What is Elective Pay?
Elective Pay (also known as Direct Pay) is a game-changer for entities that don’t owe federal income tax. Elective Pay is not a tax credit itself; it’s a mechanism that allows tax-exempt entities (including nonprofits, state and local governments, and schools) to receive the value of certain IRA clean energy tax credits as a direct cash payment from the IRS. This is crucial because tax-exempt organizations can access these incentives, which can significantly reduce project costs (in some cases up to 70% back) and fund more clean energy work. 

Which Clean Energy Tax Credits are Eligible for Elective Pay?

• The investment tax credits or “ITC” - for solar, wind, geothermal, and other projects 

  • Clean electricity investment tax credit under Section 48E 

  • Energy credit under Section 48 

• Credit for ground-source heat pumps under Section 48

• The production tax credits or “PTC” - for solar, wind, geothermal, and other projects 

  • Clean electricity production tax credit under Section 45Y 

  • Renewable electricity tax credit under under Section 45 

• Alternative fuel vehicle refueling property credit under Section 30C for electric vehicle (EV) charging, EV supply equipment, and other projects

• Commercial clean vehicle credit under Section 45W for certain EV purchases (purchased before October 1, 2025) 

• And more! 

What is the Process to File Once I’ve Completed My Project? 

Using Elective Pay, tax exempt-entities can receive cash after completing a geothermal, solar, wind, energy storage, or other eligible clean energy project.  Once your project is placed into service, you need to follow a two-step process to receive tax credits: 

1. Complete a mandatory Elective Pay pre-filing registrationwith the IRS for the project to receive a unique registration number for each property or facility. 

2. Use that number to complete and file the appropriate tax returns and claim your clean energy tax credit.

Most of these credits are claimed for the taxable year in which the property is placed in service.  There are strict deadlines for filing a tax return to claim credits through Elective Pay, and an Elective Pay credit cannot be claimed on a late-filed return. 

Important Alert: The Time to Act is NOW

Recent legislation, H.R. 1 (also known as the “One Big Beautiful Bill Act,” enacted July 4, 2025), accelerates the phase out of many of the clean energy tax credits eligible for Elective Pay and adds new prohibited foreign entity rules to some of the credits that include limits on the sourcing of materials made by Chinese companies. 

While Elective Pay itself remains intact after H.R. 1, the window of opportunity for tax-exempt entities to claim some of the clean energy tax credits is rapidly closing, so it is important to act before they expire. 

Need to take action now? This essential section has the newest alerts, e-filing partners, and interactive navigators you need to start your project today. 

• Explore New Resources and Upcoming Events

  • Section 45Z Clean Fuel Production Credit - (Current as of June 9, 2026) 

    • An overview of the Section 45Z clean fuel production tax credit, which can be claimed through Elective Pay.  Section 45Z provides a credit for transportation fuel produced in the United States that meets certain emissions rate requirements, is produced domestically after 2024, and sold on or before December 31, 2029.  Section 45Z also requires that the entity be a registered producer of clean fuel at the time of production, and this document Includes an overview of this registration requirement and process. 

• Join the L4GG Elective Pay Sprint Hub: Need fast tracked assistance? Enroll in this structured program for targeted support to plan for your project, including financing and planning for the clean energy tax credits, and to complete pre-filing registration and tax filing steps quickly and accurately. 

• Check out our Elective Pay 101 Guide: Just starting out? This comprehensive guide covers the basics of Elective Pay eligibility, required forms, and how the process works, making it the ideal primer before diving into the detailed guidance below. 

• Explore the Clean Energy Tax Navigator: Not sure if your project qualifies? Use this interactive tool to quickly estimate your project’s eligibility for certain clean energy credits and Elective Pay and identify the specific tax credits you may be able to claim. The Navigator walks you through the requirements of the clean energy credits most commonly claimed through Elective Pay and provides helpful information. 

• E-File through Giraffe Financial: Ready to apply for your Elective Pay pre-filing registration?  Or ready to electronically file your tax return to claim your credits? Access our trusted partners’ streamlined service to help you manage the required IRS submission process accurately and efficiently. Giraffe Financial can help you with all stages of the process. 

Cut through the complexity with our summaries. L4GG’s legal team translates dense regulations into clear, actionable fact sheets and guidance briefs. 

Explore our Fact Sheets & Guidance Briefs:

• Guidance Brief: Elective Pay Refund Status- (Current as of April 15, 2026).

  • Information on how to contact the IRS about the status of your Elective Pay refund, including resources for contacting the IRS and for getting assistance from the IRS Taxpayer Advocate Service, if having difficulty getting assistance from the IRS.

• Guidance Brief: Notice 2026-15 Material Assistance Safe Harbors for Section 48E and 45Y Credits - (Current as of March 18, 2026).

  • Provides an overview of the interim (temporary) safe harbors in Notice 2026-15 that entities can use to help determine whether they comply with the material assistance portion of the prohibited foreign entity restrictions.

• Guidance Brief: Prohibited Foreign Entity Restrictions for the Clean Energy Credits under Sections 48E and 45Y - (Current as of  March 18, 2026). 

  • Overview of the new prohibited foreign entity (PFE) restrictions imposed by H.R. 1 for the ITC and PTC under Sections 48E and 45Y, which look at whether the entity or project has certain ties to China, Russia, Iran, or North Korea.  Entities are disallowed these credits if (1) they are deemed to be controlled or influenced by Chinese companies or various other kinds of foreign entities (the entity-level rules); (2) in the prior year they make certain payments to a specified foreign entity (the payment rules); or (3) they source a certain percentage of materials used in the facility or property from a PFE (the material assistance rules).

• Guidance Brief: Build America, Buy America - (Current as of March 11, 2026). 

  • Provides a summary of Build America, Buy America (BABA) requirements for federal grants and loans, including an overview of the current law and guidance, BABA applicability, product requirements, waiver process, and a high-level comparison to other product-sourcing requirements.

• Guidance Brief: Domestic Content Bonus and Phase Out - (Current as of February 20, 2026).

  • Provides overview of the Domestic Content requirements for the Sections 48, 48E, 45, and 45Y credits. Under Domestic Content requirements, for a facility or property, 100% of structural steel and iron and an increasing percentage of "manufactured products" used to build a facility or property must be sourced in the U.S. For certain projects meeting the Domestic Content requirements, an increased amount of the credit is available. Additionally, for Elective Pay entities, failure to meet the applicable Domestic Content requirements could result in a reduced or disallowed credit.  

• L4GG Guidance Brief Elective Pay Pre-Filing Registration - (Current as of December 5, 2025).

  • Overview of the Elective Pay pre-filing registration process, including best practices and tips.

• L4GG Guidance Brief: Section 48 Credit for Ground-Source Heat Pumps - (Current as of November 26, 2025).

  • Brief explaining the clean energy tax credit for ground-source heat pumps, which can be received through the Elective Pay mechanism under the IRA.

• Updates to Certain Elective Pay Eligible Credits under HR1 - (Current as of June 22, 2026).

  • Overview of the changes H.R. 1 made to the clean energy tax credits most commonly claimed through Elective Pay. Includes new termination dates and other changes. 

• Guidance Brief: Beginning of Construction for the 48E & 45Y Tax Credits - (Current as of June 18, 2026).

  • Overview of the beginning of construction safe harbors and how they apply to the ITC and PTC under Sections 48E and 45Y, including the safe harbors for ensuring that your project begins construction in time for the new accelerated phase-out schedules for wind and solar under H.R. 1. 

• Guidance Brief: Beginning of Construction for Energy Credits Generally - (Current as of June 16, 2026).

  • Overview of the beginning of construction safe harbors generally for the clean energy credits.

• Elective Pay Blueprints - (Current as of April 2025).

  • Easily digestible best practice guidelines to walk you through Elective Pay and the most commonly claimed clean energy credits (Sections 48, 48E, 45, 45Y, 45W, and 30C), written with our partners the Electrification Coalition, GFOA, and the World Resources Institute (WRI). This document also discusses the prevailing wage and apprenticeship requirements, the domestic content requirements, and the energy efficient commercial buildings deduction under Section 179D.  

  • Note that it has not been updated for H.R. 1 changes.  

• Opportunities for State Agencies to Cut Costs with Federal Elective Pay Clean Energy Tax Credits - (Current as of June 20, 2025).

  • Best practices for states, discussing how to claim clean energy tax credits through Elective Pay, produced in collaboration with the Government Finance Officers Association (GFOA) and State Support Center (SSC).

• Guidance Brief: Code Section 45W Credit for Qualified Commercial Clean Vehicles - (Current as of October 31, 2025).

  • Overview of the guidance for claiming the qualified commercial clean vehicle credit, which can be claimed for electric vehicle (EV) purchases. 

  • Note that the qualified commercial clean vehicle credit is not available for vehicles purchased on or after October 1, 2025.

• Guidance Brief: When is a Lease Actually Financing? - (Current as of June 7, 2024).

  • Overview of financed EV ownership and eligibility for the qualified commercial clean vehicle credit. 

• Guidance Brief: PTC and ITC - (Current as of November 26, 2025). 

  • Overview and comparison of the PTC and ITC. 

  • Overview of Bonus Incentives for ITC/PTC - (Current as of April 09, 2026).

  • PTC/ITC-Eligible Technologies - (Current as of July 1, 2024), and ITC-Eligible Projects - (Current as of May 24, 2024). 

• Guidance Brief: Municipal Bond Haircuts - (Current as of October 16, 2025). 

  • Overview of the “municipal bond haircut” which is a reduction of the total credit amount of ITC or PTC if tax-exempt bonds are used to pay for the facility or property.

• Guidance Brief: “No Excess Benefit” Rule - (Current as of October 30, 2025), and Restricted vs. Unrestricted Funds (Current as of July 1, 2024). 

  • Overview of the “no excess benefit” rule which provides that for certain investment credits (including ITC, Section 30C credit, and Section 45W credit) the amount of the restricted funds plus the clean energy tax credit cannot exceed the cost of the facility or property.

  • Also an overview of when funds are “restricted.”  

• Fact Sheet: Clean Electricity Low Income Communities Bonus Credit Under Code Section 48E(h) - (Current as of March 2, 2026).

  • Overview of the LICB, which is a bonus credit or “adder” that can increase the amount of your ITC.  Unlike other credits, you have to apply for a LICB allocation award before the project is placed in service.

  • Updated to reflect allocations for the 2026 program year.

  • LICB Dashboard and Applicant User Guide

• Guidance Brief: Prevailing Wage & Apprenticeship (PWA) Requirements - (Current as of October 16, 2025). 

  • Overview of the PWA requirements that apply to most clean energy credits and how to comply, including practical guidance and best practices. 

• Guidance Brief: RFP Language for Claiming IRA Credits - (Current as of February 20, 2026).

  • Assists entities with drafting Requests for Proposal/Requests for Qualifications that account for PWA, domestic content, and PFE requirements imposed on certain clean energy credits.

• Guidance Brief: Identifying Filing Deadlines & Applicable Tax Year - (Current as of June 25, 2025).

  • Overview of determining your taxable year (fiscal year vs. calendar year) and Elective Pay tax return filing deadlines. 

• Guidance Brief: Initial May 15 Filing Deadline and Extension Process - (Current as of May 6, 2026).

  • Overview of the filing deadlines for Elective Pay tax returns, including the May 15 filing deadline for calendar year entities, and the process to request a 6-month filing extension for your Elective Pay tax returns. 

• Guidance Brief: E-Filing vs. Paper Filing - (Current as of October 15, 2025).

  • Discusses electronic filing and paper filing (when available) options for filing Elective Pay tax returns. 

• Guidance Brief: Elective Pay Documentation Checklist - (Current as of October 23, 2025).

  • High level overview with examples of the types of documents that entities should retain to substantiate clean energy credits claimed through Elective Pay. 

• Guidance Brief: Executive Orders and Protecting Your Federal Funding - (Current as of January 31, 2025).

  • Overview of the impact of Executive Orders on grants and tax credits and steps entities can take to protect themselves

• Guidance Brief: 501(c)(3) Tax Exempt Status Protection - (Current as of April 21, 2025).

  • Overview of how to protect your section 501(c)(3) status and what the process looks like if your organization’s section 501(c)(3) status is questioned. 

• Download the PFE Sample Supplier Certificationto demonstrate compliance with the material assistance prohibited foreign entity restrictions for the Section 48E, 45Y, and 45X credits.

  • This sample supplier certification was drafted based on the statutory requirements for a supplier certification and model certificates provided by the IRS for other tax credits and other situations using a supplier certificate.

• Access Annotated Tax Forms(link to Annotated Tax Forms)

• View the EV Infrastructure Map - 30C Tax Credit Eligibility Locator Map from DOE

Prefer to learn by watching? Dive into our full archive of recorded video trainings, slide decks, and detailed Q&A sessions from L4GG and its partners. 

Webinar videos and slides will not be updated for legislative and other changes after they are posted; for example, webinar videos and slides created before July 4, 2025, have not been updated with changes from H.R. 1. For the most up-to-date guidance see our guidance briefs. 

• L4GG: Deep Dive into Build America, Buy America (BABA) Waivers - May 6, 2026

  • Access the slide deck here (with hyperlinks to resources).

• L4GG: Introduction to BABA - April 28, 2026

  • Access the slide deck‍ ‍here (with hyperlinks to resources).

• L4GG: Setting the Story Straight - April 15, 2026

  • Access the slide deck here (with hyperlinks to resources).

• L4GG:Keeping the Forward Momentum: Understanding the Latest IRS Notice on Prohibited Foreign Entities - March 12, 2026

  • Access the slide deck here (with hyperlinks to resources).

• L4GG: BABA Tips & Tricks for 2026- March 10, 2026 

  • Access the slide deck here (with hyperlinks to resources). 

• L4GG: Prohibited Foreign Entity Compliance Part II: Product Sourcing - BABA, Domestic Content, and PFE Material Assistance - January 27, 2026

  • Access the slide deck here(with hyperlinks to resources).

• L4GG: Prohibited Foreign Entity Compliance Part I: Identifying and Managing Risks - December 10, 2025

  • Access the slide deck here (with hyperlinks to resources).

• L4GG & EESI: Where Clean Energy Tax Credits Stand(link to YouTube video recording) - December 12, 2025
  

• L4GG & Partners: Moving Forward with Elective Pay After H.R.1 - July 30, 2025

  • Access the slide deck and Q&A here (with hyperlinks to resources). 

• L4GG/WRI/GFOA: Integrating Elective Pay Tax Credits into Government Procurement and RFPs - December 10, 2024

  • Access the slide deck here (with hyperlinks to resources).

• L4GG/WRI/GFOA/USDN Webinar: Demystifying the Elective Pay Process (video) - April 18, 2024

  • Access the slide deck here (with hyperlinks to resources).

• L4GG’s accredited Continuing Legal Education (CLE): Maximizing Elective Pay Payments to Cities Under the Inflation Reduction Act

  • Free with the purchase code 2024L4GG

• CPCC w/ L4GG: Cash for Communities (video) - May 9, 2024

• L4GG/WRI/GFOA/USDN/SSDN: Slide decks for SSDN - May 1, 2024

  • Session 1: Direct Pay Overview

  • Session 2: Demystifying the Elective Pay Filing Process

• L4GG/WRI/GFOA/USDN: Demystifying the Elective Pay Process (video) - April 18, 2024

  • Access the slide deck here (with hyperlinks to resources).

• L4GG/CAP/NLC/BGA: How Cities Can Take Advantage of Direct Pay (video) - Jan. 2024

• Access the slide deck here (with hyperlinks to resources).

• L4GG: Direct Pay Overview Webinar - August 2023

• L4GG/Sabin Center Presentation to Local Governments - October 24, 2023 

• Elective Pay for Tribal Governments Part 1, Part 2, & Part 3 (links to YouTube videos) - August 4, 2023

Looking for peer-tested advice? Find high-quality insights and legal analysis from trusted partner organizations and industry experts. 

Articles from L4GG Partners

• Analysis of Final Rule on Transferability - Tax Law Center at NYU

• Analysis of §48/ITC Proposed Regulations - Wilson Sonsini

• Domestic Content - Linklaters

• Energy Communities Bonus - Linklaters

  • DOE Energy Communities Bonus Mapping Tool

• Low-Income Communities Bonus - Linklaters

  • DOE LICB Allocations Dashboard

Partner Resources

• BlueGreen Alliance - Domestic Content Guidance for Developers

• C40 Cities & Partners - Greenhouse Gas Reduction Fund Guidebook for Local Governments

• Center for American Progress - Overview on Direct Pay and Transferability 

• Center for Public Enterprise - Tax Credit “Chaining” Brief

• Clean Energy Group - Direct Pay Guide for Non-Profits, ITC for Non-Profits, Applying for IRA Bonuses, & Bonus Fact Sheets

• Clean Energy States Alliance - Build America Buy America and Domestic Content: A Primer for the Greenhouse Gas Reduction Fund Solar for All Program

• Clean Energy States Alliance - Low-Income Communities Bonus

• Congressional Progressive Caucus Center  - Livable Futures and Elective Pay Resources

• Electrification Coalition - Elective Pay Resources

• Government Finance Officers Association - IRA Implementation Resources

• NYU School of Law - Making Cents of the IRA

• Sabin Center - Proposed Regulations for Direct Pay Under the Inflation Reduction Act - Guidelines for Cities

• Stanford Law School Lawyers for a Sustainable Economy 

  • Initiative that matches nonprofits and startups working in the field of environmental sustainability with law firms providing pro bono legal services. 

• State Support Center - Direct Pay & Project Finance Memo for States, April 3, 2024

• Wilson Sonsini - IRA Legal Resources

• Wilson Sonsini - IRA Guidance Implementation Tracker 

• WRI - Bonus Mapper 

• WRI - Roadmap for Local Governments

Ready for the law, straight from the source? Here are the final rules, official user guides, and FAQs issued directly by the IRS and U.S. Treasury. 

• IRS Office Hours for Elective Pay & Transferability of Clean Energy Credits through 2026.

  • Schedule a time to get your specific questions answered directly by IRS experts regarding the Elective Pay process and requirements. 

  • All sessions are Wednesdays, 1-2pm ET, hosted virtually by the IRS

  • 2/18, 3/18, 4/15, 5/20, 6/17, 7/15, 8/19, 9/16, 10/21, 11/18, 12/16, 1/20/27.

• Watch the IRS Video Walk-Through of Pre-Filing Registration Portal(web.archive.org version of defunct irs.gov page) | See a step-by-step video demonstration from the IRS showing exactly how to navigate and use the mandatory Pre-Filing Registration Portal. 

• Review the Pre-Filing Registration Tool User Guide (with screenshots), IRS Publication 5884 | Find detailed instructions on how to successfully complete the pre-filing registration required before claiming your credits.

• Consult theIRS Energy Credits Online Permission Management User Guide (with screenshots), IRS Publication 5902 | Understand how to delegate access and manage permissions for consultants or third parties assisting with your filing. 

• Utilize the IRS Secure Messaging User Guide, IRS Publication 6025| Learn how to use the official secure channel provided by the IRS to safely exchange confidential information and receive official response to your filing questions. 

  • Secure Messaging is recommended for questions on existing Pre-Filing Registrations as of Oct. 2024

  • You can also use secure messaging in the portal to ask about the refund status of a filed return. 

  • Email for requesting technical assistance without a Pre-Filing Registration login: irs.elective.payment.or.transfer.of.credit@irs.gov

• Review the IRS website (irs.gov) page covering a particular topic, including the following: 

  • FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D under H.R. 1

  • Alternative fuel vehicle fueling property credit under Section 30C

  • Clean fuel production credit under Section 45Z 

  • And more! Use the search function on irs.gov to search for a particular topic or Form

Financing is the first step. These databases and financial tools will help you find the capital and build a strong funding strategy for your project. 

• Explore our Federal Funding Resources Page

• Search Atlas’ Public Policy Project Finance Hub

• Visit Milken Institute’s Community Infrastructure Center

• Use Center for Public Enterprises’ Interactive Financial Modeling Tool

• Visit U.S. Department of Energy’s State Energy Financing Institutions (SEFI) Funding for State Programs

• Access Wilson Sonsini’s Clean Energy Federal Funding Database and also check out their Climate Funding White Paper.

• Explore the Greenhouse Gas Reduction Fund: Greenbanks, CDFIs, other Grant recipients under the Greenhouse Gas Reduction Fund  (Solar for All Competition is currently open); 43 states have filed NOIs 

• Check Out EPA’s Climate Pollution Reduction Grant