Funding Opportunities for Nonprofits, Municipalities, and Communities

The Environmental and Energy Study Institute (EESI) held a briefing that explored the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) funding dedicated to nonprofit organizations and municipalities. For example, the introduction of “direct pay” is allowing tax-exempt entities to access the benefits of federal tax credits for the first time. Meanwhile, the Department of Energy and the Environmental Protection Agency are hard at work rolling out new programs specifically tailored to these entities. The IRA and IIJA are opening new doors for nonprofits and local governments working to reduce greenhouse gas emissions and adapt to a changing climate. 

These opportunities also bring questions: What capacities do varying organizations and municipalities have to apply for, manage, and monitor funding? What reporting requirements could pose challenges for grantees? What does equity look like across these different programs? 

Panelists addressed these questions and described the status of IRA and IIJA programs that increase the technical and financial capacity of public sector groups. They also shared case studies from across the country where funding is making a difference in communities, and discussed what lessons can be learned to bolster these federal efforts going forward. 

Highlights

KEY TAKEAWAYS

The Department of Energy (DOE) Office of State and Community Energy Programs oversees $16 billion in funding that is used to boost local economies, promote clean energy technology, and enhance community capacity.  The DOE Renew America’s Schools and Renew America’s Nonprofits programs, created by the bipartisan Infrastructure Investment and Jobs Act (P.L. 117-58), support schools and nonprofits in making energy efficiency improvements that reduce energy costs—on average the second-largest expense for these entities.  The Inflation Reduction Act (P.L. 117-169) introduced a new mechanism called elective pay, often referred to as “direct pay,” allowing tax-exempt entities to receive cash refunds from the Internal Revenue Service in lieu of certain clean energy and climate-related tax credits.  The Clean Energy Tax Navigator, created by Lawyers for Good Government, provides step-by-step guidance on filing for elective pay and provides tailored resources to help users determine project eligibility.

 

Michael Forrester, Senior Advisor, Office of State and Community Energy Programs (SCEP), Department of Energy

• The Office of State and Community Energy Programs (SCEP) is dedicated to enhancing capacity, funding, resources, and technical assistance for states, tribes, and local communities pursuing energy efficiency and renewable energy opportunities. By September 2024, SCEP had already allocated the majority of available funds to support these communities.
• SCEP oversees $16 billion in funding that is used to boost local economies, promote clean energy technology, and enhance community capacity, all while prioritizing equity through the Justice40 framework.
• SCEP manages over 28 programs, including the Weatherization Assistance Program, State Energy Program, and Home Energy Rebates Program. It is also working in close collaboration with schools and nonprofits.
• In fiscal year (FY) 2024, with funding from the Infrastructure Investment and Jobs Act (IIJA) (P.L. 117-58)) and Inflation Reduction Act (IRA) (P.L. 117-169), SCEP obligated approximately $4.5 billion in energy funds for schools.
• States are beginning to launch their home energy rebate programs and this is set to continue throughout the remainder of 2024 and into 2025.
• In the United States, there are approximately 1.5 million nonprofits, employing about 13 million people. For many of these organizations, energy costs represent their second-largest expense—after staffing—often consuming around 30% of their budgets. This financial burden often limits their ability to invest in energy-efficient building upgrades.
• There are over 100,000 public schools across the country, with more than 50% needing major upgrades due to failing infrastructure, resulting in an estimated annual funding shortfall of $85 billion.
• Public schools represent the second largest category of public infrastructure—following roads and highways—and energy costs are their second-largest expenditure, totaling approximately $8 billion each year.
• Functional energy infrastructure in schools is critical, as teachers and students spend over 1,000 hours in these environments every year, and inadequate facilities can negatively impact productivity.
• Poor ventilation in school buildings poses health risks for students, with asthma being the leading cause of school absenteeism.
• The IIJA has allocated approximately $50 million to support nonprofits and about $500 million over five years to enhance energy efficiency and indoor air quality in schools.
• The $50 million allocated for nonprofits has been awarded to nine organizations, which distribute funds to hundreds of additional groups. This subgrant process aims to lower barriers to entry, enabling more individuals and organizations to benefit from the program.
• For schools, two rounds of investment have funded 24 programs across 22 states. A thousand schools applied in the first round and over 2,000 schools applied in the second round, demonstrating high demand for these initiatives.
• The Energy Champions Leading the Advancement of Sustainable Schools Prize is another way that the Department of Energy (DOE) is supporting schools. It provides staff with training on energy management, leading to substantial cost savings.
• So far, these programs have positively impacted nearly 200,000 students, over 14,000 teachers, and more than 300 nonprofits nationwide.

 

Heather Maier, Director of Finance and Operations, Nottoway County Public Schools

• The Nottoway County School District in Virginia is located in an economically disadvantaged area. This limits the district's tax base and its ability to meet the needs of students.
• With a small student population of 1,725, the school district relies heavily on state support, which funds 73% of the budget. County funding, accounting for the remaining 27% of the budget, primarily covers teacher salaries along with some materials and supplies.
• The Nottoway County School District applied for the SCEP Renew America’s Schools grant to repair school buildings that are aging and have undergone minimal renovations.
• The Nottoway County School District partnered with Trane, an HVAC company, to initiate its project. As part of the grant process, the district completed numerous steps, including selecting a partner, assigning roles, and submitting a concept application. While waiting for SCEP feedback, the district continued to engage with project stakeholders and maintain a positive outlook, acting as if funding was already secured.
• Once it received approval to move forward, the district entered an intensive post-selection phase that involved writing the Statement of Work, justifying the budget, and ensuring compliance with National Environmental Policy Act and Build America, Buy America Act regulations.
• The Nottoway County School District has begun work in its high school buildings. This grant provides the district with the opportunity to upgrade its facilities, enhance energy efficiency, and improve indoor air quality. Additionally, it allows the district to educate students and community members about energy efficiency.
• The district received $11.5 million in federal funds and contributed $662,900 in cost share to upgrade all five of its schools. Its goal is to achieve estimated energy savings of 25-45%, which can be reinvested into other energy or instructional projects.
• The district has prioritized student involvement by hosting “Lunch and Learn” sessions with Trane to showcase potential career paths in the energy industry. They also are engaging students through job shadowing and student-led marketing campaigns focused on energy efficiency.

 

Ian Goldsmith, Clean Energy Specialist, U.S. Energy Team, World Resources Institute

• Before the IRA, tax-exempt entities—such as governments and nonprofits—could not directly claim clean energy tax credits, which limited their ability to invest in renewable energy and electric vehicles (EVs).
• The IRA introduced a new mechanism called elective pay, often referred to as “direct pay,” allowing tax-exempt entities to receive cash refunds from the Internal Revenue Service (IRS) in lieu of certain clean energy and climate-related tax credits.
• Elective pay applies to 12 new and expanded tax credits, covering a range of areas from renewable energy to advanced manufacturing and hydrogen.
• Six of the tax credits are particularly relevant for most entities:
  • Alternative Fuel Vehicle Refueling Property Credit: This credit supports EV charging and hydrogen refueling stations in low-income and non-urban areas.
  • Credit for Qualified Commercial Clean Vehicles: This credit applies to commercial EVs and plug-in hybrids, including light-duty vehicles, electric school buses, and municipal garbage trucks.
  • Clean Electricity Production Credit (Section 45/45Y) and Clean Electricity Investment Credit (Section 48/48E): These tax credits focus on clean and renewable energy technologies. The production tax credit is based on the amount of electricity a facility generates, while the investment tax credit is determined by the initial upfront costs of the installation.
• To claim a tax credit through elective pay, entities must pre-register their projects and file a tax return with the IRS. This process occurs annually, allowing tax credits to be claimed for projects completed in the previous fiscal year.
• Elective pay is retroactive, meaning the project must be completed before filing for the credit.
• Elective pay is “stackable” with other funding sources, as there are no categorical restrictions on combining it with additional funding opportunities, including federal funds.
• Elective pay is non-competitive and limitless. As long as entities accurately complete the necessary tax forms and submit them to the IRS, they will receive the full amount they are eligible for, with no cap on the funding or the number of tax credits they can claim. This is a big shift from how many nonprofits and local governments typically operate in terms of grants and loans.
• Elective pay refunds are unrestricted—once entities receive the funds, they can use the money as they see fit. Unlike grants or loans, these funds are considered entitlements from the IRS, giving entities the flexibility to allocate resources to their highest priorities.
• The World Resources Institute (WRI) has partnered with a coalition of organizations to create the IRA Elective Pay Lighthouse Cohort, dedicated to demonstrating the viability of elective pay for local governments pursing clean energy and electrification projects.
• The Lighthouse Cohort supports over 60 cities, particularly in the first year of elective pay filing, helping them successfully navigate the process and build confidence for future projects while serving as a model for other interested entities.
• The top five lessons learned from the Lighthouse Cohort work so far are:
  • Most local governments have never dealt with the IRS before and can be hesitant to do so.
  • Strong internal department coordination is key to a successful filing.
  • Various tax credit rules can complicate how much a local government receives.
  • Local governments are eager to plan projects around elective pay.
  • Clear guidance, technical assistance, and product support are invaluable for communities navigating these processes for the first time.
• Most entities are projected to receive their first checks by late 2024 or early 2025. WRI anticipates that hundreds of millions of dollars in elective pay refunds will be distributed for projects completed in 2023, with some organizations having already received their checks.
• Notable success stories include the cities of Pateros, Washington, and San Antonio, Texas, as well as the nonprofit City of Refuge in Baltimore. All of them have successfully implemented solar projects in their communities and filed for elective pay.

 

Jillian Blanchard, Director, Climate Change and Environmental Justice Program, Lawyers for Good Government

• Lawyers for Good Government created the Clean Energy Tax Navigator to help cities, school districts, tribal governments, and other tax-exempt entities file for elective pay under the IRA.
• The Clean Energy Tax Navigator provides step-by-step guidance on filing for elective pay and provides tailored resources to help users determine project eligibility.
• The Navigator addresses the six most common credits available under elective pay: EV purchases, EV charging infrastructure, wind energy, solar energy, geothermal energy, and energy storage.

 

Robin Lewis, Director for Climate Equity, Interfaith Power and Light (DC.MD.NoVA)

• Interfaith Power and Light (IPL) DC.MD.NoVA works with hundreds of congregations of all faiths in the Washington, D.C., metropolitan area to respond to the climate crisis. Its work includes education, advocacy, and technical assistance for houses of worship.
• The Solar Shepard program assists congregations interested in solar panel installation, EV charging stations, or solar battery backups.
• Environmental justice is a core component of IPL’s work focused on empowering communities to make informed decisions and reinforce their autonomy.
• Before the introduction of elective pay, 150 congregations in the Washington metropolitan area adopted solar energy, primarily using leases or power purchase agreements. Now, elective pay offers a new financing option for these institutions.
• IPL emphasizes the importance of prioritizing low- and moderate-income residents under the elective pay initiative and holds legislators accountable for upholding the Biden-Harris Administration’s Justice40 Initiative.
• The Environmental Justice Thriving Communities Technical Assistance Centers Program (EJ TCTACs) are designed to provide grant writing technical support to entities like congregations, but there is high demand for this type of support and the TCTACs are still being built out. IPL is working to fill the gap as the TCTACs expand their capacity.
• Additional IRA funding opportunities for faith communities include the Environmental Protection Agency Community Change Grants program, green bank lending, and the Solar for All partnership.
• Congregations in the DMV area can take advantage of innovative local and state programs to leverage IRA funding, such as the DC Healthy Homes Act, the Neighborhood Geothermal District pilot program, the Green and Healthy Homes Initiative, and the Montgomery County Electrification pilot program.

 

Q&A

 

Q: What steps are federal agencies taking to help local governments and nonprofits with less capacity access grant programs and elective pay?

Forrester:

• SCEP is aware that capacity is an issue, but organizations like WRI and IPL help by stepping in to fill these gaps.
• The DOE’s new Office of Community Engagement was created to serve as “the front door” of the agency for community partners. It is designed to be an accessible resource to help communities navigate the federal landscape and grant-writing process.

Maier

• Now that we have navigated the process, sharing our knowledge and experience with other schools interested in the opportunity is important to make their journeys smoother.

Goldsmith

• Nonprofit organizations recognize the potential of elective pay and are collaborating with other eligible entities to access funding.
• The Elective Pay Lighthouse Cohort Initiative serves as a model for other communities to follow.

Lewis

• Congregations work to expand the reach of federal agencies and their programs as many people trust and are connected with a house of worship.

 

Q: The domestic content requirements for elective pay remain unclear and challenging. How are you helping organizations understand and meet these guidelines?

Goldsmith

• Lawyers for Good Government has released a fact sheet explaining domestic content requirements in plain English.
• Many local governments and communities are not directly impacted because domestic content requirements only apply to projects over one megawatt in capacity.

Q: How could the programs, incentives, and investments discussed today be improved to be more accessible to communities and minimize the need for technical assistance?

Lewis:

• The main challenge is capacity, as many houses of worship are small.
• Enhancing transparency and capacity for technical assistance networks like EJ TCTACs can further support congregations in the grant-writing process.
• Outreach is crucial for connecting communities with resources, yet it is underfunded.

Goldsmith

• The organizations most likely to file for elective pay are often under-resourced. Strengthening the technical support available directly from the IRS would be very helpful.
• Many state and local governments are interested in actionable projects not covered by elective pay, such as energy efficiency improvements.

Maier

• The process was very cumbersome, but DOE served as a useful resource. DOE asked for feedback to improve the process and there was a recognition that everyone was learning from the experience.

Forrester

• The process is effective because SCEP can receive feedback and address it in real time.
• If the program were implemented again, SCEP would prioritize broad-level accessibility. Key accessibility questions include: How are organizations accessing funds? Is the written legislation easy to understand? Is there flexibility in fund allocation? Are there any unintended consequences?

 

Q: What are the typical energy costs for the Nottoway County School District and how much are you saving or expecting to save with these projects?

Maier

• The average annual electricity cost is $250,000, with an anticipated decrease of 25% to 45%. Some schools in the district may experience greater or lesser savings.
• The indoor air quality monitors are expected to help identify further improvements for HVAC systems.

 

Compiled by Jamiya Barnett and Joshua Cohen and edited for clarity and length. This is not a transcript.