The Inflation Reduction Act and Why it’s a Game Changer for Non-profit Property Owners

Have you heard of the Inflation Reduction Act? In 2022, the Inflation Reduction Act (IRA) marked a pivotal moment, sparking unprecedented investments in clean energy and various eco-friendly initiatives. Although the allocation of funds for numerous aspects of these endeavors is still in progress, several provisions within the act hold the potential to ease the accessibility of renewable energy for non-profit organizations. Beyond contributing to the battle to address the climate crisis, this endeavor is poised to extend the advantages of the clean energy transition to historically marginalized communities. In this article, the team at Green House Solar will go over the IRA more in depth and discuss why it’s especially important for non-profit property owners. 

How the IRA Makes it Easy for Non-profit Property Owners to Access Renewable Solar Energy

In recent years, a crucial driving force for the U.S. solar industry was the federal solar investment tax credit (ITC). This credit allowed qualified commercial investors to receive a tax credit equivalent to 30% of the solar installation cost, resulting in substantial savings — especially during a period when solar expenses were higher than they are today. Despite its advantages, this tax credit has limitations.

Prior to the enactment of the IRA, only homeowners and commercial entities with tax liability could claim tax credits for solar panel installations. Nonprofits, aiming to adopt solar solutions, often had to involve tax equity investors — major financial institutions leveraging tax credits to diminish federal tax liabilities. Apart from being logistically complex, these arrangements ran up significant transactional costs and administrative burdens, particularly for nonprofits facing resource constraints.

The Inflation Reduction Act introduces a major improvement through the establishment of a new “direct pay” (referred to by the U.S. government as “elective pay”). This credit delivery mechanism allows governments and nonprofits to directly access clean energy tax credits without relying on tax equity investors. Instead of a reduction in federal tax liability, eligible entities, including tribal communities, nonprofits, municipalities, public power utilities, and rural electric co-operatives, can receive the tax credit as a payment. This groundbreaking shift means that all nonprofit property owners now qualify for the credit, and the resulting savings can be directly passed on to them.

Navigating the IRA with Green House Solar in NJ

 

Additionally, within the IRA, there are supplementary tax credits extended to specific projects that contribute to job generation and the advancement of the clean energy economy. These extra incentives come in the form of labor and domestic manufacturing bonus credits, particularly for projects developed in designated priority communities. These communities encompass energy communities, which have traditionally served as focal points for the fossil fuel industry, as well as low-income and underserved areas. By leveraging these bonus tax credits, customers can essentially push their savings beyond the initial 30% ITC credit. 

If you’re a non profit property owner who needs help navigating the Inflation Reduction Act, please give the team at Green House Solar a call today. We’d be happy to discuss all the solar financing options available to you and recommend the best route for your unique situation. To learn more about our commercial solar installations in New Jersey, please visit us at: https://greenhouse.solar/commercial-solar-installation-new-jersey/