A Roadmap for Direct Pay Project Success

Updated January 31, 2025

Author: Heejin Hahn, Program Specialist (heejin@progressivecaucuscenter.org) 

This guide is a high-level overview of the basic steps to successfully complete a Direct Pay eligible project. Each project is different and faces its own challenges and not all projects will follow this exact order. Some of the sub-bullets may be reordered or done simultaneously as appropriate. Where possible, we’ve included links to additional resources, tools, and technical assistance. 


We are here to help. At any and all stages of your project, please reach out for assistance.


Table of Contents

1. Plan

2. Build

3. Pre-Filing Registration

4. File

5. Get Your Money

6. Tell Your Story and Replicate Success

IRA and Direct Pay Resource List

I Have More Questions, Who Can I Call?

1. Plan

  • Identify and gather community stakeholders. Ensure that you’ve accurately identified the needs of your community and outlined how your Direct Pay project will help address them. Engage all the community members who would impacted by this project, directly or indirectly. Center the voices of marginalized communities and be mindful of historic inequities and past harm. For more information, reference the CPC Center’s “Building Justice into Clean Energy Policy: A Checklist for Policy Makers and Advocates.”

  • Conduct an energy audit or feasibility study. Surveyors and auditors can help assess what Direct Pay projects are feasible for your entity’s existing infrastructure. They may also identify additional steps you will need to take to build a project, such as repairing and strengthening your roof for solar panels or upgrading your electrical panel to support an electric vehicle charger. (Note: Those only considering an electric vehicle purchase and pursuing the Commercial Clean Vehicle Credit will likely not require an energy audit. Entities looking to electrify an entire fleet may use the Electrification Coalition’s Dashboard for Rapid Vehicle Electrification (DRVE) Tool, which “allows users to import all fleet vehicles and compare a fleet’s conventional vehicles with an electric vehicle (EV) alternative.” We also recommend that local and state government entities look into the Climate Mayors Electric Vehicle Purchasing Collaborative.)

  • Confirm eligibility. Once you have an idea of what kind of project you’ll be pursuing at what scale, you’ll need to determine which Direct Pay Tax credit to pursue for your project. Then, check the eligibility for the tax credits, bonuses, and adders you’re interested in using Lawyer for Good Government’s (L4GG) Clean Energy Tax Navigator. The Navigator will help you understand any relevant technological, labor, and material sourcing requirements, which will inform your project planning. 

  • Integrate high-road labor standards and community benefits. Depending on the type and scale of your project, you may not be required to fulfill prevailing wage and apprenticeship requirements (PWA) to receive the full credit base. However, we encourage everyone to see your Direct Pay project as an opportunity to expand high-quality, wealth-building green jobs and invest in training the next generation of the clean energy workforce. Fulfilling PWA and working with union contractors are concrete steps project planners can take to do both these things. The cost of a clean energy project is a significant chunk of money; you can amplify its impact by investing it in your local clean energy workforce! Furthermore, you should plan to consult the community where your project is located and integrate community benefits, such as hiring targets for local and/or underrepresented communities. You can also plan for the project revenue to be re-invested in the local community. For example, you can reduce energy costs for low income residents of a building with solar or reinvest in community programming with the revenue your project generates. Depending on the project scale and your entity’s capacity, your plan could commit to these benefits in a contractual agreement such as a Community Workforce Agreement, Community Benefits Agreement, or Project Labor Agreement.

    1. What are the resources to help me with this?

      1. A Step-by-Step Guide to Worker Protection Requirements, CPC Center 

      2. L4GG Guidance Brief: Drafting Requests For Proposals (RFPs) for Projects Claiming IRA Credits

      3. CBA Framework For Success, PowerSwitch Action

      4. Common Challenges in Negotiating Community Benefits Agreements and How to Avoid Them, Partnership for Working Families

      5. Delivering Community Benefits Through Economic Development: A Guide For Elected And Appointed Officials, Partnership for Working Families

  • ​​If you pursue the Low-Income Communities bonus credit, prepare to apply when your project is under contract but NOT yet placed in service. See this Applicant Checklist to see what kind of documentation you’ll need to apply. Monitor the IRS website to see when the application for the upcoming program year opens.

  • Create a project budget. Factor in your expected savings from the Direct Pay tax credits, bonuses, and adders. 

  • Secure funding and/or financing that maintains community ownership. Make a plan for how you will secure the up-front funding and/or financing for your project. (Recall that Direct Pay eligible projects do not receive the tax credit refunds until after the project has been both placed in service and claimed on the entity’s annual tax return). Furthermore, be strategic in structuring your funding to maximize your tax credit refund and avoid reductions such as the Municipal Bond “haircut,” Domestic Content penalities, and the “no excess benefit” rule. If you plan to pursue the Investment Tax Credit, Alternative Fuel Vehicle Refueling Property Credit, or Commercial Clean Vehicle Credit and you expect restricted funds to fund a significant portion of your project, review the L4GG Guidance Briefs on Restricted vs. Unrestricted Funds and the “No Excess Benefit” Rule in detail.

    1. What are the resources to help me with this?

      1. Project Finance Hub, Climate Program Portal. See a demo here. 

      2. Elective Pay Model, Center for Public Enterprise. The tool is designed to “help understand the financial considerations public utilities and other public agencies might face when making an elective pay investment in clean energy assets.”

      3. “School Solar Ownership Models” Report and Briefing Recording by Building Power Resource Center, Center for Public Enterprise: “This memo reviews three ownership models available to school districts across the country: private ownership managed through power purchase agreements with third-party developers, direct school ownership, and green bank or state finance authority ownership.” 

  • Confirm support from your community stakeholders. Projects should reflect the needs and demands of the communities where they are rooted. Ensure that your project is connected to community demands by engaging in a meaningful community input process. If applicable, mobilize your community advocates to speak in support of the project to any remaining decision-makers, such as public officials. Then, create a community-led mechanism for accountability, such as an advisory board, to ensure the project delivers on its promised benefits for the community.

    1. What are the resources to help me with this?

      1. Direct Pay Partner Toolkit, CPC Center

      2. Tools and Resources for Project Based Community Advisory Boards, The Urban Institute

      3. Free, Prior, and Informed Consent, The United Nations

      4. The Justice is in the Details: Maximizing Equity and Justice in Public Policy, The Progressive Caucus Action Fund

A Note on Navigating Uncertainty:

For projects that are already placed in service: 

Eligible projects placed in service in 2023 and 2024 are considered quite safe and should be claimed on tax returns to demonstrate the success of Direct Pay. Submit your pre-filing registration as soon as your projects are placed in service and provide plenty of review time (at least 120 days before you plan to file). Do your best to be accurate and thorough with your submission to prevent having to provide further clarifying documentation or information, which could lengthen your registration review time. Also be sure to submit your tax return claiming direct pay on time and request a filing extension if you need to. Since the IRS will likely suffer funding cuts and thus have less staff, time, and capacity to process registrations and tax returns, entities should expect longer wait times, and plan accordingly. Entities should do everything they can on their end to complete timely registrations and filings and submit early whenever possible. 

For projects that are still in construction:

Place whatever projects you can in service as soon as possible while Direct Pay is still lawful. Projects placed in service during 2025 are likely to be protected by “the grandfather clause” in the case of a repeal, but it is not guaranteed. If placing your project in service in 2025 is not feasible, try to at least commence construction. Historically, the implementation of new agency rules and/or phasing out of old ones has sometimes allowed leniency to projects whose beginning of construction predates the release of new rules. Learn more from L4GG’s Guidance Brief “IRA Credits, Direct Pay, and the 2024 Elections” here.

2. Build

​​If you received preliminary approval for the Low-Income Communities bonus from the Department of Energy, do not place your project in service until AFTER receiving your allocation letter. Take care to complete your project so it remains in compliance with the application criteria and avoids disqualification (learn more here).

3. Pre-Filing Registration

  • Prepare. Check out our overview of the pre-filing registration process.

    1. For more information, watch the IRS overview video. Reference the IRS guide.

    2. Compile the necessary information and documents. (See document checklist and the worksheet pg 66).

    3. Ensure that the entity that owns the project is the one claiming the credit. Confirm that the entity has its own EIN as “the IRS can process only one tax return (including superseding or amended returns) for each EIN.” For entities that are part of a larger organization or structure (for example an individual school within a school district, a public works department within a city government, or a Catholic church within a diocese), it’s especially important to clarify which entity actually owns the project and thus which EIN should be used to claim the credit.

  • Create a clean energy account.

    1. Coordinate who from your entity will be the “clean energy officer,” or the user who first sets up the account and manages user permissions. Ensure that the clean energy officer is a person authorized to register on your entity’s behalf. This may require some internal coordination within your organization to prevent duplicative efforts.

    2. Reference the IRS’s Clean Energy Authorization Permission Management Guide. 

  • Submit your pre-filing registration at least 120 days before you plan to file your taxes. Earlier is better! You may register an eligible project in the IRS pre-filing registration portal as soon as 1) the project is placed in service and 2) the portal for the appropriate tax year is open. Remember that “each registrant can have only one registration package for an annual accounting period (taxable year).”

  • While you wait for your registration numbers:

    1. Monitor the portal/your email for any updates or requests for additional information.

    2. Request a filing extension if you don’t think you’ll receive your registration number(s) in time.

    3. Continue your search for e-filing providers if applicable.

    4. Start to gather information and prepare for the next step of filing.

  • Receive a registration number for each project.

​​If you received an allocation letter for the Low-Income Communities bonus credit, submit information about your completed project in the Department of Energy’s application portal. Then you should receive an eligibility letter from the IRS with a control number for your project.

4. File

  • Select an e-filing provider as appropriate. Government entities are the only entities permitted to paper file, although e-filing is still highly recommended when possible for efficiency. While the IRS announced a temporary e-filing exemption and automatic extension for entities claiming Direct Pay for projects placed in service during a “taxable year ending on any day from Dec. 31, 2023, through Nov. 30, 2024,” please note that this was a one-time measure for tax year 2023 and entities should not count on similar relief in the future. 

  • ​​Gather the necessary info for the required tax forms. Learn more about what forms you will need to file and what they each entail:

    1. L4GG Annotated Tax Forms

    2. IRS Form 990-T for Elective Payment Election Only Presentation (30 minute video)

  • When you receive your eligibility letter for the Low-Income Communities bonus from the IRS, note the control number and enter it in the relevant section on Source Credit Form 3468. 

  • Be mindful of your filing deadline and request a 6-month extension (Form 8868) if necessary.

  • Submit your tax return early. At the very latest, submit by your deadline. After your deadline for a certain tax year passes, you can no longer claim Direct Pay for that tax year. You won’t be able to claim Direct Pay on an amended return. This is why it is critical to be mindful of your tax filing deadline and request a filing extension if necessary. If you’re in a scenario where all of the following are true:

    1. 1) Your filing deadline (including extensions) has NOT yet passed

    2. 2) You’ve already submitted your original tax return

    3. 3) You forgot to claim Direct Pay or forgot to claim some eligible projects on your original return

Then you may re-submit your return by your deadline (including extensions)with new Direct Pay elections to replace your original return. This is called a “superseding return.”

5. Get Your Money

Create a plan for how you will use your refund. After repaying any lenders or paying any outstanding bills, consider reinvesting your refund into another Direct Pay project or another initiative that will benefit your community. Present any energy and cost savings from your project to your community stakeholders and collect their input on how the savings can be reinvested in the community.

6. Tell Your Story and Replicate Success

  • Celebrate with your community stakeholders. Provide updates on the benefits of your project to the community leaders and members who helped make it possible. For example, share how many new jobs were created or any energy or cost savings from the project after being placed in service. Collect stories from your stakeholders on the impact of the project on their lives.

  • Share your Direct Pay project with us and our partners. Storytelling is a powerful way to demonstrate the impact of Direct Pay and protect clean energy tax credits, as well as inspire others to build similar projects. 

    1. Fill out our form and select “Sharing my story of a Direct Pay project”

    2. For any clean energy IRA-related programs and projects funded by the IRA generally, including Direct Pay: Investing in America: IRA Success Stories & Case Studies

    3. For schools making Inflation Reduction Act (IRA) related investments, including Direct Pay: UndauntedK12 Schools and the Inflation Reduction Act

    4. Local Government Direct Pay Tracker

    5. For federal funding projects in Rural America: Resource Rural Storytelling Submission 

  • Encourage your community to continue organizing for clean energy. Call upon your local and state lawmakers to support:

    1. Funding for technical assistance programs 

    2. Upfront funding for Direct Pay projects such as municipal bonds, grants, no-interest loans, and revolving loan funds

    3. High-road labor standards for clean energy projects supported by the above

Learn more from Cash for Communities: Leveraging Historic Federal Funds for Racial, Economic, and Climate Justice by Local Progress and the CPC Center and the State Legislator’s Guide to Direct Pay: Building Jobs & Sustainable Public Energy by State Innovation Exchange (SiX) and the CPC Center.

IRA and Direct Pay Resource List

You can find more resources on Direct Pay in these Links and Resources from the CPC Center and our partner organizations.

I Have More Questions, Who Can I Call? 

We've partnered with the Clean Energy Tax Navigator (“the Navigator”), powered by Lawyers for Good Government so that eligible entities have a one-stop-shop to learn and receive assistance on claiming Direct Pay. 

For help financing a project, check out our partners at The Project Finance Hub (PFH), powered by Atlas Public Policy, which is a clearinghouse for tools and guidance to finance clean energy projects.

If you still have questions, we encourage you to reach out to us directly if you have questions about eligibility or need assistance navigating this process. You can also find a list of technical assistance providers in our IRA and Direct Pay Resource List.

The IRS also has a very busy customer service line, and you can find more information on who to call here. However, please note that the IRS cannot tell you if your project or organization qualifies for the Direct Pay Tax credit.