Yes, in a specific way: churches and other tax-exempt organizations can use a mechanism called elective pay (also called direct pay, created under Internal Revenue Code Section 6417) to receive a cash payment tied to a portion of an eligible solar or clean energy project's cost. It is not a grant that arrives before construction — the church builds or contracts the project first, registers it with the IRS, and then claims the payment on a return filed after the system is placed in service. This is a genuinely useful tool for congregations planning a solar project, but it changes a church's cash-flow planning more than it changes whether the project gets built.
Key Takeaways
- Elective pay lets tax-exempt organizations receive the cash value of certain federal clean energy tax credits, even though churches don't owe federal income tax.
- The payment is claimed after the project is placed in service, not before — this is financing you get reimbursed for, not upfront grant money.
- Claiming it requires pre-registering the project with the IRS and filing a return, even for organizations that would otherwise never file one.
- Credit percentages and eligibility rules for clean energy tax credits have changed with recent federal legislation and continue to evolve — verify current terms before budgeting a project around them.
- State rebates, utility net-metering programs, and denominational green-building funds can sometimes stack with elective pay, but rules vary and must be confirmed independently.
Why This Isn't a Typical "Grant"
Most of what we cover on FaithGrants — NSGP, CDBG, TEFAP — is a competitive or formula-based award a church applies for before spending money. Elective pay works differently. It's a tax provision, created by the Inflation Reduction Act of 2022, that solves a specific problem: tax-exempt organizations historically couldn't use federal clean energy tax credits at all, because those credits only offset taxes owed, and churches don't owe federal income tax. Elective pay converts the credit into a payment the organization can actually receive, but only after the underlying project exists and is generating power.
That distinction matters for planning. A congregation that assumes the payment will help fund construction is planning around the wrong sequence — the money follows the build, not the other way around. See our full grant programs overview for how this compares to the funding categories that do pay before or during a project.
What Elective Pay Covers
| Project Type | Typically Eligible | Typically Not Eligible |
|---|---|---|
| Rooftop or Ground-Mount Solar | Solar electric systems installed on church-owned property, sized to the facility's use | Systems installed on leased property without an ownership or long-term lease arrangement that qualifies |
| Battery Storage | Battery storage paired with an eligible renewable energy system | Standalone backup generators unrelated to a renewable energy project |
| Other Clean Energy | Certain geothermal and other qualifying clean energy technologies, depending on current rules | General HVAC replacement or insulation work with no renewable energy component |
| Ownership Structure | Church owns the system outright, or is the direct beneficiary of a qualifying financing structure | Systems owned entirely by a third-party developer under some power purchase agreements (the developer, not the church, may be the eligible party) |
ℹ️ Key Distinction
Elective pay is tied to specific federal clean energy credit categories, most commonly the investment tax credit for solar. It is not a general facility-improvement fund — a new roof, windows, or HVAC system with no renewable energy component doesn't qualify on its own, even if it improves energy efficiency. Geothermal heat pump systems are the one HVAC-adjacent exception worth knowing about; see our church HVAC & energy efficiency grants guide for how that distinction plays out, plus the utility rebate and weatherization options that exist outside elective pay entirely. If your project is a broader building overhaul, our church building repair grants comparison covers the funding paths that apply to that kind of work instead.
How the Payment Is Actually Calculated
The underlying credit has historically been structured around a base percentage of qualifying project cost, with the potential for additional percentage points depending on factors like the project's location (in a designated "energy community"), whether it serves a low-income area, and whether the equipment meets domestic content requirements. Larger projects have also carried labor requirements — meeting prevailing wage and apprenticeship standards — to access the full credit amount.
We're intentionally not publishing a specific percentage here. Federal clean energy tax rules have been revised more than once since 2022, including significant changes to eligibility windows and requirements in 2025 legislation, and getting the number wrong in a congregation's project budget is a real financial risk. Before your church or its contractor prices a system, confirm the current base rate, any bonus adders, and applicable deadlines directly through IRS.gov's elective pay guidance or with a CPA who has handled a tax-exempt clean energy filing.
The Process, Step by Step
- Plan and finance the project. Because the payment arrives after construction, the church needs a way to fund the build — cash reserves, a capital loan, a capital campaign, or a developer arrangement.
- Confirm the project meets current eligibility rules. Work with your installer or a tax advisor familiar with elective pay to confirm the system qualifies under current guidance before signing a contract.
- Build and place the system in service. The project must actually be operating — generating power — before a claim can be filed.
- Pre-register with the IRS. Tax-exempt entities must register the project through the IRS's pre-filing registration process to receive a registration number before claiming elective pay.
- File the required tax return. Even organizations that never otherwise file a federal return must file the applicable form for the tax year the project was placed in service, including the registration number and required documentation.
- Receive the payment. Processing happens on the IRS's return-processing timeline, not a grant agency's award calendar — budget for it to take time.
Not Sure If a Clean Energy Project Fits Your Budget?
Start a free eligibility review to see which funding categories — including facility and financing options — may apply to your congregation's capital plans.
Check Your Grant Eligibility →Documentation to Have Ready
✓ Elective Pay Documentation Checklist
- EIN and, if available, IRS 501(c)(3) determination letter
- Signed contract and final invoice from the solar installer, itemizing eligible costs
- Proof the system is placed in service (interconnection agreement or utility confirmation)
- IRS pre-filing registration number for the project
- Board resolution authorizing the project and the elective pay election
- Records supporting any bonus credit claim (location, domestic content, or labor compliance documentation)
When This Isn't the Right Tool
Elective pay makes the most sense for congregations that can already fund a solar project's construction cost and are looking to recover part of it afterward. It's the wrong starting point for a church that has no capital and is hoping for upfront funding — in that case, a smaller project, a phased build, or a third-party-owned system under a power purchase agreement (where a developer owns and maintains the panels and the church simply buys power at a lower rate) is usually more realistic than trying to finance a full system against a future tax payment. If your facility also needs non-energy capital repairs, evaluate those separately — CDBG funding, historic preservation grants, or private foundation support may apply to the rest of the building even if they don't touch the solar system. See our community development grants for churches guide and historic preservation grants guide for those paths. A congregation's grounds — trees, green space, landscaping separate from the building itself — draw from yet another funding source; see our creation care grants for churches guide for the USDA program that funds that work.