Inflation Reduction Act: What is Direct Pay?

Diving into the details of the legislation to help you understand your options.

The Inflation Reduction Act creates significant opportunities for building owners to ready their operations for long-term resiliency and eliminate deferred maintenance, realize cost savings, accelerate decarbonization and reach equitable outcomes for generations to come.

McKinstry’s Megan Owen walks through Direct Pay for tax-exempt entities, which allows for a cash payment equivalent to the value of a tax credit:

What is Direct Pay? 

The Inflation Reduction Act’s Investment Tax Credit, ITC, now features a game changing Direct Pay option for tax-exempt entities, which allows for a cash payment equivalent to the value of a tax credit. Direct Pay opens the door for these entities to benefit from an opportunity not previously available to them. The legislation is empowering for these organizations because cost is no longer a barrier to entering into energy transition work.

Public-sector and tax-exempt clients now have greater control over the design and components of their project and more options for financing that provide better long-term economic benefit. While there are a few criteria to be met, for these tax-exempt organizations, direct pay offers the ability to significantly decrease the cost of transforming their facilities and operations.

Who is eligible?  

Direct Pay is for tax-exempt organizations under 501 a, c and d, state and local governments, state-funded higher education institutions, public K-12 districts, Indian tribal governments, electric co-ops providing rural energy and more.

What next? 

These public entities are vital and are the hearts of our communities. They represent connection, pride, support and service for their employees, residents and visitors. They are also often underfunded for capital needs and face significant deferred maintenance challenges. We know leaders of these organizations often feel that upgrades and transformation are impossible. The Inflation Reduction Act was built to provide financial support for our cherished community-centric buildings to engage in transformational projects and invest in their future and resiliency, reduce operating expenses and meet clean energy goals and realize improvements they never thought possible. 

For more information and resources, please visit our IRA blog or contact us below.

Financial Disclaimer: McKinstry is not engaged in providing legal, tax or financial advice. The information provided herein is intended only to assist you in your decision-making and is broad in scope. Accordingly, before making any final decisions you should consider obtaining additional information and advice from your accountant or other financial advisers who are fully aware of your specific circumstances.

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