�Investment Tax Credit: Direct Pay��Direct pay allows tax-exempt organizations to receive unlimited federal support, through a process corresponding to private sector tax credits.�

• Traditionally, we think about federal funding for tax-exempt organizations as a competitive process to allocate a limited pool of grant funding.
• On the other hand, private sector companies receive federal support through tax credits. The process is not a competition because there is no limit to funding - taxpayers are entitled to receive these funds as long as they meet the eligibility requirements.
• Direct pay is a new paradigm for the public and nonprofit sectors: it works like a tax credit, but the federal government provides a direct payment of cash rather than tax savings because tax-exempt entities wouldn't be able to benefit from tax savings.

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�Investment Tax Credit: Direct Pay�

With direct pay, you don't have to apply for funds. After investing in a project, you are entitled to the funds, and the pool of federal funding is unlimited. In other words, if a school department invests $1 million in a solar project that is eligible for an IRA tax incentive, the organization is entitled to a direct payment of $300,000 from the IRS by filling out a form and providing the required documentation.

The Investment Tax Credit provides:

•  A tax credit equal to 30% of project cost.
•  Must meet prevailing wage and apprenticeship requirements, or the project must be under 1 MW; otherwise, only 6% of project cost.
•  Technologies: Solar, geothermal heat pumps, energy storage, fuel cells, hydrogen, wind turbines.
•  Bonus tax credits
•  Domestic content (10%) - project uses American-made components.
• Energv community (10%) - project is in area that has been dependent on fossil fuel production or distribution.

The Energy Efficient Commercial Buildings Deduction provides

• Up to $5.00/square foot, depending on the reduction in energy use; the deduction starts at $2.50/square foot and increases by $0.10 for each percentage point of reduction above 25% until it reaches $5.00/square foot.�
• Must meet prevailing wage and apprenticeship requirements; otherwise only up to $1.00/square foot.
• Assuming a corporate tax rate of 21%, the value of the deduction cannot exceed 21% of the project cost.�
• Technologies: Interior lighting, HVAC, water heaters, building envelope.
• While energy efficiency projects are not eligible for direct pay, public entities can receive the deduction as a discount on the project cost from the primary designer that claims the deduction.

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Energy Efficient Commercial Buildings Deduction (§179D)

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