Federal Funding for Businesses, Nonprofits, Developers, and Other Entities

Solar On Your Facility

Less than 1 MW(ac)
The IRA will provide 30% funding for solar installations of less than 1 MW(ac) on commercial facilities, with no maximum allowance. The 30% credit also applies to battery storage and interconnection charges. 

• The incentive is a 30% tax credit for a for-profit business that files tax returns.
• The incentive is a 30% Direct Pay from the US Treasury for nonprofits and public entities.
• Projects can earn additional credit for:
  • Domestic content minimums (10%) 
  • Brownfield or an energy community (10%)
  • Low Income Community (10 - 20%) This is a separate provision and will require a separate application, subject to annual maximum of 1.8GWac/year and other provisions. Projects must apply for and receive notice of bonus allocation before the project is complete.  
• The total credit is reduced by up to 15% for projects funded via tax-exempt bonds (which applies mostly to local governments and school districts).  
  • For example: solar project funded wholly via tax-exempt bonds that meets domestic content criteria would qualify for a total credit of 34% [which is 30% + 10% - (15% x 40%) = 34%] 
• In general, the eligible project amount is not affected by tax-exempt grants or incentives from entities like Focus on Energy; consult your tax professional and see the US Department of Energy guidance for more information
• Credits are in effect 2023 - 2032

Refer to Department of Energy summary for more information on the Investment Tax Credit for solar energy projects.  

More about transitioning your organization to renewable energy is here. 

Farmers and other rural landowners may want to explore AgriSolar, where a PV array co-exists with farming operations. 

1 MW or Larger Solar

In order to receive the full 30% credit, systems that are 1MW or larger have additional requirements around Prevailing Wage and Apprenticeship. Refer to the US Department of Labor FAQs for more  information on prevailing wage and apprenticeship.

Entities can claim tax credits for larger solar arrays by a) the Investment Tax Credit (which is the provision described above that also applies to smaller systems) or b) accessing the Production Tax Credit, where payment is based on energy generated. The IRA updates both of these provisions, increasing the credits, accommodating more renewable energy technologies and adding prevailing wage and apprenticeship requirements.

Refer to IRS guidance for more information on both the Production Tax Credit and the Investment Tax Credit for large renewable energy projects. 

More about transitioning your organization to renewable energy is here. 

Farmers and other rural landowners may want to explore AgriSolar, where a PV array co-exists with farming operations. 

Geothermal At Your Facility

With the Investment Tax Credit entities can receive a 30% credit for geothermal installations if a) the system size is under 1 MW(ac) or, b) if it is over 1 MW(ac) and the prevailing wage and apprenticeship requirements are met. See additional FAQs from the US Department of Labor on prevailing wage and on apprenticeship requirements.

• The incentive is a 30% tax credit for a for-profit business that files tax returns
• The incentive is a 30% Direct Pay from the US Treasury for nonprofits and public entities
• Projects can earn additional credit if:
  • Domestic content minimums (10%) 
  • Brownfield or an energy community (10%)
  • Low Income Community (10 - 20%) This is a separate provision and will require a separate application, subject to annual maximum of 1.8GWac/year and other provisions. Projects must apply for and receive notice of bonus allocation before the project is complete.  
• The total credit is reduced by up to 15% for projects funded via tax-exempt bonds (which applies mostly to local governments and school districts).  
  • For example: solar project funded wholly via tax-exempt bonds that meets domestic content criteria would qualify for a total credit of 34% [which is 30% + 10% - (15% x 40%) = 34%] 
• In general, the eligible project amount is not affected by tax-exempt grants or incentives from entities like Focus on Energy; consult your tax professional and see the US Department of Energy guidance for more information
• Credits are in effect 2023 - 2032

Refer to IRS guidance for more information on both the Production Tax Credit and the Investment Tax Credit for more details. 

In situations where a facility is adding both solar and geothermal, the combined system must be under 1 MW(ac) or meet the prevailing wage requirements.

Example

Forest Edge Elementary in the Oregon Area School District has a 646 kW (dc)/500 kW(ac) solar array, a geothermal system with a capacity of about 800 kW and a 125 kW battery. So total capacity is 500+800+125=1,425 kW or 1.4 MW(ac). Under the IRA, that facility would exceed the 1 MW(ac) cap so, to get the full 30% credit, a team building that facility today would need to meet the prevailing wage and apprenticeship requirements.

Wind, Biogas and Other Renewable Energy Systems

The IRA expanded the types of renewable energy systems included in the Production Tax Credit and the Investment Tax Credit. 

Refer to IRS guidance for more information on both the Production Tax Credit and the Investment Tax Credit for large renewable energy projects.

Energy Efficient Commercial Buildings

The IRA expanded and enhanced an existing energy efficiency tax deduction, Energy Efficient Commercial Buildings Deduction (179D).

Under the IRA the tax deductions of $0.63 to $1.88 per square foot is modified to be $0.50 - $1.00 on a sliding scale based on savings achieved, with incentives increasing to $2.50 to $5.00 per square foot when the project meets prevailing wage and apprenticeship requirements. 

The tax deduction applies to both new construction and retrofits.  And the tax deduction is permanent; there is no expiration provision in the legislation.  It is a tax deduction, not a tax credit. 

Increasing energy efficiency 25% over the baseline will garner a $2.50/square foot tax deduction provided that prevailing wage and apprenticeship requirements are met. A 50% reduction would garner the $5.00/square foot tax deduction.  The deduction is based on modeled energy savings; there are specific requirements about who does the modeling and what kind of model is used. 

• The baseline for new construction is the ASHRAE 90.1 standard (starting with ASHRAE 90.1-2007 for projects placed in service in 2023-2026, and 90.1-2019 for projects placed in service starting in 2027).
• The baseline for existing building retrofits can be the energy use intensity (EUI) of the current facility. 

This tax deduction does not qualify for Direct Pay. Instead local governments and nonprofits can assign the deduction to the project designer.  

More Information

• The IRS summarizes the changes to this tax deduction in their October 2022 request for comments.
• Rewiring America has a factsheet about electrification for contractors 
• Other helpful discussions of the changes to the 179D tax deduction include:
  • Capstan has an IRA summary that includes some examples
  • Summary from Forvis
  • Summary from Clark Schaeffer Hackett
• Note that this is a tax deduction, not a tax credit. We encourage entities to discuss the potential deduction as part of project planning with both project contractors and tax advisors. 

Residential New Construction

The IRA updates and expands a tax credit for builders of new energy efficient residential housing called the New Energy Efficient Homes Credit (45L).

For single-family homes, builders are eligible for:

• $2,500 per home that meets the EPA’s ENERGY STAR Single-Family New Homes program
• $5,000 for a home that meets the US Department of Energy’s Net Zero Energy Ready Homes program requirements

For multi-family homes, builder/developers are eligible for:

• $500 per unit that meets the EPA’s ENERGY STAR Multifamily New Construction program
  • Increased to $2,500 per unit that also meets prevailing wage requirements
• $1,000 for a home that meets the US Department of Energy’s Net Zero Energy Ready Homes program requirements
  • Increased to $5,000 per unit that also meets prevailing wage requirements

Also see additional guidance from both the EPA for Energy Star Homes tax credits and the DOE for the Net Zero Energy Ready Homes credits.  See also the guidance document from the US Treasury.

Fleet Vehicles

The IRA includes separate provisions for clean fuel tax credits for consumers and businesses. 

• The consumer credits for purchasing a new electric vehicle include specific requirements around vehicle components. 
• The business credit does not include specific requirements around vehicle components

The clean vehicle credit is a tax credit for businesses and available as Elective Pay for nonprofits and other tax exempt entities. 

For qualified commercial clean vehicles, the credit equals the lesser of:

• 15% of the entity’s tax basis in the vehicle (30% if the vehicle is not powered by gas or diesel)
• The incremental cost of the vehicle

The maximum credit is $7,500 for qualified vehicles with gross vehicle weight ratings (GVWRs) of under 14,000 pounds and $40,000 for all other vehicles. The credit applies to road vehicles as well as mobile machinery, as defined in § 4053(8) of the Code.

Learn more about the EV credit under lease arrangements.

See also FAQs for the Commercial Clean Vehicle Credit

Commercial Electric Vehicle Charging

Businesses that install EV chargers and station equipment at their property can qualify for a tax credit of up to 6% of the cost of charging equipment (or 30% if prevailing wage and apprenticeship requirements are met), up to a maximum credit of $100,000 per unit. Projects completed before December 31, 2022 are subject to the prior $30,000 cap.

To qualify, the equipment must be placed in a low-income community or a non-urban area.

• Rural: The US Census defines urban areas - everything else is considered rural. Urban areas have a population of 5,000 or more so the tax credit is available in all the areas that are not urban. Use this map from the Greater Madison MPO to see if your location qualifies as urban or not.  (The map defaults to Dane County but you can use the drop down arrow to select "All" to search for addresses outside of Dane County.)  All areas encircled by the red borders are urban. 
• Low-Income:  Low-income communities include population census tracts where the poverty rate is at least 20% or is a metropolitan or non-meetropolitan area census tract where the median family income is less than 80% of the state medium family income level.  This map shows low income census tracts across the US.  Use the search icon to type in an address and it will tell you the poverty rate and median income of that tract.  (Be patient - it's a big map so it will take a few minutes to fully load.)

Review the IRS guidelines for all of the specifics about this credit.  

Elective Pay

Local governments, tribal governments and some tax-exempt entities that do not pay taxes can receive payments directly from the US Treasury for some of their clean energy projects. Draft guidance on how Elective Pay will work was issued on June 14, 2023. This page reflects the latest IRS guidance and will be updated if the protocols change. 

The credits available to state and local governments, tribal governments and tax-exempt entities are substantial. 

For example:

• If a school installs a solar array that costs $100,000, they can get $30,000 back via Elective Pay.
• If a neighborhood center purchases an electric minibus to transport children they can get up to $40,000 back via Elective Pay. 

The IRS has identified a five-step process to claim Elective Pay credits:

1. Identify and pursue the qualifying project or activity. 
2. Determine your tax year. An entity’s tax year is their annual accounting period (e.g., a fiscal year of July 1 to June 30 or January 1 to December 31).  Please see IRS FAQ #23 for more information. Note that you need to pre-register project in the tax year that the project is completed, which might mean that steps 3 and 4 are concurrent in some cases.
3. Complete your project and place it into service. Keep all the documentation necessary to properly substantiate any underlying tax credit, including if bonus amounts increased the credit. 
4. Complete pre-filing registration with the IRS. This will include the credits you intend to earn, among other information. Upon completing the pre-application, the IRS will provide you with a registration number for each applicable credit property. You will need to provide that registration number on your tax return as part of making the elective pay election. 
   • Complete pre-filing registration in sufficient time to have a valid registration number at the time you file your tax return. 
   • Please see IRS FAQ questions #32 through #40 for more information about pre-filing registration. More information about this process will be available from the IRS by late 2023. 
5. File the required annual tax return by the due date (or extended due date) and make a valid elective payment election. This includes properly completed and attached source credit forms, Form 3800 (including registration numbers) and required return attachments. For general filing tips for exempt organization returns, see tax information, tools, and resources for charities and other tax-exempt organizations.
6. Receive payment after the return is processed.

See the IRS FAQ for more details on this process as well as the IRS Elective Pay webpage for information sheets for specific kinds of tax-exempt entities. Also see this factsheet for an overview of the Elective Pay process, as well as the same verison in Spanish. We also have a summary handout for tax-exempt organizations.

Elective Pay does not apply to all of the tax credits under the IRA but it does apply to important credits including the renewable energy credits and the clean fuel vehicles.  A full list of the activities that qualify for Elective Pay is at the IRS FAQ #13. 

Notably, Elective Pay is not authorized for the Energy Efficient Commercial Buildings Deduction. In that instance tax-exempt entities are permitted to allocate the tax deduction to the project designer. 

Elective Pay is not a federal grant with ongoing reporting requirements. It is a one-time transaction where entities will be able to claim federal support for their projects. As such, it is going to be especially helpful for smaller communities or nonprofits to use. 

Coupling IRA with PACE

PACE, Property Assessed Clean Energy, is an innovative way for property owners to finance energy efficiency, water conservation, renewable energy and other related projects.

Essentially PACE is a lien against your property assessment. Dane County is one of about 50 counties in Wisconsin where businesses and nonprofits have access to this financing mechanism. (Homeowners are not eligible for PACE financing in Wisconsin, although there are green mortgage products that offer similar benefits.)

A key benefit of PACE is that the financing can be set up so that your repayments are smaller than your energy savings—so that you realize bottom line savings even while you pay for the project installation. 

The IRA is going to make projects more affordable for businesses and nonprofits in our area. If the upfront capital is still a barrier for you, PACE is a great solution. 

Coupling IRA With Focus On Energy

Focus on Energy is Wisconsin’s statewide energy efficiency and renewable energy program. Focus has been helping residents and businesses pursue clean energy solutions since 2001 and has assisted hundreds of entities across Dane County on thousands of energy efficiency and renewable energy projects. If you are interested in how your business can leverage the IRA to save money you should connect with Focus on Energy to be certain you are maximizing your ability to qualify for all available incentives from Focus on Energy in addition to IRA incentives.

Below are several sources to search for additional federal and state grant opportunities, and learn more about grants targeting underserved communities:

• Climate Action Funding Guide - a guide to offer resources for locating federal funding opportunities.
• Federal Funding Opportunities for Local Decarbonization (FFOLD) - this database includes decarbonization funding opportunities through the Federal Registratar, Grants.gov, and federal legislation. It is updated quarterly.
• Grants.gov for all federal grant opportunities.
• Public Service Commission OEI grant program. This annual state program supports a wide variety of energy projects related to energy efficiency, renewable energy, energy storage, energy planning, and more.
• The Electrification Coalition has created an EV Funding Finder, a new tool that helps identify federal funding for electric vehicles from both the Infrastructure and Inflation Reduction Acts.