The Inflation Reduction Act will have a major impact on the clean energy industry in the years to come. One of the greatest benefits is the ability for non-profit entities to afford clean energy and energy efficiency projects. Money is certainly an issue for most non-profits and upgrading systems to be more energy efficient or green is too expensive for many. Most existing incentives for buildings to move in this direction revolved around good tax breaks and depreciation of equipment. Since non-profits don’t pay taxes, this would not benefit them. Often, a non-profit would work with a “for-profit” company, who would invest in the upgrade, take advantage of the generous tax break, and then lease the equipment or output to the non-profit. This is a good deal, but the non-profit may not get the total monetary benefit as even magnanimous for-profits certainly may want to make some profit out of these ventures, besides the tax break.

The Inflation Reduction Act changes this by allowing the option for direct payment of the benefit rather than the Investment Tax Credit. Non-profits can now quickly receive their incentive for investing in upgraded energy equipment, solar panels, or batteries and not be shut out. Access for non-tax paying entities of the 30% ITC will significantly influence non-profits and low-income communities to move forward on projects that not only will benefit the planet, but save them expenses, as well.

ITC direct payment will allow non-profits, such as charities, affordable housing developers, community-based organizations, and state, local and tribal governments, to receive the benefits of the ITC as an upfront payment, rather than a tax credit. This will enable non-profits to take advantage as for-profits have already done for significant energy efficiency, solar, battery storage, and other resilient power systems, enabling such systems and their industries to grow in the US and in areas that have not had such projects before. In certain communities of need, the ITC credit may be as high as 50%.

Thus, this is a time to discuss potential projects with non-profits. Such big-ticket items have been out of their realm for so long, many may never have thought about a smart, beneficial energy efficiency, solar, or battery storage project. Spend some time to reacquaint them with the technology, show them it works (there is no or little risk), what the potential benefits and savings are for the entity, and the improved economics for the non-profit. It may take some doing to get used to, but the conditions have never been better for this neglected group of entities to benefit from smart energy projects.

CCES is not a tax or accounting firm, but has the technical experts to help a non-profit or any organization determine which energy upgrade projects are best for it and bring in experienced, vetted vendors and experts on incentives to make this work. Contact us today at karell@CCESworld.com or at 914-584-6720.