Federal incentives for energy investments and energy production have increasingly been delivered through federal tax incentives. In the past, public power utilities have benefited only indirectly from these energy tax credits through the purchase of electricity from developers claiming these credits. Starting in 2023, tax-exempt entities, including public power utilities, can monetize certain energy tax credits through a mechanism called “elective payment.”
This guide explains how elective payment works and how nonprofit utilities can use the mechanism to directly receive tax credits for their qualifying energy projects.
Topics covered in the guide include:
- Who Qualifies for Elective Payment?
- What Credits Qualify for Elective Payment?
- Meeting Prevailing Wage and Apprenticeship Requirements
- The Investment Tax Credit vs Production Tax Credit
- Bonus Credits
- Domestic Content Requirement for Elective Payment
- Tax-Exempt versus Taxable Financing
- Filing an Elective Payment Return
- Project Development from the Perspective of Elective Payment