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Inflation Reduction Act Provides $369 Billion in Tax Credits and Direct Pay Options for Local Governments

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The federal Inflation Reduction Act’s (IRA) “elective pay” (often called “direct pay”) provisions will allow tax-exempt and government entities for the first time to be able to receive a payment equal to the full value of tax credits for building qualifying clean energy projects.

This could be game changing for local governments who were not previously eligible for tax credits because of the tax-exempt status. The Direct pay option is a mechanism that allows an entity to claim a tax credit as a rebate. This direct pay option is a part of the IRA for tax-exempt entities such as cities, counties, public schools, universities, and rural cooperatives, providing these entities a new tool to fund clean energy projects. Qualifying technologies include solar, geothermal, electric vehicles, battery-generators, energy storage systems, and combined heat and power cogeneration. Most technologies need to be under construction by January 1, 2025, to qualify.

For more information: Direct Pay | Clean Energy | The White House

Contact MTAS Consultant Warren Nevad for more information.