Direct payment opportunity for projects of tax-exempt entities

Public school administrators and board of education members across the country face tough decisions when it comes to addressing how to pay for the repair or replacement of aging equipment, vehicles and infrastructure.

The direct-pay provision in the Inflation Reduction Act enables schools and other tax-exempt groups to receive certain clean energy and climate-related tax credits as direct cash refunds from the Internal Revenue System.

Entities can receive up to 30% of a clean energy project’s cost, with the possibility of additional credits closer to a 50% reimbursement. Bonuses are applied based on the project’s location, and for materials sourced in the U.S.

In Nebraska, Hastings Public Schools applied for the direct-pay credit after installing a geothermal closed-loop heating and cooling system. After a project cost of about $3.6 million, the estimated reimbursement is $1.1 million.

Trent Kelly, director of technology and operations at Hastings, said, “This is a great program that schools can use to upgrade facilities. We are very happy with the process and have already talked to some schools about the process and savings.”

He anticipates the geothermal system will save Hastings Public Schools between $75,000 and $100,000 annually.

State, local and tribal governments, police, fire authorities, and tax-exempt entities under any 501 section are eligible for direct pay. Qualifying projects include solar, wind, electric vehicle charging stations, battery storage, and community solar that bring clean energy to neighborhood families. Direct pay is non-competitive and limitless and the reimbursement payments are unrestricted.