes, they ARE now eligible for the federal Investment Tax Credit (ITC) of 30% of the cost of installing a solar energy system and battery storage. These elective pay credits are paid by the federal government to the nonprofit, IN CASH.
What Is the Inflation Reduction Act (IRA)?
The Inflation Reduction Act (IRA) was enacted to reduce the federal budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy. It includes an array of climate and energy incentives supporting domestic clean and renewable energy production. Qualifying activities include the production of clean and renewable electricity, installation and manufacturing of solar, wind, and other renewable energy equipment, the installation of energy-efficient upgrades to organizations, businesses and homes, and the purchase of electric vehicles (EVs) and charging equipment. The IRA opened the door to nonprofits, governments, and other tax-exempt organizations to enjoying financial benefits through Elective Pay.
How the Elective Pay Process Works
To obtain the elective pay credit, there is a process that must be followed, including the completion of a pre-filing registration with the IRS – this registration number, provided for each applicable project, must be included on tax returns, typically an organization’s form 990. And then that money will be paid by the IRS in the tax year after the project is complete.
Elective Pay Credits Are Not Competitive
The elective pay credits are not competitively awarded – projects must simply meet the criteria for the specific credit to be eligible. They can be combined with other sources of Department of Energy and federal financial assistance.
Solar Projects Can Increase Donor Engagement
Another critical aspect of solar (and other sustainability projects) for nonprofits is that many donors these days are interested in and activated by projects like this. Combining donor engagement and stewardship with the elective pay credits can maximize the financial benefit for the donor and the nonprofit. We’ve worked with many nonprofits who have held fundraising events specifically to raise money for solar, and donors love it.
Solar Is a Smart Investment for Nonprofits
While the elective pay process can be somewhat cumbersome, the elective pay credits are a HUGE financial benefit, and can make a solar energy project a good investment for a nonprofit. If you are involved in a local nonprofit, we are happy to help talk through the process, eligibility and federal requirements with you. Your nonprofit can save on energy costs and get money back from the federal government at the same time! Just give us a call.
