Integrating Elective Pay Tax Credits into Government Procurement and RFPs

Introduced in the Inflation Reduction Act, elective pay (also known as “direct pay”) enables tax-exempt entities to receive federal climate and clean energy tax credits as direct cash refunds from the IRS. This year alone, elective pay will likely bring back hundreds of millions of dollars to non-profits, Tribes, states, local governments, and rural electric cooperatives across the country for projects they completed in 2023. As interest in and knowledge of elective pay grows, eligible entities are starting to consider how they can maximize the financial benefits of elective pay by planning for it from the very beginning of their projects.

This webinar will cover how tax-exempt entities can fully integrate elective pay into their existing procurement and bidding processes. Based on their collaboration in the Lighthouse Cohort, representatives from WRI, Lawyers for Good Government, and the Government Finance Officers Association will share what they have learned about the most important considerations for using elective pay. Their presentation will cover the basics of elective pay; key tax credit rules, regulations, and processes that impact purchasing; and strategies for internal coordination around elective pay. Additionally, L4GG will be discussing RFPs and will share information on upcoming draft sample RFP language.

Speakers:

• Ian Goldsmith, Clean Energy Specialist, WRI
• Jillian Blanchard, Director, Climate Change and Environmental Justice Program, Lawyers for Good Government
• Emily Brock, Director, Federal Liaison Center, Government Finance Officers Association
• Mike Mucha, Deputy Executive Director, Government Finance Officers Association

If you'd like to learn more, check out the resources below as well as L4GG's new guidance brief, which includes information and sample language for entities looking to draft RFPs, RFQs, and contracts  that account for the Prevailing Wage and Apprenticeship (“PWA”) and Domestic Content (“DC”) requirements imposed on projects by certain IRA tax credits. 

Resources:

• IRS has put out resources to help folks understand the registration process, including an overview for local governments, FAQs and a pre-filing registration user guide.

• World Resources Institute created an Inflation Reduction Act Roadmap for Cities and also coordinates trainings and technical assistance on elective pay and IRA implementation for local governments.

• Lawyers for Good Government (L4GG) provides extensive information, fact sheets, and worksheets on their Elective Pay and IRA Tax Incentives Resources page that can help you plan and prepare for elective pay filing. L4GG also provides an ability to ask a legal question of its large expert attorney network and publishes all previous answers. Use L4GG’s Clean Energy Tax Navigator and new guidance brief.

• The Government Finance Officers Association (GFOA) aggregates information on finance-oriented questions including portal submissions; timing of IRS, financial statement and audit processes; financial statement recognition of credits, and strategic financial planning. GFOA has best practices and IRA implementation resources for states, localities and instrumentalities that you may find helpful in planning.

• Electrification Coalition provides technical assistance and resources for vehicle elective pay credits.

Annotated Tax Forms:

• Form 3468 - Section 48/Investment Tax Credit (ITC) - from GFOA & L4GG

• Form 8936 & Schedule A - Section 45W/EV purchases - from Electrification Coalition

• Form 8911 & Worksheet 1 - Section 30C/EV infrastructure - from Electrification Coalition

• Form 3800 - General Business Income - from GFOA & L4GG

• Form 990-T - Exempt Org. Business Tax Return - from GFOA & L4GG