What to know about IRA’s Direct Pay opportunity

At this year’s New Mexico Infrastructure Finance Conference (NMIFC) on October 28th at the Isleta Resort and Casino, our spotlight workshop will be on the Inflation Reduction Act’s Direct Pay program, also known as Elective Pay. There’s a lot of buzz around this unique opportunity for tax-exempt entities to claim cash rebates from the federal government, so the State of New Mexico is providing public entities with a chance to learn from the U.S. Department of Treasury, U.S. Department of Energy, and other Direct Pay experts. This is an unprecedented workshop so here’s what you should know to catch up on the buzz around Direct Pay and how to cash in.  

What’s Direct Pay?
Direct Pay is a game-changing federal program under the Inflation Reduction Act (IRA) that allows non-taxpaying entities, like state agencies, local and tribal governments, and nonprofit organizations, to benefit from federal tax credits across ten categories of clean energy projects (below). This IRA provision – in effect now through 2032 – makes federal incentives more accessible to public and nonprofit entities that typically don’t benefit from tax credits. The State of New Mexico and our local and tribal government partners now have a unique opportunity to participate in renewable energy and sustainability initiatives that align with broader goals of reducing carbon emissions and building resilience against climate change. 

Why should public entities participate?  
Direct Pay turns federal tax credits into cash payments, benefiting public entities that lack taxable income but need funding for renewable energy projects. By utilizing this program, public agencies can effectively reduce the total costs of clean energy investments to the tune of 10 to 70 percent of the total project cost, thereby accelerating their path to energy savings and sustainability. Many public entities own extensive real estate and vehicle fleets, making them prime candidates for clean energy upgrades and zero emission vehicle adoption. Simply put, Direct Pay lowers the cost of many facility and fleet improvements that state, local and tribal entities are already planning to do to generate clean energy and adopt electric vehicles and associated refueling infrastructure.  

What type of projects qualify?
Common eligible projects that could qualify include onsite solar and wind, geothermal HVAC systems, microgrid controllers, and electric and hybrid vehicles and charging stations. The federal program also includes provisions to increase your base rebate amount depending on factors such as project location in a designated “energy community” and compliance with domestic content and prevailing wage and apprenticeship provisions. 

 Here are the ten categories that qualify: 

• Production Tax Credit for Electricity from Renewables  

• Clean Electricity Production Tax Credit  

• Investment Tax Credit for Energy Property  

• Clean Electricity Investment Tax Credit  

• Low-Income Communities Bonus Credit  

• Zero-Emission Nuclear Power Production Credit  

• Advanced Energy Project Credit  

• Advanced Manufacturing Production Credit  

• Credit for Qualified Commercial Clean Vehicles  

• Alternative Fuel Vehicle Refueling Property Credit  

• Clean Hydrogen Production Tax Credit  

• Clean Fuel Production Credit  

How do I sign up for the workshop? 
Register at the NMIFC website to sign up for the Direct Pay workshop.

We look forward to seeing you there! 

In addition to the workshop, you can learn more about Direct Pay HERE.