In a significant shift for nonprofits, recent federal incentives now offer direct payments to cover a large portion of solar installation costs. The financial support of a direct payment option (equivalent to a tax credit) makes it possible for nonprofits — which typically don’t pay taxes and haven’t benefited from tax-based solar incentives in the past — to finally access affordable solar energy. 

Here’s how this game-changing direct pay option empowers nonprofits to reduce their energy costs and environmental impact.

What Is the Direct Pay Option for Nonprofit Solar?

The direct pay option was introduced under the Inflation Reduction Act of 2022. This new cash payment option enables qualifying nonprofits to receive a payment equal to 30% of their total solar installation costs. 

Already, the IRA has had a huge impact on promoting solar infrastructure. The IRS recently released figures for the tax year 2023 that revealed 752,300 returns that benefited from the rooftop solar clean energy tax credit. According to the Center on Budget and Policy Priorities, 70% of the IRA’s $400 billion in climate investments is in the form of these uncapped tax credits, which are planned to remain available through 2032.

Unlike traditional tax credits, which reduce taxes owed, the Inflation Reduction Act solar incentive delivers a direct check from the Treasury Department — an incredible opportunity for nonprofits with no taxable income. This financial support opens the door for many nonprofits to pursue solar installations that were previously out of reach and enjoy all of the continuous financial and sustainability benefits that come along with it.

To qualify for IRA solar incentives, organizations must meet a few basic requirements:

  • Hold 501(c)(3) status under federal tax law
  • Obtain Permission to Operate (PTO) after January 1, 2023
  • Ensure their project complies with domestic production requirements, which impacts the percentage received.

Projects that met these standards in 2024 were able to secure the full 30% payout, while those that didn’t were still able to receive 90% of that amount.

The Benefits of More Accessible Commercial Solar for Nonprofits

With energy costs continuing to rise, solar energy represents a strategic investment that reduces reliance on utility power. Harnessing solar energy helps nonprofits to achieve three core benefits: 

  • Significant cost savings
  • Increased control and predictability of ongoing operating expenses
  • Alignment with sustainability goals

Enjoy Cost Savings & Financial Relief

It can be challenging for nonprofits to access funds for large capital projects. The direct pay incentive helps bridge the gap with funds that make the initial investment in solar manageable (while also accelerating the return on investment).

For example, a nonprofit with a $100,000 solar project could receive a $30,000 direct payment, reducing the effective project cost to $70,000. The overall savings of using solar will continue to accumulate as the system generates power, ultimately offsetting your organization’s energy bills and freeing up budget resources for mission-critical programs.

Smaller systems may be eligible for additional bonus credits, such as low-income community adders, that increase the total incentive. Larger systems, on the other hand, provide more substantial energy savings and may qualify for additional financing options. With direct pay, nonprofits can customize their solar approach based on budget, energy needs, and long-term goals.

Take Back Control of Operating Expenses

Solar power provides stability in an era of fluctuating energy prices. With solar, nonprofits can manage a consistent source of energy, allowing for more predictable operating expenses year over year. Budgeting becomes easier, and organizations gain financial security, knowing their energy costs won’t suddenly spike due to market changes.

Align With Sustainability Goals

For many nonprofits, reducing environmental impact aligns with their mission. Solar power offers a clean energy solution that helps organizations decrease their carbon footprint and showcase a commitment to sustainability. By adopting solar, nonprofits make a statement about their values, attract eco-conscious donors, and set an example within their communities.

How to Navigate Direct Pay for Nonprofits:

Direct payment can help to balance the financial equation for nonprofits, but make sure to ensure your eligibility and approach the project strategically with these three steps:

  1. Assess Eligibility: Confirm your 501(c)(3) status and ensure your solar project meets the PTO requirements for the project.
  2. Partner With a Trusted Solar Provider: An experienced solar partner can help manage the technical requirements and documentation needed for direct pay eligibility. With Geoscape Solar, nonprofits don’t need to navigate this process alone.
  3. Optimize Project Timing: Timing matters for maximizing incentives. The sooner your project launches, the sooner you can take advantage of the most current incentives before they reach their expiration or run out.

Why Nonprofits Are Choosing Geoscape Solar

The Geoscape Solar team has over 100 years of combined experience in supporting nonprofits through their transition to solar. From initial assessment to financing and system design, we’ve got your back. Your nonprofit can achieve significant savings on solar with targeted solutions such as the IRA direct payment (and other options).

Explore how solar can fuel your nonprofit’s mission. Contact Geoscape Solar today and get a complimentary solar analysis for your property to take advantage of direct pay and design a solar solution that powers your goals.