As tax credits can make or break certain renewable energy projects, it’s become essential that certified public accountants (CPAs) can articulate to their clients the intricacies of federal clean energy tax credits and the financial savings they offer.
For instance, the Investment Tax Credit (under Internal Revenue Code [IRC] sections 48 or 48E) is available for zero-emission energy generation technology, including solar, geothermal, and energy storage projects. Electric vehicle (EV) chargers installed in certain areas are also able to claim the Alternative Fuel Vehicle Refueling Property Credit (IRC section 30C). Many other federal credits are available for a range of renewable energy technologies. Of course, CPAs that better understand these credits can reach a broader range of potential clients.
With several key deadlines looming, here’s what CPAs need to know about helping tax-exempt clients take advantage of these incentives while there’s still time.
Notably, many CPAs in Illinois are still unaware of a relatively new mechanism called “elective pay,” often referred to as “direct pay,” which enables tax-exempt entities to claim these tax credits as a direct cash payment.
Created by the Inflation Reduction Act of 2022, elective pay allows tax-exempt entities and others to receive the same benefits as private entities when investing in clean energy.
The Investment Tax Credit has long been available to private residents and companies, and now public and tax-exempt entities can benefit too. By filing a tax return, these entities that have purchased energy property, such as solar panels, EV chargers, and geothermal heat pumps, can claim tax credits valued at 30% or more of eligible project costs. (Projects to which the Prevailing Wage and Apprenticeship rules apply receive a base credit of 6% if noncompliant with these rules. Projects that are compliant and that claim bonus credits [e.g., the Energy Community Bonus Credit] can increase their tax credit to 40% or more.) Instead of lowering their tax liability, these entities receive a check for the value of the credit from the IRS.
For tax-exempt entities filing on a calendar year basis, returns are due May 15, 2026, and any projects placed in service in calendar year 2025 must claim the credits by this date. To file, entities must have completed pre-filing registration on the IRS website and received a project identification number. Filing for a six-month extension is an option, but this also must be done for calendar year filers by May 15. With elective pay, late returns aren’t permissible, and original returns that don’t claim elective pay can’t be amended to do so. If tax-exempt entities are seeking your help, file an extension for them using Form 8868.
Since the passage of H.R. 1, also known as the One Big Beautiful Bill Act, there’s been much confusion about the availability of federal tax incentives for clean energy. Here are the key dates you need to know to help advise your clients and help combat misinformation:
Despite the longevity of some of these credit deadlines, it’s important that your tax-exempt clients act now to ensure they maximize their time to execute projects.
The Illinois Power Agency (IPA) is offering free technical assistance to tax-exempt entities that are pursuing solar and other clean energy projects and claiming elective pay. The IPA also administers two renewable energy credit incentive programs for solar projects: Illinois Shines and Illinois Solar for All, both of which can be paired with these federal incentives for extra savings.
Overall, these federal credits aren’t just a tax perk for tax-exempt entities—they’re a source of project capital that can stretch limited budgets and free up resources for core services. By guiding clients through the process, CPAs can make a real difference between a missed opportunity and funding mission-critical work.
