Direct Pay for § 25D Residential Energy Efficient Property Tax Credit
August 3, 2021

Chairman Ron Wyden Ranking Member Mike Crapo
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, D.C., 20510 Washington, D.C., 20510

Chairman Richard Neal Ranking Member Kevin Brady The U.S. House of Representatives The U.S. House of Representatives Ways & Means Committee Ways & Means Committee 1102 Longworth HOB 1102 Longworth HOB
Washington, D.C., 20515 Washington, D.C., 20515


Re: Direct Pay for § 25D Residential Energy Efficient Property Tax Credit

Dear Chairman Wyden, Ranking Member Crapo, Chairman Neal, and Ranking Member Brady:
As the Senate and House of Representatives consider the extension and modification of several energy related tax provisions, we respectfully request that any legislative package include a “direct pay” or similar cash payment program for residential energy properties as defined in 26 U.S.C. § 25D.

A direct pay option for section 25D would put main street Americans on equal footing with their higher-income and corporate counterparts, which isn’t only the fair and equitable thing to do, it is also one of the best decarbonization policies available. Additionally, exclusively expanding direct pay for only a portion of the tax code bolsters corporations, while hurting communities and taxpayers who stand to benefit the most. Forty-two percent of all energy related greenhouse gas emissions in America come from decisions that are made in the household. ¹ Incentivizing households to reduce residential emissions both empowers individuals to make a difference and would have a profound effect on the U.S.’s overall greenhouse gas emissions profile. This option has been endorsed in an independent RAND report ² released last month as well as a very recent Solar United Neighbor’s et al paper. ³

Opponents have falsely claimed that incentives for zero emissions technologies are simply subsidies for the country’s highest income households. Including a direct pay option for Section 25D would increase equity and open access to clean energy for lower income households and communities – which spend a disproportionate amount of their incomes on energy – allowing them to benefit from the economic, health, and emissions benefits incentivized by section 25D investments. Lower income households have the least ability of all households to bear the upfront costs of clean energy investments and then wait for a tax refund months or, with carry-forward, years later.

We understand that some have expressed concern about the increased likelihood of fraud and an inability to properly oversee and audit a 25D direct pay program. These concerns are not grounded in factual history or logic. Homeowners already take full advantage of the 25D credit without a track record of abuse. Research also shows that lower-income households have the lowest levels of tax evasion of any income group. ⁴ Regardless, we are ready and willing to work with you to identify safeguards, as well as procedural solutions, that ensure section 25D direct pay – or a similar program – can be implemented so as to strengthen eligibility verification and eliminate the potential for fraud or misuse.

Thank you very much for your efforts in support of clean energy tax incentives to date and your consideration of our recommendations to make these incentives accessible to low- and moderate-income households.


Sincerely, (as of 8/9/21)




¹Rewiring America, About Us, https://www.rewiringamerica.org/our-mission (accessed July 15, 2021).

²RAND Corporation, Incentivizing Solar, Catalyzing Solar Energy Technology Adoption to Address the Challenge of Climate Change, https://www.rand.org/pubs/perspectives/PEA1372-1.html (July 2021)

³Solar United Neighbors, Institute for Local Self-Reliance, Initiative for Energy Justice, The National Impact of 30
Million Solar Homes: A Vision for an Equitable Economic Recovery Built on Climate Protection and Energy
Democracy, July 2021

⁴Brookings, How Big is the Problem of Tax Evasion, https://www.brookings.edu/blog/up-front/2019/04/09/howbig-is-the-problem-of-tax-evasion/ (April 9, 2019).
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