Overview
The federal Inflation Reduction Act of 2022 (IRA) represents the most ambitious climate legislation in U.S. history. This transformative law marks unprecedented investments in clean energy, energy efficiency, and emissions reduction. By offering a wide array of incentives—including tax credits—it aims to make clean energy solutions more accessible and affordable for households, businesses, and public institutions nationwide.
A key innovation within the IRA is the introduction of "elective pay," also known as direct pay. This mechanism allows tax-exempt entities—like nonprofits, municipalities, and tribal governments—to receive clean energy tax credits as direct payments, even if they don’t have tax liability. Essentially, it ensures that everyone, regardless of their tax status, can benefit from these tax credits to adopt clean energy.
