The Inflation Reduction Act (IRA), the largest climate bill in U.S. history, has spurred significant solar industry investment since it became law in 2022. The IRA included big incentives for clean energy, including an Investment Tax Credit (ITC) for solar of 30% for ten years. This ten-year extension provided confidence and security in the industry that, has opened up solar investment and benefitted communities, businesses, and households nationwide.
The IRA included incentives for solar projects that include domestic production, projects that benefit low-income households, and additional funding for agriculture and rural small businesses, to name a few. Many industries benefited from this new legislation, with non-profits not to be overlooked. The IRA made the 30% ITC available to not-for-profits as a direct pay refund. This update is a big deal – here’s why:
- Before the IRA, tax-exempt entities such as municipalities, not-for-profit organizations, schools or universities, religious organizations, etc., could not utilize the ITC. That meant their for-profit neighbors could go solar for considerably-lower project costs. Although some municipalities or non-profits could move forward with solar due to financing, others who were not eligible for funding could not afford to go solar without the federal tax credit.
- The passing of the Inflation Reduction Act was a game changer for not-for-profit organizations and all tax-exempt entities. Solar became much more accessible and affordable to non-profits, now benefiting from a 30% tax credit in direct pay. That’s 30% of the project cost returned to the organization.
What are the different solar options for non-profits?
There are two main project structures for non-profits.
1. Own Your Solar Array.
Incentives available include:
- NYSERDA grant through the NY-Sun Program.
- 30% Federal Investment Tax Credit.
This option allows some organizations to reduce their electric bill to $0, producing the best return on investment.
2. Community Solar/Power Purchase Agreement.
Larger non-profits, municipalities, schools, and universities often like this option as it is an easy way to meet sustainability goals with $0 capital investment required. A power purchase agreement is a fixed, often reduced rate that an organization receives for clean, local solar power.