The Inflation Reduction Act: A Game-Changer for Nonprofits on the Path to Sustainability
As we mark the second anniversary of the Inflation Reduction Act (IRA), nonprofit organizations across the nation are beginning to unlock unprecedented opportunities in clean energy. This landmark legislation was signed into law on August 16, 2022, and it represents one of the most transformative efforts in U.S. history to tackle climate change, promote energy independence, and build a resilient, green economy. For nonprofits, the IRA offers a unique chance to reduce their carbon footprints, enhance energy resilience, and redirect savings back into their missions.
What is the Inflation Reduction Act?
The IRA, officially known as H.R. 5376, is a comprehensive legislative package focused on clean energy, healthcare, tax reform and reducing the federal deficit. For nonprofits, the most relevant components of the IRA are the clean energy and climate provisions, which are designed to cut U.S. carbon emissions by 50% by 2030. The legislation is set to drive over $336 billion in new investments in the clean energy economy.
How the IRA Advances Clean Energy
The IRA’s impact on clean energy is extraordinary. One of its key achievements is expanding the Federal Investment Tax Credit (ITC) for renewable energy projects. Before the IRA, the ITC was scheduled to phase down, but the act restored it to 30% for projects that begin construction before 2033.
Projects eligible for the expanded ITC include those related to renewable energy technologies like solar, battery storage, energy-efficient equipment, and electric vehicles. Additionally, the IRA introduces provisions to help low-income and disadvantaged communities benefit from this clean energy transition. Grants, rebates, and other financial incentives are available to promote clean energy deployment in these areas, further increasing environmental equity.
The clean energy sector is also expected to experience significant job growth due to the IRA, with hundreds of thousands of new jobs being created across manufacturing, installation, and other areas within the industry.
How the IRA Benefits Nonprofit Organizations
For many nonprofits, sustainability, mission alignment and cost-savings are key priorities when considering a solar program. Historically, tax-exempt organizations could not take advantage of the ITC, creating a significant barrier to pursuing clean energy projects.
One of the most groundbreaking aspects of the IRA for nonprofits is introducing the Elective Pay option, commonly referred to as “Direct Pay.” This provision allows nonprofits to receive a direct payment from the IRS in lieu of the traditional ITC, effectively reducing the cost of renewable energy projects by 30% or more. Nonprofit recipients of this Direct Pay incentive can claim it by filing the required forms within the tax year that the credit is earned. This Direct Pay option enables nonprofits to redirect the savings from clean energy projects back into their core missions and services.
The IRA offers additional funding to nonprofits focused on disaster recovery, community resilience, or climate adaptation to strengthen communities against climate impacts. Grants and incentives can be used for projects that provide backup power during emergencies or mitigate the effects of extreme weather on vulnerable populations.
Many mission-driven organizations that serve poverty-stricken or historically disadvantaged communities can benefit from the IRA’s bonus ITC credits. These credits are available for projects in low-income areas and/or in communities disproportionately disadvantaged by the transition to cleaner energy sources, aligning clean energy investments with broader economic and social justice goals.
The IRA in Action: Mission Energy Clients
Mission Energy has helped several nonprofit and religious organizations install solar energy and take advantage of the IRA’s incentives.
One of those organizations is Sisters of the Holy Spirit and Mary Immaculate in San Antonio, Texas. Using IRA tax-credit incentives and state-level grants, the Sisters of the Holy Spirit and Mary Immaculate is adding to their existing rooftop solar by installing a battery-storage microgrid to safeguard their vulnerable residents during local utility grid failures.
Taking the Next Step: Leveraging IRA Opportunities
By tapping into the IRA’s incentives, nonprofits can achieve their sustainability goals and strengthen their communities and missions. If your organization is considering a renewable energy project, now is the perfect time to explore the opportunities the IRA provides.
Mission Energy is committed to helping nonprofits navigate these new opportunities and make solar and battery storage programs a reality. Contact us to schedule a meeting and learn how we can support your journey toward a greener, more resilient future.