What Texas actually pays for solar, and who it pays
Start here, because half of what gets put in front of a nonprofit board is an incentive the organization is not eligible for. Program Year and statutory values current as of October 2026.
Any owner, which in practice means a taxable one
Tax Code section 11.27 exempts the added appraised value of a solar device. A church, school or charity whose property is already exempt gains nothing. It is a real lever on third-party-owned solar sitting on your land, because the device stays exempt though its owner is taxable.
Public entities only
Private nonprofits are not eligible. A low-interest state loan no longer reduces the federal credit, so this stacks cleanly for the entities that can use it.
Taxable entities
Tax Code sections 171.056 and 171.107 reach the installer or offer a deduction against a tax your organization does not owe. A 501(c)(3) is exempt from the franchise tax under section 171.063.
Texas has no personal income tax, and a 501(c)(3) is exempt from the franchise tax under Tax Code section 171.063. The two solar franchise-tax provisions, sections 171.056 and 171.107, reach the installer or offer a deduction against a tax your organization does not owe. Neither moves money for a tax-exempt owner.
Everything above lowers a bill. The federal credit sends you money.
Your organization owes no federal income tax, which for forty years meant the investment credit was worth nothing to you and your only route was letting a developer own the system. Section 6417 changed that. You claim the credit on a Form 990-T and the IRS pays it to you as a single payment. Not a discount, not a credit carried forward. A payment.
Base credit
Of eligible basis, where prevailing wage and apprenticeship are met or the facility is under 1 MW AC.
Energy community
Ten points on top, tested at the project's census tract or county. 128 qualifying tracts in Texas.
Low-income communities
Section 48E(h), under 5 MW AC, and it has to be applied for and allocated. Not automatic.
Domestic content adds another ten points, and for an applicable entity it is also a condition. At 1 MW AC and above, for a project whose construction began after December 31, 2025, failing the domestic content requirement eliminates the elective payment unless an exception applies. Under 1 MW AC the condition does not apply at all. That one threshold decides how much of your procurement we need to see.
The questions that decide whether the stack holds
These are the questions Texas organizations actually ask us, in the order they ask them. Each answer carries the authority it comes from, so you can check it or hand it to your board.
We are getting a state or utility incentive. Does that cut the federal credit?
No. There is no provision of Section 48 or Section 48E that reduces the credit because a state or utility incentive exists. Four things can reduce it, and a state incentive is not one of them: tax-exempt bond financing, a grant earmarked in writing for this specific property, a legacy Treasury grant under the 2009 recovery act, and a true cost-based rebate that reduces basis. Everything else stacks.
Can we take a tax-exempt grant and still claim the full credit?
Usually yes, and this is the answer most organizations get wrong. Treasury Regulation 1.6417-2(c)(3)(i) puts grant and forgivable loan money into the credit base “regardless of whether basis is required to be reduced (in whole or in part) by such amounts under general tax principles.” The limit is in the next paragraph: if the grant was given for the specific purpose of acquiring that property, the grant plus the credit cannot together exceed what the property cost. The regulation's own example: an $80,000 project with a $60,000 restricted grant and a $40,000 credit loses $20,000 of credit.
So how do we keep a grant from eating the credit?
It is decided by the grant document, not by your ledger. The test is whether the money was restricted to acquiring that one property, measured when the grant was awarded, or when a loan was approved. Funds that can go to several different credit properties, or to a credit property or something else, are not restricted. The regulation's fourth example treats HUD Capital Funds as unrestricted for exactly that reason. If you are still negotiating the grant, that sentence is the one to negotiate. Pub. 5884 says the IRS looks for a restriction the donor imposed in writing.
Does a performance payment per kWh reduce our basis?
There is no IRS guidance on that question, and anyone who tells you otherwise should show you the cite. What we can say: a payment for electricity delivered over 20 years is not money received to acquire the property, so it is outside the restricted grant rule, and it is not computed off installed cost, so it is not the kind of rebate that gets treated as a purchase price adjustment. The item that deserves real care is a single upfront rebate calculated from what the system cost. We paper the position either way.
Do tax-exempt bonds reduce it?
Yes, and this is the one reduction that bites in practice. Section 48E(d)(2) borrows the rule in Section 45(b)(3): the credit is reduced by the credit times the lesser of 15 percent or bond proceeds over cumulative additions to the capital account, measured at year end. The cap is 15 percent of the credit, not of basis, and it reaches any obligation whose interest is exempt under Section 103, not only private activity bonds. The 2025 tax act did not change it.
What about a state low-interest loan?
It no longer touches the credit. The reduction for subsidized energy financing was repealed for construction beginning after August 16, 2022. The heading on Section 48E(d)(2) still says “subsidized energy financing,” and so does a heading on Form 3468, but the operative text points only at the tax-exempt bond rule. If the loan is later forgiven you leave the financing question and land in the grant rule above, tested as of when the loan was approved.
Does anyone ask us about the grant?
Once, and not on the return. Pre-filing registration asks, for each investment-related credit property, the source of funds you used to acquire it, under Treasury Regulation 1.6417-5(b)(5)(vii)(E) and signed under penalties of perjury. Nothing on Form 990-T or Form 3468 asks about a grant, a rebate or a state incentive. If a grant lands after you file, there is an amended return path, and correcting it before the IRS opens an examination keeps you out of the 20 percent excessive payment penalty.
Have one we did not answer? That is usually the one worth a call. Send us the project and the incentive you are being offered.
Request a Scoping ReviewSolar has to be in service by December 31, 2027
Section 48E(e)(4), added by the 2025 tax act, says the credit “shall not apply to any qualified property placed in service by the taxpayer after December 31, 2027” where the facility is wind or solar. That termination reaches facilities whose construction began after July 4, 2026, which was three months ago. So unless your project was already under construction by then, the question is no longer whether you can start in time. It is whether you can be generating by the end of 2027, with interconnection, an executed agreement, permitting, procurement and construction in between.
Beginning of construction is now size-gated
Notice 2025-42 makes the five percent safe harbor available only to solar with maximum net output of 1.5 MW AC or less. Above that, physical work is the only route. This is a size test, not an entity test, and we see it misdescribed as a nonprofit carve-out.
Storage is not on this clock
Section 48E(e)(4)(C) excludes energy storage technology placed in service at the facility from the termination. A project that cannot make the solar window may still have a storage path.
Geothermal heat pumps are a different section
Ground source heat pump property stays in Section 48 with construction beginning before January 1, 2035. If that is your project, this deadline is not yours.
Tell us your placed in service date, or your expected one, and who owns the system. That is enough for us to tell you whether the calendar still works and what the credit is worth.
Check my timelineWhat the public record says about Texas
Every figure below comes from a primary federal or state source and can be checked. Current as of October 2026.
Commercial power, per kWh
0.58 times the national average of 14.53¢, below the US mean. EIA Electric Power Monthly, July 2026.
Low-income community tracts
46% of the state's 6,896 census tracts qualify as Category 1 for the Section 48E(h) bonus. Allocation required.
501(c)(3) organizations
Of which at least 24,752 are classified by the IRS as churches. Exempt Organizations Business Master File, September 8, 2026.
Energy community status
128 census tracts in Texas qualify on coal closure, and 69 counties qualify on the statistical area test (including Harris County). Status is tested at placed in service. Check the roof's census tract against the current IRS appendix before anyone claims this bonus.
Net metering
No statewide mandate. Export compensation is set by each utility.
What we would check first in Texas
Texas is the energy community state. Sixty-nine counties qualify on the statistical area test and 128 census tracts qualify on coal closure. With the cheapest commercial power in this set and no net metering mandate, the bonus adders rather than the avoided-cost savings are what carry a Texas project.
LoanSTAR Revolving Loan Program
Public entities only. Private nonprofits are not eligible.
Read any financing offer for who ends up owning the system. A no-money-down structure that puts ownership with a third party moves the federal credit to them, and you receive a discounted rate instead of the payment. That is the most expensive sentence in this market.
These are completed engagements. We do not publish client names or addresses.
Four steps, and one of them has a queue
Step 1Confirm you own it
Elective pay reaches the owner of the energy property. If a developer owns the system and sells you power, the credit is theirs. This is settled before any tax analysis begins.
Step 2Price the credit
Eligible basis, the base rate, and every bonus the project can actually document. Sitework, roofing and interconnection are not automatically in basis, and an invoice total is not an eligible basis.
Step 3Register with the IRS
Pre-filing registration through IRS Energy Credits Online, one number per property. The IRS works these in the order received and does not expedite. Leave the number off the return and the election is ineffective.
Step 4File the return
Form 990-T carrying the election, with Form 3468 and Form 3800, and Form 7220 where prevailing wage and apprenticeship apply. An enrolled agent signs it and holds your Form 2848.
Find out what your credit is actually worth in Texas
Tell us the placed in service date, who owns the system, and roughly what it cost. That is usually enough for us to tell you where your filing stands, what the credit is worth, and whether any bonus applies, before anyone commits to anything.
Request a Scoping Review