Public school administrators and board of education members across the country face tough decisions when it comes to addressing how to pay for the repair or replacement of aging equipment, vehicles, and infrastructure.

The direct pay provision in the Inflation Reduction Act (IRA) enables schools and other tax-exempt groups to receive certain clean energy and climate-related tax credits as direct cash refunds from the Internal Revenue System (IRS).  

Entities can receive up to 30 percent of a clean energy project’s cost, with the possibility of additional credits closer to a 50 percent reimbursement. Bonuses are applied based on the project’s location, and for materials sourced in the U.S. 

In Nebraska, Hastings Public Schools applied for the direct pay credit after installing a geothermal closed-loop heating and cooling system. After a project cost of about $3.6 million, the estimated reimbursement is $1.1 million.

Trent Kelly, director of technology and operations at Hastings, said, “This is a great program that schools can use to upgrade facilities. We are very happy with the process and have already talked to some schools about the process and savings.” 

He anticipates the geothermal system will save Hastings Public Schools between $75,000 and $100,000 annually.

State, local and tribal governments, police, fire authorities, and tax-exempt entities under any 501 section are eligible for direct pay. Qualifying projects include solar, wind, electric vehicle charging stations, battery storage, and community solar that bring clean energy to neighborhood families. Direct pay is non-competitive and limitless, and the reimbursement payments are unrestricted.

Established in 1973, the Center for Rural Affairs is a private, nonprofit organization working to strengthen small businesses, family farms and ranches, and rural communities through action oriented programs addressing social, economic, and environmental issues.

Val Ankeny,

policy associate