Elective Pay - Blueprints for Communities

The Inflation Reduction Act (IRA) includes historic tax provisions that will accelerate the deployment of clean energy, clean vehicles, clean buildings, and clean manufacturing, and save communities money on their energy bills. The U.S. Department of Energy (DOE) is partnering with the U.S. Department of Treasury and the Internal Revenue Service (IRS) to support implementation of several of these tax provisions.

Thanks to the Inflation Reduction Act’s (IRA) Elective Pay (often called “direct pay”) provisions, tax-exempt and governmental entities can, for the first time, receive a payment equal to the full value of tax credits for building qualifying clean energy projects. This new mechanism presents a potentially transformative opportunity for communities and non-profits, including many DOE grant and loan recipients, to directly benefit from federal tax credits for clean energy. In addition, the IRA modified the 179d energy efficient commercial building property tax deduction to increase the incentive for energy efficient investments and expand accessibility to tax-exempt entities. However, tax-exempt entities affected by these historic provisions (including state, territory, and local governments; Tribes; and non-profits) do not have significant experience with tax filings and often have limited capacity to dedicate to navigating IRS regulations and filing processes. This funding opportunity aims to address this knowledge gap, supporting the development of additional resources to guide communities as they claim IRA tax credits through Elective Pay and complete projects that create good-paying jobs, lower energy costs, and advance an equitable transition to a clean and resilient energy system.

The Elective Pay – Blueprints for Communities opportunity was launched in July 2024 to support the development of additional resources for these communities as they plan and execute projects which are eligible for clean energy tax credits through Elective Pay or the 179d energy efficient commercial building property tax deduction. The opportunity envisions blueprints as documents that will help guide interested entities through all stages of a sample project, identifying important considerations, opportunities, and restrictions along the road to claiming Elective Pay. Blueprints developed through this funding opportunity will address multiple topics central to planning and implementing an eligible project, potentially including but not limited to the following: building a project team; funding and financing; designing an eligible project; documentation and record keeping; tax year determination; prevailing wage, apprenticeship, and domestic content requirements; IRS pre-registration; and tax return filing.

This funding opportunity is managed by ENERGYWERX in partnership with DOE, a collaboration made possible through an innovative Partnership Intermediary Agreement set up by the DOE's Office of Technology Transitions. This agreement enables ENERGYWERX to broaden DOE’s engagement with innovative organizations and non-traditional partners, facilitating the rapid development, scaling, and deployment of clean energy solutions.

Applications for this funding opportunity opened on July 7, 2024, and will close at 3:00 p.m. (Eastern) on  August 8, 2024. DOE anticipates that applicants will be notified of their selection by August 2024 and that this engagement will run through February 2025.