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

The document explains how the 'direct pay' (elective pay) provision of the U.S. Inflation Reduction Act allows tax-exempt entities, such as local governments, nonprofits, and tribal nations, to receive federal clean energy tax credits as cash payments. It highlights that WRI and partners have assisted 27 local governments in filing for credits, with participants claiming at least 840 projects for their 2023 tax years, averaging $308,739 in benefits per government. Case studies illustrate the use of these funds for solar arrays in Buncombe County, NC, EV charging in Chattanooga, TN, electric vehicle fleets in Philadelphia, PA, and wastewater infrastructure in Pateros, WA.

• The 'direct pay' or 'elective pay' mechanism allows tax-exempt entities to receive federal clean energy tax credits as direct cash payments from the IRS, overcoming the previous barrier where such entities lacked the tax liability required to use these credits.
• Direct pay is being utilized by a diverse range of tax-exempt organizations across the United States, including nonprofits, faith-based organizations, school districts, and tribal nations.
• WRI and its partners have supported 27 local governments in filing for direct pay credits; for the 2023 tax years, these participants are claiming at least 840 projects, including 677 EV projects, 113 EV charger projects, and 50 solar projects, with an average claim of $308,739 per local government.
• Specific community applications of direct pay include Philadelphia, PA receiving over $1 million for 130 battery electric vehicles in 2023, and Pateros, WA covering 100% of project costs for a reservoir and wastewater treatment plant through an Investment Tax Credit and a domestic solar panel bonus, leading to an expected annual electricity bill saving of over 45%.

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} }