An Update on Energy Tax Credits for Schools
Last update: May 14, 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 14, the House Ways and Means Committee advanced bill text that proposes a wide range of changes to energy tax credits (among other matters). The Table below contains the proposed changes to the energy tax credits most commonly used by schools.
The current proposal from the House Ways and Means Committee is advancing through additional steps in the process and will be voted on by the full House of Representatives, likely in the coming weeks. The Senate will go through its own process of producing bill text. Eventually, the House and Senate versions will need to be reconciled into one agreed-upon bill. We expect this process to unfold over the next few months.
Below are letters from House and Senate Republicans expressing support for energy tax credits.
May 14, 2025: Congresswoman Jen Kiggans (VA-02) and 13 Republican lawmakers issue a joint response to Ways & Means Committee’s portion of the reconciliation markup text concerning clean energy tax credits.
May 8, 2025: 12 Republican lawmakers call on Speaker Mike Johnson to protect Section 48E and Section 48Y energy tax credits.
April 10, 2025: Senators Murkowski, Curtis, Tillis, and Moran express support for energy tax credits in a letter to Senate Majority Leader John Thune.
March 9, 2025: 21 Republican lawmakers urge Ways & Means Committee Chairman Jason Smith to protect energy tax credits that incentivize domestic manufacturing and energy innovation.
August 6, 2024: 18 Republican lawmakers call on Speaker Mike Johnson to protect energy tax credits that prioritize American business and market certainty.
Look out for ongoing news coverage and visit our Energy Tax Credit Action Center for opportunities to engage on this topic.
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.
The effective date of any new law is likely to be the start of a new tax year – January 1, 2026. Historically, projects that have commenced construction before the effective date of a new policy have been protected against those changes. It will be important to understand whether the new law uses “commence construction” or “placed in service” as the relevant milestone for determining which projects will be affected by the new go-forward policy.
Districts pursuing projects today can reduce the risk associated with this funding by commencing construction on eligible projects as soon as possible.
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 supports 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.
Updated: May 14, 2025
