Direct Pay Tax Credits Provide Clean Energy, Jobs, Resilience & More for Communities

This World Resources Institute fact sheet describes the impact of the U.S. Inflation Reduction Act's (IRA) 'direct pay' (elective pay) provision, which allows tax-exempt entities to receive clean energy tax credits as cash payments. It highlights how local governments, nonprofits, and tribal nations use these funds to finance electric vehicles, solar arrays, and infrastructure, providing examples from cities such as Philadelphia, Chattanooga, and Pateros.

• The 'direct pay' or 'elective pay' provision of the 2022 U.S. Inflation Reduction Act (IRA) allows tax-exempt entities—including local governments, school districts, tribal nations, faith-based organizations, and nonprofits—to receive federal clean energy tax credits as direct cash payments from the IRS, bypassing the need for tax liability.
• The World Resources Institute and its partners have assisted 27 local governments in filing for direct pay tax credits. For the 2023 tax years, these participants have claimed or will claim at least 840 projects, consisting of 677 EV projects, 113 EV charger projects, and 50 solar projects, with an average claim of $308,739 in tax benefits per local government.
• Specific community applications of direct pay include Philadelphia, PA, which qualified for over $1 million in credits for more than 130 battery electric vehicles purchased in 2023; Chattanooga, TN, which used credits to offset the cost of electric vehicle charging stations; and Buncombe County, NC, which used solar array reimbursements to support city operations following Hurricane Helene.
• In Pateros, WA, a city of 611 people, direct pay and a bonus for domestically produced solar panels allowed the city to cover 100% of the costs for a project to power its wastewater treatment plant and reservoir. The city anticipates annual electricity bill savings of over 45% for these facilities.

APA

World Resources Institute (n.d.). Direct Pay Tax Credits Provide Clean Energy, Jobs, Resilience & More for Communities. https://files.wri.org/d8/s3fs-public/2025-03/direct-pay-tax-credits-2-pager.pdf

Chicago

World Resources Institute. Direct Pay Tax Credits Provide Clean Energy, Jobs, Resilience & More for Communities. n.d. https://files.wri.org/d8/s3fs-public/2025-03/direct-pay-tax-credits-2-pager.pdf.

Wikipedia

{{cite report |author=World Resources Institute |title=Direct Pay Tax Credits Provide Clean Energy, Jobs, Resilience & More for Communities |url=https://files.wri.org/d8/s3fs-public/2025-03/direct-pay-tax-credits-2-pager.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitutenddirect, author = {{World Resources Institute}}, title = {{Direct Pay Tax Credits Provide Clean Energy, Jobs, Resilience \& More for Communities}}, institution = {World Resources Institute}, url = {https://files.wri.org/d8/s3fs-public/2025-03/direct-pay-tax-credits-2-pager.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }