According to the U.S. Department of Energy, K-12 school districts spend nearly $8 billion annually on energy costs, the second largest expense after teacher salaries. Aging facilities combined with limited school budgets can result in deferred maintenance of facilities, with current estimates of around $270 billion needed for infrastructure repairs.
In 2022, the U.S. Department of Energy announced a grant program funded by President Biden’s Bipartisan Infrastructure Law (BIL) focused on energy improvements at public school facilities, especially in the highest-need districts, and designed to save schools money. Similarly, the White House released a toolkit on federal resources for addressing school infrastructure needs in April 2022. And today, the Department of Education is announcing its grantees under the Supporting America’s School Infrastructure grant program, which bolsters the capacity of States to support school districts in improving school facilities with the goal of more equitable access to healthy, sustainable, and modern learning environments for all students.
The Inflation Reduction Act (IRA) provides for the largest investment in clean energy in U.S. history, and it also creates a unique opportunity for K-12 school districts to leverage federal tax credits to help to fund investments in clean energy infrastructure and reduce cost.
Through elective pay, also known as “direct pay,” school districts can claim certain clean energy tax credits and receive funds directly from the IRS for their qualifying projects or investments. Under proposed Treasury regulations, public school districts that are agencies or instrumentalities of state, local, tribal, or territorial governments can benefit from several tax credits. After a school district places eligible property in service, the school district can register its intent to claim a tax credit with the IRS and file a tax return. The IRS would then make a payment in the amount of the credit.
What Tax Credits Can School Districts Claim?
School districts that meet the underlying requirements can claim tax credits such as:
- Clean energy tax credits including the Investment Tax Credit (48, 48E) and the Production Tax Credit (45, 45Y).
- Tax credits for electric vehicles under the Commercial Clean Vehicle Credit (45W) and the Alternative Fuel Vehicle Refueling Property Credit (30C), which includes electric vehicle charging equipment.