Data approachEIA rates · NREL sun hours · 2026 federal policy · methodology
Yes. Under §6417 elective pay, nonprofits, churches, schools and governments can still receive the §48E solar credit as a cash payment: 30% base for projects under 1 MW, so $79,500 on a $265,000 system. The project must have begun construction by July 4, 2026 or be placed in service by December 31, 2027.
That deadline is the key 2026 change. The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) ended the homeowner solar credit (§25D) after 2025 and set a cutoff for the business solar credit: solar must have begun construction by July 4, 2026 or be placed in service by the end of 2027. Because the July 4, 2026 begin-construction date has passed, an organization starting a solar project now generally needs it placed in service by December 31, 2027 to get any federal credit.
This guide explains who qualifies, how elective pay works, the deadlines, the bonus adders, realistic savings with and without the payment, and the filing steps. It is general information, not tax advice; confirm your project with a tax professional experienced in energy credits. Policy dates come from the IRS OBBB FAQ and IRS elective pay guidance.
🏛️ Incentives
Can Nonprofits Still Get a Solar Tax Credit in 2026?
Yes, for qualifying projects. Tax-exempt organizations use the business clean electricity investment credit (§48E) and receive it as a payment through elective pay. That route remains open for solar that meets the 2026–2027 deadlines.
Federal solar credits in 2026: who they apply to
Credit
Who uses it
Status in 2026
§25D Residential Clean Energy Credit
Homeowners who own their system
Ended for expenditures after Dec 31, 2025
§48E Clean Electricity Investment Credit
Businesses, farms, third-party owners of leased/PPA systems, and tax-exempt entities via elective pay
Available for solar that began construction by Jul 4, 2026 or is placed in service by Dec 31, 2027; FEOC restrictions apply
MACRS depreciation (5-year)
Taxable businesses
Still applies to taxable owners; not relevant to tax-exempt owners
USDA REAP grants
Agricultural producers and rural small businesses
Program exists; funding rounds vary; most nonprofits are not eligible applicants
Summary: Nonprofits cannot use the homeowner §25D credit, which has ended, but they can use §48E through elective pay if the project meets the deadlines. The base §48E rate is 30% for solar systems with a maximum net output under 1 MW (AC), which covers most nonprofit rooftops. Larger projects reach 30% only if they meet prevailing-wage and apprenticeship requirements.
🏛️ Incentives
How Does Elective (Direct) Pay Work for Nonprofits?
Elective pay treats the credit as a payment of tax, so an organization that owes nothing receives the full credit amount as a refund. It was created by the Inflation Reduction Act for tax years beginning after 2022 and was not repealed in 2025.
Eligible “applicable entities” include 501(c)(3) and other tax-exempt organizations, churches and religious organizations, public schools and universities, state and local governments, Tribal governments, and rural electric cooperatives. The organization must own the solar system.
To claim it, the organization completes pre-filing registration for each project in the IRS Energy Credits Online portal and receives a registration number, then files Form 990-T with Form 3468 (the investment credit form) for the tax year the system is placed in service. Under IRS guidance, filing a 990-T solely to make an elective pay election does not by itself mean the organization has unrelated business income.
Two details affect the amount:
Domestic content for larger projects. For elective-pay projects of 1 MW or more, failing domestic-content requirements can reduce or eliminate the payment unless an exception applies. Systems under 1 MW are exempt from that reduction.
FEOC restrictions. Projects that begin construction after 2025 must meet the foreign-entity-of-concern rules on components and suppliers. Ask your installer to document compliance in writing.
For projects large enough to need detailed modeling, the commercial solar ROI calculator helps test the economics before you engage an installer.
📋 Key Insights
What Are the 2026–2027 Deadlines for Nonprofit Solar?
A solar project qualifies for §48E if construction began by July 4, 2026, or if the system is placed in service by December 31, 2027. For projects starting now, the practical deadline is being in service by the end of 2027.
Deadline checklist (as of October 2, 2026)
Situation
Can it still qualify?
Construction began on or before July 4, 2026 (documented under IRS beginning-of-construction rules)
Yes, under the begin-construction path, subject to IRS continuity requirements
Construction not begun by July 4, 2026; system placed in service by Dec 31, 2027
Yes
Construction not begun by July 4, 2026; placed in service in 2028 or later
No federal solar credit
Summary: If you have not started, the date that matters is December 31, 2027. If you did start before July 5, 2026, you need documentation that you met the IRS beginning-of-construction tests and have kept up continuous work.
“Placed in service” generally means the system is installed, interconnected and ready to operate. Utility interconnection, permitting and equipment lead times can each take months, so organizations aiming for 2027 should build slack into the schedule and write completion dates into the installer contract.
Beginning-of-construction rules are technical and have been in flux. IRS Notice 2025-42 (August 2025) removed the 5% cost safe harbor for solar over 1.5 MW AC, leaving the physical work test, while small solar of 1.5 MW AC or less could still use it. A federal court vacated that notice on June 6, 2026, and law-firm analyses describe the 5% safe harbor as restored. Further appeals or IRS guidance could change this, so have your tax advisor confirm which path your project relies on.
📋 Key Insights
Which Bonus Credits Can Nonprofits Add to the Base Credit?
Three bonus adders can raise the §48E rate above 30%, and they work through elective pay like the base credit. They do not extend the 2026–2027 deadlines. For more on this topic, see our guide to Federal Solar Tax Credit 2026.
Adder
Increase (projects under 1 MW)
Requirement
Energy community
+10 percentage points
Site in a qualifying area (e.g., near a closed coal mine or coal plant, or a statistical area meeting fossil-fuel employment and unemployment tests); check DOE’s mapping tool
Domestic content
+10 percentage points
Required shares of US steel, iron and manufactured components; can be difficult with panels on the market
Low-income communities
+10 or +20 percentage points
Requires a capacity allocation through a capped IRS/DOE application program; confirm whether a round is open
Data visualization
Elective payment on a $265,000 100 kW system by credit rate. 30% pays $79,500; 40% pays $106,000. Source: credit rate times installed cost; rates per IRC Section 48E.
Chart summary: At the 30% base, a $265,000 system receives $79,500, and the energy-community adder lifts that to $106,000. The 50% bar ($132,500) is a paper maximum that needs both energy-community and domestic-content adders, which is hard to reach. Budget on the 30% base until an adder is confirmed. The solar tax credit calculator shows the 2026 status by installation type.
📈 Payback Period
How Much Can a Nonprofit Realistically Save?
A 100 kW system, roughly right for a mid-sized school or community center, costs about $265,000 in our illustration, and a 30% elective payment cuts simple payback from about 16 years to about 11.
Example: 100 kW nonprofit solar projectIllustrative inputs, not a quote: $2.65/W installed price; production = 100 kW × 4.5 peak sun hours × 365 × 0.82 ≈ 134,700 kWh/yr; savings valued at 16.3¢/kWh with a 0.75 bill offset ≈ $16,465/yr; 25-year totals assume 3%/yr electricity rate increases and 0.5%/yr panel degradation, and exclude maintenance, inverter replacement, financing costs and discounting. Commercial tariffs with demand charges can differ substantially, so replace these with your own bill and bid.
Scenario
Installed cost
Elective payment
Net cost
Year-1 savings
Simple payback
25-yr net savings
No credit (missed deadline or ineligible)
$265,000
$0
$265,000
~$16,465
~16.1 yrs
~$296,300
30% base (§48E, under 1 MW)
$265,000
$79,500
$185,500
~$16,465
~11.3 yrs
~$375,800
40% (base + energy community)
$265,000
$106,000
$159,000
~$16,465
~9.7 yrs
~$402,300
Data visualization
Simple payback, 100 kW nonprofit solar. A 30% elective payment cuts payback from 16.1 to 11.3 years. Source: calculated from the stated assumptions (PVWatts-style production, 16.3 cents per kWh).
Chart summary: The 30% elective payment shortens simple payback by about 4.8 years, from 16.1 to 11.3. Adding the 10-point energy-community adder brings it to about 9.7 years. Payback is net cost divided by $16,465 in year-one savings, so a higher rate or better production changes every bar.
A small congregation shows the same pattern at a smaller scale: a 20 kW system at $2.65/W costs about $53,000, earns a $15,900 payment at 30% ($21,200 at 40%), and on the same inputs saves about $3,300 in year one, a payback of about 11.3 years with the base payment versus 16.1 without.
For a small office with a $150 monthly bill, our standard residential model gives an 8.2 kW system at $24,600 ($3.00/W), $1,350 in year-one savings, and an 18.2-year payback with no credit, or about 12.8 years if a 30% payment of $7,380 is received.
Data visualization
Cumulative cash flow, 100 kW nonprofit solar, Years 0 to 25. The 30% payment case turns positive around Year 10, versus about Year 15 with no credit. Source: calculated from the stated assumptions (3 percent yearly rate increase, 0.5 percent degradation).
Chart summary: Each line starts at the net cost after the elective payment and climbs by the year’s bill savings. The 30% case reaches break-even just after Year 10 and ends Year 25 at $375,800, compared with $296,300 with no credit. Maintenance, inverter replacement and financing costs are excluded, so real-world lines would sit lower.
What improves results most: large daytime loads (schools, clinics, offices) that use solar output directly, higher electricity rates, and full retail net metering. Commercial systems in high-rate states such as California, Massachusetts and New York tend to benefit most. State programs can add value too; for example, Arizona offers sales and property tax exemptions for solar energy devices, so confirm eligibility for your organization. See the payback period by state guide for rate and net-metering context.
Run the numbers for your state
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📋 Key Insights
What Are the Steps to Claim Elective Pay?
Confirm eligibility, lock a schedule that meets the deadline, register the project with the IRS, file a timely Form 990-T with Form 3468, and plan financing around the wait for payment.
Step 1: Confirm entity and project eligibility. Verify your organization is an applicable entity under §6417 and that it will own the system. Organizations that are not eligible for elective pay may be able to use credit transferability if they have tax liability; ask your advisor.
Step 2: Lock the schedule. Put the placed-in-service target (no later than December 31, 2027 for projects not begun by July 4, 2026) in the installer contract, and ask for documentation of FEOC compliance and, if you pursue it, domestic content.
Step 3: Register with the IRS. Complete pre-filing registration in IRS Energy Credits Online for each facility and obtain registration numbers before you file. Register well ahead of your filing date; processing times vary.
Step 4: File Form 990-T on time. Attach Form 3468 and your registration numbers for the tax year the system was placed in service. Elective pay must be elected on a timely filed original return, including extensions; a late election is not allowed. A CPA experienced with energy credits is worth the cost.
Step 5: Receive the payment and plan cash flow. The IRS pays the elective amount as a refund after processing. Budget for a wait of several months; a bridge loan from a bank or community development financial institution (CDFI) can cover the gap, and the solar loan calculator models financing costs.
Recapture: Investment credits are subject to recapture. If the property is sold or stops qualifying during the first five years after it is placed in service, part of the credit must be repaid: 100% in the first year, stepping down 20 percentage points a year, with none after five full years. Organizations that may relocate should model this before committing.
Grants and forgivable loans used to pay for the project have specific interaction rules with elective pay, so tell your advisor about every funding source.
🏛️ Incentives
What Do Nonprofits Commonly Get Wrong About Solar Credits?
The most expensive mistake in 2026 is assuming the old timeline still applies. Several other misunderstandings persist.
“The credit runs through 2032.” Not for solar. Under the 2025 law, solar qualifies only if construction began by July 4, 2026 or the system is placed in service by December 31, 2027.
“The homeowner credit ending means ours ended too.” The §25D homeowner credit ended after 2025, but nonprofits never used it. The §48E business credit, available through elective pay, continues on the 2026–2027 deadlines.
“Filing a 990-T will put our tax-exempt status at risk.” Filing a 990-T solely to make an elective pay election does not by itself create unrelated business income under IRS guidance.
“A PPA gets us the same credit.” Under a PPA or lease, the third-party owner claims §48E. The nonprofit benefits only if the PPA price reflects it, so compare total costs.
“Batteries work the same way as solar.” Energy storage is a separate §48E category with its own rules and is not subject to the same 2027 solar cutoff under current law, but FEOC restrictions apply. Confirm treatment of a battery with your advisor before assuming a payment.
“We need to pay off the system before claiming.” The claim is tied to the placed-in-service year, not to when financing is repaid. A nonprofit can finance the full cost and apply the payment to the loan when it arrives.
Sources: IRS OBBB FAQ; IRS elective pay and Energy Credits Online guidance; IRS Notice 2025-42 and the June 6, 2026 court decision vacating it; EIA electricity prices; NREL PVWatts; DSIRE. Calculation assumptions: methodology. Last updated October 2, 2026.
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Yes, but on a deadline. Tax-exempt organizations can use elective (direct) pay under §6417 to receive the §48E clean electricity investment credit as a payment, even with no tax liability. For solar, construction must have begun by July 4, 2026, or the system must be placed in service by December 31, 2027. Foreign-entity-of-concern (FEOC) restrictions apply to projects that begin construction after 2025. The homeowner §25D credit ended after 2025 and never applied to nonprofits.
Eligible 'applicable entities' include 501(c) tax-exempt organizations, churches and religious organizations, public schools and universities, state and local governments, Tribal governments and rural electric cooperatives. The entity must own the system. The base rate is 30% for solar under 1 MW AC, so a 20 kW church system at $2.65/W ($53,000) would receive a $15,900 payment. Bonus adders can raise the rate to 40% or more if the project qualifies.
Yes, if the solar system is placed in service by December 31, 2027. The July 4, 2026 begin-construction date has passed, so a project starting now has to be installed, interconnected and ready to operate by the end of 2027. A system placed in service in 2028 or later does not qualify for the federal solar credit unless construction began by July 4, 2026. Put the completion date in the installer contract and allow time for permitting and utility interconnection.
The organization registers each project in IRS Energy Credits Online to get a registration number, then files Form 990-T with Form 3468 for the tax year the system is placed in service. The election must be made on a timely filed original return, including extensions; it cannot be made on a late or amended return. For most calendar-year nonprofits, Form 990-T is due the 15th day of the fifth month after year end, with a six-month extension available.
Owning is the only way for the nonprofit itself to receive elective pay. With a PPA or lease, a third-party owner builds the system and may claim §48E itself if the project meets the 2026–2027 deadlines; the nonprofit sees that value only through a lower power price or rent. Compare the PPA's total 25-year cost against ownership with the elective payment. If you own the system, note that investment credits are subject to recapture if the property is sold or stops qualifying within five years of being placed in service.
$150/month electric bill by state
System size and payback vary by electricity rate and sun hours — see your state.
18.19¢/kWh — US average residential price. Source: EIA Electric Power Monthly, Table 5.6.B (year-to-date through July 2026), residential average retail price (July 2026) (EIA)
Solar production
4.5 peak sun hours/day × 0.82 system derate. Approximate state-average daily solar resource (peak sun hours) based on NREL solar resource data (NSRDB); not location-specific — use NREL PVWatts for an address-level estimate. (NREL PVWatts)
Installed price
$3.00 per watt before incentives. Blended 2026 US residential installed price used by this site; EnergySage marketplace reported about $2.60/W (mid-2026); full-market medians are higher.
Federal tax credit
$0 for homeowner-owned systems installed in 2026 — the 30% §25D credit ended Dec 31, 2025 (IRS)
Net metering
National blend — solar assumed to offset 75% of the bill (87% in full-retail net-metering states, 55–70% elsewhere).
Estimates only — not tax, legal or financial advice. Get at least three installer quotes and confirm incentives with your utility and a tax professional.