By Bauyrzhan Zhaxylykov
Across Michigan, religious institutions, schools, local governments and nonprofits are turning to a federal program called Elective Pay to help pay for solar panels and other clean-energy projects.
One of them is Redeemer Church in Lansing, which used the program to help pay for its solar installation.
Vicki Crouch, the president of the Helping Hands Christian Learning Center Board at the church, said it installed solar panels in 2024.
“We put solar panels on our roof to save energy. It helps us, but it helps everyone,” Crouch said.
After a long planning process, installation took a few weeks, followed by city approvals before the system began operating in July 2024.
The church applied for Elective Pay that fall and received the refund the next spring.
The solar system cost about $100,000, leaving roughly $70,000 for the church to cover.
Without Elective Pay, the plan may have stalled.
“We probably would not have done it,” said Crouch.
“Donations from several members helped pay most of the remaining cost,” she said.
Elective Pay was created under the Inflation Reduction Act of 2022 to help tax-exempt organizations invest in clean energy.
The program allows nonprofits, schools, religious institutions, local governments and other eligible public entities to receive federal payments for projects they otherwise couldn’t benefit from because they don’t pay federal income taxes.
“These incentives come back to them in the form of direct payments, basically a cash payment from the IRS,” said Michael Wilson, the director of finance and compliance at Michigan Saves.
The organization’s website says it helps home and building owners and public entities “access affordable financing to make clean energy investments and building upgrades that lower utility bills and create healthier homes.”
Wilson said, “The goal is to advance clean-energy projects nationwide and allow these entities to receive a percentage of their project cost back after it is placed in service.”
To spread awareness about Elective Pay, the Michigan Infrastructure Office’s Technical Assistance Center launched an ambassador program last November.
Trained “ambassadors” are paid to help nonprofits understand the process, explain why the program matters and encourage organizations to apply.
Wilson serves as an Elective Pay ambassador in the Lansing area.
“If a project doesn’t begin construction by July 4 of this year, it must be completed and placed in service by Dec. 31, 2027, to benefit from the program,” Wilson said.
“If construction starts before July 4, organizations have four years to place the project in service and claim the credit.”
Another Elective Pay ambassador, Lissa Spitz of Ann Arbor, is a program manager with the Washtenaw 2030 District, a public-private partnership that works on environmental issues.
She said many nonprofits don’t know the funding is available.
“If organizations are in the planning stages and want to install one of these projects soon, we can help them get ready,” Spitz said.
“Many people think that because residential tax credits were eliminated, everything was eliminated. This money is still out there,” she said.
Wilson said the Elective Pay process usually takes several months after a project is completed. Organizations first complete a pre-filing registration with the IRS, receive a registration number and then file a tax return to claim the payment.
“Overall, the process typically takes about six to seven months,” Wilson said.
As federal energy policies continue to change, experts say organizations should take advantage of Elective Pay while it is still available.
Barry Solomon, a professor emeritus of environmental policy in the Department of Social Sciences at Michigan Technological University, said the program can have a multiplier effect for communities.
“Elective Pay benefits local communities by lowering the cost of energy and electricity, creating additional jobs in renewable energy development and large-scale battery deployment,” Solomon said, adding that the savings can free up resources for schools, teachers and local services.
At the same time, many eligible groups are small nonprofits with limited budgets and struggle to pay for projects upfront, experts say.
Bridge financing programs such as Michigan Saves can help cover those initial costs until organizations receive their Elective Pay reimbursements.
“Under the Michigan Saves bridge financing program, qualified entities can receive between $20,000 and $250,000 in upfront funding,” Solomon said, adding that loans are repaid after organizations receive their federal Elective Pay payments.
Because many small nonprofits are unfamiliar with IRS procedures, ambassadors say they are ready to guide them through the process.
“We’re here to help with that,” Spitz said. “If I have to make 10 phone calls for somebody, I’m happy to make 10 phone calls so they don’t have to take the time.”