Direct Pay (Elective Pay)
What is Direct Pay and who needs to file?
Direct Pay, also referred to as Elective Pay, is a new policy under the Inflation Reduction Act that allows tax-exempt and government entities to benefit from the solar investment tax credit (ITC). This process may appear daunting for many tax-exempt entities that don’t typically file with the IRS, so the Resonant Energy team has compiled some guidance provided by the IRS and the Department of Energy. While this is a good place to get started, it is important to consult your own tax professional for guidance about your organization’s specific case.
Pre-Register for Direct Pay
To apply to receive elective pay or do a transfer credit, you must pre-register with the IRS. You can pre-register once you receive Permission to Operate or “PTO”. Please keep in mind you must pre-register before May 15th in the tax season after you receive PTO. The IRS recommends pre-registering early to make sure they have enough time to process your pre-registration ahead of your tax deadline
If your system received PTO in 2024, you must apply for pre-registration before May 15th, 2025. You can file for a tax extension if necessary, which would grant you 6 additional months.
If your entity has never filed taxes or lacks a filing requirement, you may adopt a tax year based on your fiscal year so long as you maintain adequate books. Please note that submitting an application for elective pay may result in an audit.
Filing and Receiving Payment
Once you have pre-registered for Direct Pay, the IRS will send you a registration number which will need to be included in your filing. The IRS has not given a timeline for when organizations can expect to receive their rebate.
Resonant Energy will support clients through the Direct Pay filing process. Clients looking for a more detailed overview of the Direct Pay process and support for their project can reach out to their project team.