U.S. Expands Solar Tax Credit Access: Direct Payments Now Available for Tax-Exempt Entities

The recently enacted Inflation Reduction Act enables tax-exempt organizations to receive direct cash payments equivalent to the 30% Photovoltaic Investment Tax Credit (ITC).  This landmark policy shift eliminates the previous requirement where non-profits depended on third-party developers or banks to monetize tax incentives through Power Purchase Agreements (PPAs).

Eligible Entities for Direct Payment:

1. All tax-exempt institutions

2. U.S. state/local/tribal governments

3. Rural Electric Cooperatives

4. Tennessee Valley Authority (federally owned utility)

Financing Transformation:

Under the new structure:

    • Tax-exempt entities may secure construction loans from developers/banks

    • Upon receiving direct government payments, borrowers repay lenders

    • Remaining balances become conventional installment payments

Industry expert Kalra notes: "Entities currently assuming credit risk via PPAs should logically extend construction financing given this secured repayment mechanism."

Legal Precedent:

Benjamin Huffman (Partner, Sheppard Mullin) confirms: "This mirrors previous cash grant structures - essentially borrowing against guaranteed government disbursements, which are easily structured under this program."

Strategic Impact:

Andie Wyatt (Policy Director, GRID Alternatives) emphasizes: "Direct ownership of PV systems represents a transformative advancement for institutional energy sovereignty, enabling true sustainability independence."

Implementation Status:

While the solar industry awaits Treasury Department guidance on payment logistics, the framework establishes foundational eligibility criteria, fundamentally restructuring non-profit solar economics by transitioning from energy purchasing (PPAs) to asset ownership.