Clean Energy Tax Credits for Churches, Synagogues and Mosques

For the first time, faith-based, tax exempt entities are eligible to take advantage of federal tax credits to install solar panels, add electric vehicle infrastructure, and store energy through a process called Elective Pay or Direct Pay. In lieu of a typical tax credit, the IRS will treat faith-based institutions as if they did pay tax, and they will get refunded the owed amount for the project. Eligibility began in 2023 and will go through 2032. 

There are 12 clean energy tax credits that are available to nonprofits, including for the production of electricity from renewable sources like putting solar on their roofs and for purchasing commercial clean vehicles. 

Process for Houses of Worship to receive direct payments for clean energy projects

• Design and implement your qualifying clean energy project. You will need to know what credit you are applying for.
• Determine your tax year, if you don’t already know, either based upon a calendar or fiscal year.
• Complete pre-filing registration with the IRS:
  • Create a Clean Energy Business Account for your organization at www.irs.gov/eptregister. This website also includes a comprehensive user guide and video tutorial.
  • Select your Registrant Type (i.e., non-profit organization or local government). This is where you will provide information about your organization.
  • Select the credits your organization intends to claim. You will provide supporting documentation for the projects or investments.
  • Review and submit your requests for registration numbers. Don’t worry you can save your work in progress!
  • After you submit your registration, you can monitor its status online. If everything checks out, you will receive a registration number.
• File your tax return and pick the corresponding direct pay election. This is when you will provide your registration number.
• Receive your direct payment after the tax return is processed!

The IRS has a comprehensive Direct Pay Guide, web resource, and FAQ resource. The White House additionally has a helpful guide, as well as the Treasury Department. Making the most of the benefits from the IRA is one of the best ways that we can jumpstart clean energy, keep our air and water clean, and mitigate climate change.

Things to know as your house of worship goes solar

Understand how solar and storage works in Alaska

Obviously, Alaska has a unique climate and seasonal light cycles. You can review our Solar and Storage in Alaska primer to understand what you can expect from your solar panels in Alaska, what kind of solar panels will suit your needs best. 

Choosing the right solar installer

Making the transition to solar power means first choosing the right solar installer. You want to prioritize having a certified, experienced installer with quality solar panels, but what does that look like exactly? To help advise your decision, review this guide from the Department of Energy, which includes a list of questions to ask, attributes to look for, and tactics to seek out reputable installers. Our Rooftop Solar and Storage in Alaska primer can also help with this. 

Funding solar energy

Solar projects can be partially covered through the Investment Tax Credit (ITC). For projects that produce less than 1 megawatt of power, the baseline coverage of the system is set at 30%. There are also multiple bonuses that exist depending on if the project is in a low-income community, if the panels are manufactured in the United States, as well as others. 

While at least 30% of the cost of your solar energy system can be covered, raising the remaining sum can seem daunting. Luckily, many faith-based communities have already taken creative steps to achieve their financial goals and provide great examples to emulate. Some have set up LLCs from members’ investments and then sold the electricity back at a lower rate than the utility. Institutions can also take advantage of opportunities provided by green banks which will provide billions of dollars from the IRA for clean energy projects. 

Examples: 

• Trinity Presbyterian Church of McKinney, Texas installed 22 solar panels on their church in 2019, as a way to care for God’s creation while saving money. 
• Federated Community Church in Flagstaff, Arizona are keeping 2 million pounds of carbon dioxide out of the atmosphere, while saving approximately $350,000 over the next forty years.
•  In 2018, Hindu Temple of the Woodlands spent $15,000 on electricity. Now with solar panels, 80-90% of the temple’s energy needs are met while 120,000 pounds of carbon dioxide are kept out of the atmosphere each year. 
• Congregation Beth Israel of Austin, Texas installed solar panels in 2014 and expects to save $90,000 in electricity bills over the 25-year life of the system.

Net-Metering

In addition to reducing on-site use of electricity, solar energy can also generate extra money by putting surplus power onto the grid. When extra solar energy is produced, Alaska customers receive a credit on their bill through a process known as net metering. Each month, the utility will calculate how much electricity your building used compared to how much you generated. If you used less electricity than you generated, you are paid for the excess electricity that went into the grid for your community to use. If you used more than you generated, you’re only charged for the difference between the two. 

Available bonuses for solar energy installation

• Domestic Content (+10%) – To qualify for this 10% bonus, 100% of steel and iron components must be manufactured within the United States.
• Energy Communities (+10%)- Projects located in ‘energy communities’ – communities that have historically been dependent on fossil fuel industries – can receive an additional 10% bonus
• Environmental Justice Solar and Wind (+10% or +20%) – The first 10% bonus credit can be applied if the project is based in a low-income community, which is determined by looking at census tracts. The second option is a 20% bonus for projects part of a qualified low-income residential building project or economic benefit project.