CEG Comments on Direct Pay Option within the Inflation Reduction Act

Clean Energy Group submitted comments to IRS Notice 2022-50, Elective Payment of Applicable Tax Credits, on November 3, 2022. Elective payment is also known as the direct pay option within the Inflation Reduction Act. This novel approach allows entities that do not have a tax liability, such as local governments and non-profits, to receive the tax credit in rebate form, regardless of tax liability status. This direct pay option can be used for both PV solar as well as battery storage. The direct pay option is not available for use by individuals, however, creating an unjust scenario that provides more benefits to wealthier individuals who have a tax burden and who can utilize the clean energy tax credits available in the Inflation Reduction Act. CEG is recommending that the Internal Revenue Service and the Treasury Department draft guidance that allows non-profits and local governments that build or purchase-and-rehabilitate housing that is then turned over to qualified low-income residents to be allowed to use this provision to add solar and/or battery storage to the homes before they are turned over to their new owners. Allowing low-income-serving entities to take direct payment of a tax credit they would not otherwise be allowed to take in order to offset the cost of adding solar and storage, both for relief of energy burden and for resilience, could increase the amount of solar and storage on low-income single-family homes, effectively addressing a deficiency in the Inflation Reduction Act.