A report released on Oct. 22 by Democrats on the Senate Finance Committee shows that 2,645 returns earned $2.5 billion in direct pay tax credits in 2023, and 2024, the first two years in which tax credits were available.
Direct payment -- also known as elective payment -- of tax credits to tax-exempt entities, including public power utilities, was made possible by the Inflation Reduction Act (IRA). While the One Big Beautiful Bill Act has since begun the phaseout of these energy tax credits, direct payment still remains an option.
“The implementation of the IRA and the Elective Pay option gives our not-for-profit members the same incentive possibilities enjoyed by investor-owned utilities and other energy developers who invest in renewable energy projects,” the report quotes Indiana Municipal Power Agency President and CEO Jack Alvey as saying.
Referring to IMPA’s community solar park program, Alvey said that direct receipt of the related investment tax credit (ITC) “now goes directly and in-full to the 350,000 people in our municipal electric communities, enabling IMPA to continue serving our members with low-cost, reliable, and environmentally-responsible power.”
A recent survey of public power utilities showed more than 30 public power utilities have claimed, or intend to claim, direct payment of energy tax credits, APPA noted.
Projects include solar, hydropower, geothermal, battery storage, new and existing nuclear, electric vehicles, and electric vehicle charging equipment.
The report notes that further uptake of tax-creditable projects by entities eligible for direct payment has been hampered by the repeal of energy tax credits and “regulatory uncertainty, complexity, and higher compliance costs.”
In a press release announcing the report Senate Finance Committee Ranking Member Ron Wyden (D-OR) said the report proves there is “massive demand” for “any and all” programs that lower energy costs and rebuild aging infrastructure. Senator Wyden also said that if Democrats regain majority control of Congress, “reinstating the wind and solar tax credits and bolstering the Direct Pay Program will be a top priority.”
APPA said it is working with Democratic and Republican allies in Congress, including Wyden, to educate them on the hurdles faced by public power utilities seeking to make use of direct payment. To advance legislation to fix direct payment, APPA is also working alongside other stakeholders, such as rural electric cooperatives, school districts, and others cited in the report as making use of elective payment.
