Direct Pay Available for Local Governments to Use for Clean Energy Projects

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Brittney Gutierrez

Climate and Energy Technician

The Inflation Reduction Act (IRA) of 2022 marks a momentous investment in climate action by providing numerous opportunities for local governments to fund clean energy projects and technologies. Funding is available through grants, loans, and new and expanded tax credits, including the “direct pay” provision. 

Direct pay provides tax-exempt entities, such as nonprofits and local, state, and tribal governments, the opportunity to receive a payment equal to the full value of tax credits for qualifying clean energy projects. Eligible entities can use direct pay for 12 of the tax credits outlined in the IRA. Projects include generating renewable energy and battery storage projects, building community solar projects, installing electric vehicle charging infrastructure, and purchasing zero-emission vehicles.

This unprecedented tax credit provision makes it easier for local governments to invest in clean energy, complete large projects faster and more affordably, save money, and improve public health. 

Click here for a full list of applicable tax credits available for direct pay.

How to apply for direct pay:

  1. Identify the project and credit you want to pursue
  2. Complete your project, place it into service, and determine the corresponding tax year
  3. Determine when your tax return is due
  4. Complete pre-filing registration with the IRS before your tax return is due
  5. Once you receive a valid registration number, file your tax return by the due date
  6. Receive your direct payment


To learn more about how direct pay can benefit your agency, contact us at

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