An Update on Energy Tax Credits for Schools

Last update: July 1, 2025

We will update this space as we learn new information about the continued availability of Elective (Direct) Pay and energy tax credits for school infrastructure projects.

The Key Takeaway

Energy tax credits remain available by law.

Elective payments are characterized as mandatory government spending and are not subject to Executive Orders or annual appropriations. Non-taxable entities continue to receive checks from the IRS for elective payments.

Reconciliation & Changes to Energy Tax Credits

Republicans in Congress are currently advancing a budget reconciliation bill that proposes significant changes to energy tax credits. These changes could have substantial impact on the future availability of energy tax credits. 

On May 22, the House passed H.R. 1 by a 215-214 vote that proposes a wide range of changes to energy tax credits (among other matters). 

On June 16, the Senate Finance Committee released text that contains their proposal for changes to energy tax credits. This version is expected to undergo additional changes before the full Senate votes on the bill. Then the House and Senate will need to reconcile on a single bill for the President to sign.  

On July 1, the Senate passed their version of budget reconciliation by a 51-50 vote. The bill now goes back to the House. 

The Table below contains the proposed changes to the energy tax credits most commonly used by schools.

This table includes energy tax credits relevant to K-12 schools. Visit Evergreen Action’s summary of the Senate text as of June 28, 2025.

Assessing Risk and Managing Projects in Uncertainty

If Congress passes a new law enacting changes to energy tax credits, certain projects already underway may still be eligible to claim and receive elective payments. Historically, projects that have commenced construction before the effective date of a new policy have not been subjected to changes. 

Here are three actions to take: 

• For the specific credits that your district is pursuing, understand the proposed effective dates for the new policy. 

• Understand how your current construction timeline relates to those key dates. 

• Explore opportunities to meet the “commence construction” milestone for your projects with both your construction partners as well as your tax/accounting support. There is both a work test and an expenditure of funds test that is available to filers to establish that they have commenced construction on an eligible project. 

There is no guarantee that these historical precedents will hold.  Moreover, there are other non-legal, but practical considerations such as IRS staffing which could delay or impact the availability of elective payments for schools.

All communities must assess the risk for themselves. States can consider providing additional support to ensure that clean energy projects can continue at schools.

This post represents our best understanding of certain tax provisions for general informational purposes only and is not itself tax guidance. Please consult qualified tax professionals about your specific circumstances and refer to guidance issued by the IRS for detailed information on the rules associated with energy tax credits, elective pay, and other relevant tax provisions.

Last update: July 1, 2025