Because of the Inflation Reduction Act—the federal climate legislation passed in 2022—congregations can, for the first time, get federal support with clean energy projects, including solar, geothermal, and electric vehicle (EV) charging stations. With the introduction of the IRA, faith communities and nonprofits previously excluded from the opportunity to access tax credits available commercial properties, are now able to file for Direct Pay (or Elective Pay) and receive 30% or more back on project costs. With this new opportunity has come new questions, new inspiration and a new hope for the impact that faith communities can have on Michigan's climate.
The Direct Pay option with the IRA helps make it possible for children from Detroit's Lord of Lord's Ministries to see an example of creation care in action!
What projects are eligible for Direct Pay? Miguel Yane Barneuevo of the Environmental and Energy Study Institue (EESI) states that lighting, HVAC, geothermal heat pumps, insulation and other energy efficiency equipment that results in a savings of 25% or more. The goal is to reduce energy and Kilowatt emissions.
A base credit of 30% is offered as a payback amount on funds invested in clean energy costs. Faith communities that are considered to be located in low-income areas or in areas with high unemployment have an opportunity to add on another 10%. Purchasing materials domestically can add on another 10%. And another 10% is available if your faith community is located in what the feds consider an "energy community" that has been affected by the closure of fossil fuel-based power plants. Therefore, a 30-60% payback amount can make a huge difference in moving forward with energy efficiency projects for many Michigan congregations.
"We were trailblazers! Someone needed to figure out how to apply for Direct Pay, and it may as well have been us." The Rev. Calvin Glass, Lord of Lord's Ministries
The Reverend Calvin Glass of Detroit's Lord of Lord's Ministries, is one of the first in the state to apply for Direct Pay through the Inflation Reduction Act.
Congregations who have successfully completed the Direct Pay application process report that it is important to pay attention to details, and follow instructions listed on the websites very carefully. Applications can only begin once the qualified clean energy project is completed and placed into service. Necessary information should be gathered prior to applying and preregistering the project with the IRS via the portal. Once that is successfully completed, a registration number will be provided, and congregation's need to file form 9907. It is important to note that it could take from 4-18 months from the installation of your project to the receipt of the Direct Pay payment. However, Michigan Saves, the State's nonprofit green bank, is now offering bridge financing to cover the gap. Faith communities who implement solar projects using Solar Faithful's expertise can get assistance with filling out the Direct pay application.
Greensky Hill Indian UMC in Charleviox is celebrating the installation of new solar panels this year.
Faith leaders in Michigan who are considering exploring the Direct Pay option to help with project costs would want to know that, like everything worthwhile, there are obstacles to navigate in this process. What are the hurdles to cross in applying for Direct Pay? The process can be lengthy and complicated, and depending on a congregation's understanding of tax law or familiarity with governmental websites, could be challenging. In 2023, Michigan IPL assisted the Lord of Lord's Ministries in Detroit to complete a solar installation. Rev. Dr. Calvin Glass worked cooperatively with his solar installer to navigate the process of applying for Direct Pay to cover 30% of his solar project costs, a project put into service in November of 2023. Pastor Glass stated that in his experience, the website was not too user friendly, as it took him several weeks to get his application submitted. Having completed the application successfully, he was notified by the IRS of the need to reapply on an updated webpage that was better designed to handle the amount of traffic it was getting. As of this writing, the Lord of Lord's Ministries application has been under review with the IRS for 4 or 6 months.
Michigan IPL is creating a space for members of our network to learn together about how congregations can access the federal direct pay benefits (with solar, you might have known these previously known as “federal tax credit”). Join us for a monthly IRA working group, meeting via zoom, where we can share more together and learn some best practices cooperatively. Register for Michigan IPL's IRA working group today!