Your Nonprofit Built a Solar Project. Here's How the IRS Pays You Back.
For decades, clean energy tax credits were worthless to organizations that don't pay federal income tax. A school district could put solar on every roof it owned and never see a dollar of the Investment Tax Credit. The Inflation Reduction Act changed that with Section 6417: eligible tax-exempt entities now receive the credit as a direct cash payment from the IRS.
The mechanics are unfamiliar but not complicated. The credit starts at 30% of eligible project costs, bonus credits can push it toward 70%, and the election is made on a form most nonprofits have never filed before: the 990-T.
The sequence, start to finish
StepConstruction Begins
The beginning-of-construction date locks in key eligibility rules, including which placed-in-service deadline applies. Contracts and dated records matter from day one.
StepProject Placed in Service
The credit is claimed for the tax year the project is placed in service. Bonus credit positions, such as energy community status, should be documented as of this point.
StepPre-Filing Registration
Your organization registers each eligible property on the IRS Energy Credits Online portal. The IRS recommends starting at least 120 days before your return is due.
StepForm 990-T Filed with the Election
The election is made on a timely filed Form 990-T with Form 3468 and Form 3800 attached, along with the registration numbers.
StepThe IRS Pays Your Organization
The elected credit is treated as an overpayment and refunded by direct deposit or check.
Why timing suddenly matters
Under the 2025 tax law, solar and wind projects that began construction by July 4, 2026 keep the standard multi-year window to be placed in service. Projects starting later must be placed in service by December 31, 2027. And for construction starting after September 2, 2025, physical work, not the old 5% cost safe harbor, generally establishes the start date.
If your project is in motion, act now
The filing calendar deserves attention now, not at tax time. Pre-filing registration alone takes months, and bonus-credit documentation is easiest to assemble while the project team is still engaged.
What about grant-funded projects?
Certain grants and forgivable loans interact with the credit calculation, and in some cases restricted grants plus the credit cannot exceed project cost. This is exactly the kind of question to resolve during eligibility confirmation, before filing rather than after.
Section 6417 Direct Pay: A Filing Guide for Tax-Exempt Entities
Step-by-step walkthrough of pre-filing registration, Form 990-T preparation, common pitfalls, and a compliance checklist.
Download PDFQuestions about your project?
We review eligibility, registration, and bonus-credit positions before you commit to anything.
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