Organizations investing in qualifying clean electricity generation and energy storage projects may be eligible for a valuable federal tax incentive under IRC Section 48E, the Clean Electricity Investment Credit. Depending on the facts, the credit can equal up to 30% of eligible project costs, making it an important consideration for organizations planning significant capital investments.
Although many organizations first encounter this incentive through solar energy projects, Section 48E is not limited to solar. It is a technology-neutral credit that generally applies to qualifying clean electricity generation facilities and energy storage technologies placed in service after 2024. Depending on the project, this may include solar photovoltaic systems, battery energy storage, certain wind and geothermal projects, and other qualifying technologies.
For nonprofits, schools, farms, churches, businesses, governmental entities, and community organizations, these incentives can help offset project costs while supporting long-term operational savings and sustainability goals. However, determining the available credit is more complex than simply multiplying project costs by 30%.
Eligibility depends on a variety of factors, including the type of technology, ownership structure, eligible project costs, prevailing wage and apprenticeship requirements, available grants or rebates, and the organization’s filing position. For tax-exempt organizations, an additional opportunity exists through elective pay (direct pay), which may allow eligible entities to receive certain clean energy credits as a refundable payment even if they do not owe federal income tax.
At Greenwood Ohlund, we help organizations evaluate the tax, accounting, and financial implications of major capital projects, including clean energy investments. Understanding the rules before construction begins can help maximize available incentives while avoiding costly surprises later in the process.
What Is the IRC Section 48E Clean Electricity Investment Credit?
IRC Section 48E is the federal Clean Electricity Investment Credit, enacted as part of the Inflation Reduction Act’s transition to technology-neutral clean energy incentives. For many qualifying projects placed in service after 2024, it replaces the legacy investment tax credit under IRC Section 48.
Rather than focusing on a limited list of technologies, Section 48E generally provides a credit for qualifying clean electricity generation facilities and energy storage technologies that satisfy the applicable requirements.
While solar remains the most common example, organizations considering battery storage, geothermal systems, wind projects, or other qualifying clean energy technologies may also benefit from the credit.
Certain projects that began construction before 2025 may still qualify under the legacy Section 48 rules. Because the applicable provision depends on a project’s facts and timeline, organizations should evaluate which rules apply before estimating the expected benefit.
How Much Is the Credit?
Section 48E is often described as providing a 30% federal tax credit, but that figure should be viewed as a potential maximum—not an automatic result.
The available credit depends on several factors, including:
- The type of qualifying technology.
- When the project is placed in service.
- Whether prevailing wage and apprenticeship requirements are satisfied or an exception applies.
- Which project costs qualify as eligible basis.
- Whether bonus credit opportunities apply.
- The effect of grants, rebates, or other funding.
- Whether the organization qualifies for elective pay.
In addition, not every project cost is necessarily eligible for the credit. Equipment, installation, and certain directly related costs may qualify, while other expenditures may require separate analysis.
For these reasons, organizations should avoid relying solely on vendor estimates or preliminary financial models. A proposal showing a “30% federal tax credit” can be a useful planning tool, but it should not replace a review of the project’s tax and accounting implications.
Elective Pay: A Significant Opportunity for Tax-Exempt Organizations
Historically, many nonprofits and other tax-exempt organizations could not fully benefit from federal tax credits because they had little or no federal income tax liability.
The Inflation Reduction Act introduced elective pay, sometimes called direct pay, allowing many eligible tax-exempt and governmental entities to receive the value of certain clean energy credits as a refundable payment from the IRS.
This can significantly improve the economics of qualifying projects for organizations such as:
- Nonprofits
- Independent schools and universities
- Churches and religious organizations
- Governmental entities
- Tribal governments
- Affordable housing organizations
- Community-based organizations
- Other qualifying tax-exempt entities
However, elective pay is not automatic. Organizations must satisfy eligibility requirements, complete IRS pre-filing registration, maintain adequate documentation, and timely file the required tax forms.
For many organizations, the filing and compliance requirements deserve just as much attention as the project itself.
Planning Before Construction Begins
Clean energy projects often involve contractors, engineers, utility providers, grantors, lenders, accountants, and legal advisors. Each participant may focus on a different aspect of the project, but tax planning should be part of those conversations from the beginning.
Evaluating credit eligibility before contracts are signed can help organizations understand the potential federal incentive, identify documentation requirements, coordinate accounting treatment, and avoid unexpected filing issues.
Claiming the Credit—Documentation, Filing, and Planning Considerations
Understanding the Section 48E Clean Electricity Investment Credit is only the first step. Successfully claiming the credit—or, for eligible tax-exempt organizations, receiving an elective payment—requires thoughtful planning, strong documentation, and coordination between project managers, finance teams, and tax advisors.
Organizations often spend months evaluating equipment, selecting contractors, and securing financing. The same level of attention should be given to documenting the project and understanding the tax implications before construction is complete.
How Grants and Other Funding Can Affect the Analysis
Grant funding is one of the most important—and frequently misunderstood—aspects of a clean energy credit analysis.
Many nonprofits and public entities receive funding from federal, state, local, utility, or private grant programs to help offset project costs. While these programs can significantly improve a project’s financial feasibility, they can also affect the overall tax analysis.
The impact depends on the specific terms of the funding and the applicable tax rules. Organizations should not assume that receiving grant funding either eliminates the credit or has no effect on it.
Questions worth considering include:
- Is the grant restricted specifically to the clean energy project?
- Is the funding reimbursement-based or paid in advance?
- Does the grant require repayment if certain conditions are not met?
- Are utility rebates or state incentives also available?
- How will the funding be reflected in the organization’s accounting records?
For example, two organizations may install nearly identical projects but receive very different tax benefits because their funding arrangements differ. One organization may finance the project primarily with its own resources, while another receives grants or rebates tied directly to the installation. Although the projects appear similar, the tax analysis may not be.
The takeaway is simple: grant agreements, award letters, rebate documentation, and project financing should be reviewed before estimating the expected federal benefit.
Documentation Is Critical
A successful clean energy credit claim begins long before a tax return is filed.
Organizations should maintain documentation supporting both project eligibility and project costs throughout the life of the project. Good recordkeeping not only supports the credit but also strengthens financial reporting, grant compliance, and audit readiness.
Depending on the project, documentation may include:
- Executed construction and equipment contracts.
- Final invoices and proof of payment.
- Grant agreements and award letters.
- Utility rebate documentation.
- Technical specifications for the qualifying property.
- Ownership records.
- Placed-in-service documentation.
- Utility interconnection or permission-to-operate documentation, when applicable.
- Documentation supporting any applicable bonus credits.
- Board approvals and significant project authorizations.
- Accounting records supporting capitalization and project costs.
Waiting until tax return preparation to gather these records often creates unnecessary challenges. Establishing a documentation process at the beginning of the project is generally more efficient than reconstructing records months later.
Understanding the Filing Process
For organizations claiming elective pay, the filing process involves more than completing a tax return.
Depending on the organization’s circumstances, the process generally includes:
- Confirming eligibility for the applicable credit.
- Completing IRS pre-filing registration through Energy Credits Online.
- Receiving a registration number for each qualifying property.
- Preparing the applicable federal tax forms.
- Making the elective pay election on a timely filed return.
Depending on the facts, filings may include Form 3468, Form 3800, and, for many tax-exempt organizations, Form 990-T.
Timing also matters.
The credit is generally claimed for the tax year in which the qualifying property is placed in service. Organizations that discover they failed to claim an available credit may, in some circumstances, be able to file an amended return, subject to the applicable statute of limitations.
Because filing requirements continue to evolve through IRS guidance, organizations should coordinate the filing process with their tax advisor rather than waiting until the return due date.
Accounting Considerations Beyond the Tax Credit
The federal tax incentive is only one piece of the overall financial picture.
Organizations should also consider how the project will be reflected in their accounting records and financial statements.
Questions commonly include:
- Should the project be capitalized as a fixed asset?
- What useful life is appropriate?
- How should grants or reimbursements be recognized?
- How should utility rebates be recorded?
- Are additional financial statement disclosures required?
- How will ongoing operating savings affect future budgets and forecasts?
For nonprofits, grant agreements deserve particular attention. Some grants are conditional and require performance milestones before funding is earned, while others include reporting requirements or restrictions that continue after the project is complete.
Addressing these accounting questions early can help avoid surprises during year-end reporting or the annual audit.
Questions to Ask Before Moving Forward
Before committing to a clean energy project, organizations should take time to evaluate both the financial and compliance implications.
Some helpful planning questions include:
- Does the proposed technology qualify under current federal rules?
- Will our organization own the project?
- Are we eligible for elective pay or another method of claiming the credit?
- How will grants, rebates, or other incentives affect the analysis?
- Have prevailing wage and apprenticeship requirements been considered?
- What documentation should we begin collecting now?
- Who will complete the IRS registration and filing requirements?
- How will the project be reflected in our financial statements?
- Are our expected project savings based on realistic assumptions?
Asking these questions before contracts are signed can help reduce uncertainty later and improve project planning.
How Greenwood Ohlund Can Help
Clean energy projects often involve more than tax credits. They also affect accounting, financial reporting, budgeting, grant compliance, cash flow planning, and long-term organizational strategy.
Greenwood Ohlund works with nonprofits, schools, businesses, governmental entities, and community organizations to evaluate the financial implications of significant capital investments. Our team helps clients understand how tax incentives fit within the broader context of their organization—not just how much a credit may be worth.
Our services may include:
- Evaluating potential eligibility for clean energy tax incentives.
- Assessing the impact of grants, rebates, and other funding.
- Assisting with elective pay planning and filing considerations.
- Advising on capitalization and accounting treatment.
- Supporting financial statement reporting.
- Helping organizations develop documentation that supports their filing position.
By bringing tax and accounting considerations together early in the process, organizations are often better positioned to make informed investment decisions.
Bottom Line
The IRC Section 48E Clean Electricity Investment Credit represents a significant opportunity for organizations investing in qualifying clean electricity generation and energy storage projects. For many tax-exempt organizations, elective pay has expanded access to these incentives in ways that were not previously available.
However, the value of the credit depends on more than the cost of the project. Ownership, project timing, funding sources, documentation, and filing requirements can all affect the final result.
Organizations should evaluate these issues before construction begins—not after the project is complete. Early planning can help maximize available incentives, support compliance, and avoid unexpected complications during the filing process.
If your organization is considering a qualifying clean energy project, Greenwood Ohlund can help evaluate the tax, accounting, and financial reporting implications so you can move forward with confidence.
Eric Kimpton, Senior Tax Manager
