How your house of worship can go solar

New federal tax credits are helping churches, synagogues, temples, and other houses of worship go green with solar energy

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True Life Church in Round Rock Texas has a 45 kw solar PV system

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Houses of worship across Texas are going solar – putting their values into action, helping protect God’s creation, and saving money on their electric bills at the same time. 

The passage of the Inflation Reduction Act (IRA) in August 2022 marks a historic moment in the US battle to mitigate climate change with the largest investment into clean energy and electrification ever seen in the country. With consumer rebates and tax credits available for solar energy and electric vehicles, there are more ways to take advantage of this funding than ever. And for the first time, faith-based, tax-exempt entities can directly take advantage of these incentives.  

Prior to the passage of the IRA, places of worship and other tax exempt entities were unable to directly take advantage of federal tax credits to support installation of solar panels. Now, 30% (* or more) of the cost of a solar project and installation can be covered by direct pay tax credits from the federal government through 2032. 

How do direct pay tax credits for solar work?

In lieu of a typical tax credit, faith-based communities can receive a ‘direct pay’ tax credit. How it works is that the IRS will treat you as if you did pay this tax, and you will get refunded the owed amount for your solar project. To receive this credit, make an election on a tax filing in the year in which the project is placed in service. Eligibility begins in 2023 and the solar project must be completed and capable of connecting to the grid before filing this election. Organizations wishing to apply for a direct pay credit should take the following steps, according to the White House:

  1. Identify the project and tax 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 will be 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, including extensions.
  6. Receive your direct payment.

Those interested should also contact their tax advisors for expert assistance.  

Things to know when as your house of worship goes solar

  • Understand available financing 

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. 

  • 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. You can also visit Environment America and EnergySage’s tool to find the best solar installer near you.

  • Funding solar energy

While at least 30% of the cost of your solar energy system can be covered, raising the remaining sum can seem daunting. Luckily, faith-based communities have already taken creative steps to achieve their financial goals. 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 national green banks. With support from the IRA, national green banks will be established to provide billions of dollars into clean energy projects. 

Although funding solar energy systems for your house of worship will now be significantly easier with new opportunities in the IRA, faith communities across the country have already taken this step. 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. 

Switching to solar energy combines both environmental and economic priorities. 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.

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, in most states customers receive a credit on their bill through a process known as net metering. Net metering isn’t required in Texas, however, and every utility and retailer electric provider has their own policies for compensation of surplus solar. If you live in a part of Texas where you can choose your own retail electric provider (REP), check out Solar United Neighbor’s helpful guide on picking a REP which will give you the best deal.

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.

Grace Coates

Former Clean Energy Associate, Environment Texas

Luke Metzger

Executive Director, Environment Texas

As the executive director of Environment Texas, Luke is a leading voice in the state for clean air, clean water, clean energy and open space. Luke has led successful campaigns to win permanent protection for the Christmas Mountains of Big Bend; to compel Exxon, Shell and Chevron Phillips to cut air pollution at three Texas refineries and chemical plants; and to boost funding for water conservation, renewable energy and state parks. The San Antonio Current has called Luke "long one of the most energetic and dedicated defenders of environmental issues in the state." He has been named one of the "Top Lobbyists for Causes" by Capitol Inside, received the President's Award from the Texas Recreation and Parks Society for his work to protect Texas parks, and was chosen for the inaugural class of "Next Generation Fellows" by the Robert S. Strauss Center for International Security and Law at UT Austin. Luke, his wife, son and daughters are working to visit every state park in Texas.

Lisa Frank

Executive Director, Washington Legislative Office, Environment America; Vice President and D.C. Director, The Public Interest Network

Lisa directs strategy and staff for Environment America's federal campaigns. She also oversees The Public Interest Network's Washington, D.C., office and operations. She has won millions of dollars in investments in walking, biking and transit, and has helped develop strategic campaigns to protect America's oceans, forests and public lands from drilling, logging and road-building. Lisa is an Oregonian transplant in Washington, D.C., where she loves hiking, running, biking, and cooking for friends and family.

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