Direct Payment Option For Renewable Energy

As noted in a previous Legal Alert, the United States Department of the Treasury and the Internal Revenue Service issued guidance in June pertaining to the "Direct Payment Option" available for tax credits under the Inflation Reduction Act of 2022 (IRA). The purpose of the Direct Payment Option is to provide financial incentives for the benefit of organizations that are otherwise tax exempt so that they can establish renewable energy programs. It allows these organizations to receive a check from the Treasury Department in the amount of the tax credit that otherwise would have been available to the organization had the organization been obligated to pay taxes.

Clearly, the target audience for this program are municipalities, municipal agencies (e.g. transit agencies, water departments, airports, etc.) that otherwise would not have a way to own a financially-viable renewable energy project without the tax incentives. For airports, it allows them to construct and own