How elective pay works
The organization owns the system, completes the IRS pre-filing registration to get a registration number for the project, and then files a return claiming the credit. The IRS pays the credit amount like a refund.
Organizations that don’t normally file, such as many churches, still have to file a return (Form 990-T when no other return is required) to make the election. The return is due by the organization’s normal due date — May 15 for calendar-year entities — with a six-month extension possible. Miss it and the payment is lost.
The deadlines
Under the 2025 law, solar that didn’t begin construction by July 4, 2026 must be placed in service by December 31, 2027 to qualify for §48E. That leaves roughly 15 months from the date we wrote this for design, board approvals, permitting, installation and interconnection. Nonprofit decisions often take time, so the calendar is the main risk.
Battery storage keeps §48E eligibility through construction starting in 2033, phasing down after that. New sourcing restrictions on foreign-entity materials apply to projects beginning construction after 2025; equipment choice matters, and we check it.
Credit size and the fine print
The §48E credit has a base rate and a higher rate for projects under 1 MW or that meet prevailing-wage and apprenticeship requirements; most nonprofit projects are well under 1 MW. Larger projects using elective pay can face a reduction unless they meet domestic-content requirements. Your tax advisor should confirm the credit rate and any reductions before you budget around them.
Because a nonprofit can’t use depreciation, elective pay is often the main federal benefit. A PPA with a taxable owner is the alternative: the owner claims the credit and sells you power at a lower rate, with no upfront cost.
What to do next
- 1Get board-level agreement on exploring solar early — the 2027 deadline is close.
- 2Have us design and price the system, with and without storage.
- 3Engage a tax advisor familiar with elective pay and §48E.
- 4Complete the IRS pre-filing registration before filing the return that claims the credit.
- 5Compare ownership with elective pay against a PPA.
FAQ
Questions we hear
Does our church need to file a tax return to get the payment?
Yes. The IRS says entities not ordinarily required to file must file a return to make the elective payment election, typically Form 990-T. Your tax advisor can confirm.
When do we get the money?
After the system is placed in service and you file the return for that tax year. You need to fund the project in the meantime, often through reserves, a loan or a donor campaign.
Can a town or school district use elective pay?
State and local governments and other applicable entities can use elective pay under §6417. Our nonprofit and municipal solar service covers these projects.
What if we miss the 2027 solar deadline?
The solar portion would lose §48E eligibility under current law. Storage keeps eligibility longer. Plan with margin — interconnection delays happen.
Is elective pay better than a PPA?
Ownership with elective pay usually costs less over the system’s life, but requires capital upfront. A PPA avoids upfront cost and paperwork but shares the value with the owner. It depends on your finances.