Expiring Energy Tax Credits: What Not-for-Profits Need to Know

Not-for-profit organizations are often surprised to learn that significant federal energy tax credits are available to them, even though they do not pay income tax. Through recent legislative changes, tax-exempt entities can now directly receive certain energy credits as cash through an IRS process known as elective pay.

What many organizations may not realize is that this opportunity is time-limited. With key eligibility and construction deadlines approaching in 2026 and 2027, organizations considering sustainability investments or infrastructure upgrades may be facing a narrowing window to act. Understanding how these credits work, which projects qualify, and how to navigate the process is essential to capturing their full value before they expire.

Elective pay allows eligible not-for-profits and government entities to receive refundable energy tax credits even though they do not have traditional tax liability. Rather than offsetting taxes owed, these credits are claimed as a payment of tax and refunded by the IRS.

The credit is claimed through Form 990-T, even if the organization does not otherwise file that form. In addition to filing the 990-T, the organization will also have to complete Forms 3468 and 3800. Before filing, organizations must complete a required pre-filing registration through the IRS energy credits system and obtain a registration number tied to the qualifying project. That registration number is then included with the tax filing after the property is placed in service.

While several energy incentives have expired, two credits remain available to not-for-profit organizations today. Both are claimed through elective pay and come with detailed eligibility and compliance requirements.

Applies to qualifying clean electricity projects such as solar and wind installations. The base credit begins at 6 percent of project costs and can increase to as much as 30 percent if prevailing wage and apprenticeship requirements are met. Some projects could be eligible for bonus amounts for meeting domestic content requirements and for being placed in service in an “energy community”. For certain wind and solar projects, construction must generally begin by mid-2026, with projects placed in service by December 31, 2027. Other qualifying technologies may follow different timelines.

Applies to electric or alternative fuel vehicle charging and refueling property. The base credit also ranges from 6 percent to 30 percent when labor requirements are satisfied and is capped at $100,000 per qualifying item, such as each charging port or fueling unit. This credit is currently available for property placed in service through June 30, 2026, although eligibility can depend on where the property is installed, including whether the location meets certain census tract requirements.

With deadlines approaching, delaying project planning can quickly eliminate eligibility altogether.

These credits can represent hundreds of thousands or even millions of dollars, depending on the size and scope of the project. However, the rules are technical and evolving. Qualification thresholds, labor standards, location requirements, IRS registration procedures, and proper tax filings all need to align.

For many organizations, the challenge is not interest but execution. Determining whether a project qualifies and successfully navigating the elective pay process requires specialized tax knowledge and a deep understanding of not-for-profit reporting obligations.

CSH works closely with not-for-profit organizations to evaluate eligibility, guide them through IRS registration, and prepare the required tax filings, including Form 990-T. The firm regularly coordinates with project developers and advisors to ensure credits are claimed accurately and in compliance with IRS guidance. In some cases, CSH professionals have supported projects resulting in credits totaling millions of dollars.

With deep experience serving the not-for-profit sector and a dedicated tax team that understands the nuances of energy incentives, CSH helps organizations move from opportunity to execution. As energy credit rules continue to evolve and compliance requirements remain complex, having a trusted advisor is essential. For not-for-profits looking to align sustainability initiatives with sound financial strategy, CSH brings the technical expertise and sector insight needed to turn energy investments into meaningful financial returns.