IRS Energy Direct Pay Rules Take Some Projects ‘Off the Table’

An avenue for tax-exempt organizations to secure a refund for clean energy tax credits was curbed in recent Treasury rules—an unexpected outcome for some in the industry.

President Joe Biden’s Inflation Reduction Act gives entities that are usually tax-exempt a chance to benefit from the tax credits, allowing them to receive a refund from the government instead of the tax credit—which can cover up to 70% of a project’s costs.

The Treasury Department and the IRS on June 14 proposed rules on direct pay, restricting partnerships from making the election fordirect pay on behalf of the partners.

The carve-out gives ...