How companies can fund solar for schools and nonprofits

A generous grant can cost a school part of its solar tax credit. Under the IRS rules for elective pay, if a grant made specifically for a solar project plus the credit adds up to more than the project costs, the credit is cut until the two match the cost. The regulation's own example: a $60,000 foundation grant toward an $80,000 system that would earn a $40,000 credit. The credit drops by $20,000.

So the way you give matters as much as the amount. This guide compares the main ways a company can pay for solar that a school, clinic or nonprofit will own or use, what each one does to the tax credit, and what you can say about it afterward.

Five ways to fund solar someone else owns

A grant is the simplest route, and the one the credit cap below applies to most directly.

With a loan, the money comes back. If your corporate foundation makes it at a below-market rate, it may qualify as a program-related investment, which the IRS defines for private foundations as an investment made mainly for the foundation's exempt purposes, where "production of income or appreciation of property is not a significant purpose." A forgivable loan made for this project counts toward the credit cap, like a grant.

A buy-down pays part of a developer's cost so the host gets a lower power price. Elective pay goes only to an owner that qualifies, so a host that doesn't own the system gets none, and the developer-owner claims the credit. Our guide to solar project finance for business buyers covers how power purchase agreements work.

A host's own green revolving fund recycles money. The EPA describes these funds as an internal pool that pays for clean energy projects, where "some or all of the savings" flow back in as repayments and fund the next one. Seeding a host's fund suits a university or hospital system with several buildings.

Community solar subscriptions pay for low-income households to receive credits from a shared project. The federal program built for this, Solar for All, is in limbo: the EPA ended the $7 billion program in August 2025, and on September 18, 2026, a federal judge in Rhode Island ruled that the EPA had ended it illegally. The EPA says it is considering an appeal, so don't plan around the money yet.

How a grant interacts with the tax credit

Schools, nonprofits, local governments and tribes can receive the clean electricity investment credit as a cash payment through elective pay, even though they pay little or no federal tax. The rules are in 26 CFR 1.6417-2.

Grant money used to buy the system still counts toward its cost basis, so the credit is calculated on the full cost. The catch is the cap: if a grant made "for the specific purpose" of buying the system, plus the credit, adds up to more than the cost, the credit is reduced until the total equals the cost.

Flip the example around and you can see the line. On an $80,000 system with a $40,000 credit, a restricted grant of up to $40,000 leaves the full credit in place. Every restricted dollar above that removes a dollar of credit. In a second example in the regulation, a school district's $300,000 grant toward a $400,000 clean school bus keeps its full $40,000 credit, because $340,000 is still under the cost.

Two more details in the rule matter to a funder:

• Restricted is decided when the grant is awarded. A grant awarded after the system is bought is generally not restricted, unless approval was "perfunctory" and the money "virtually assured" at the time of application.
• The cap doesn't reach unrestricted money. The rule doesn't apply to money from the organization's general funds, or money that "can be put to other purposes."

We can't tell you how to structure your gift, and the rule doesn't name ordinary loans that have to be repaid. Get the recipient's tax counsel involved before the grant terms are set.

Project size and start date change the credit

Two thresholds decide whether a nonprofit-owned project gets paid at all.

• 1 megawatt AC. For a project of 1 MW AC or more that began construction after December 31, 2025, the elective payment falls to 0% unless it meets the domestic content rules or qualifies for an exception. Under 1 MW AC, there's no reduction.
• The July 4, 2026 start date. Solar that began construction after July 4, 2026 has to be placed in service by December 31, 2027 to earn the credit. Our solar finance guide covers what counts as beginning construction.

There's also a bonus for projects under 5 MW AC: 10 extra percentage points for projects in low-income communities or on tribal land, and 20 for projects that pass at least half their financial benefit to low-income households. It needs an allocation from the IRS, and the low-income communities bonus program's 2026 application window closed on August 7, 2026.

What your money buys

The Department of Energy's solar cost benchmarks for early 2025 model a 250 kW (DC) school rooftop system at a modeled market price of about $1.98 per watt. At that price, $100,000 pays for roughly 50 kW, and the whole system costs about $495,000 before any credit.

Two caveats: the benchmark is a modeled price, not a market average, and it's built to meet Build America, Buy America domestic content rules. Ask for the actual quote.

For the host, the return is a lower power bill for years. According to ENERGY STAR, K-12 school districts spend over $8 billion a year on energy.

What you can claim afterward

Less than many funders expect. Each megawatt-hour creates one renewable energy certificate, and whoever holds it owns the claim. In the EPA's guidance on solar power use claims: "Without exclusive ownership of any RECs, you cannot publicly claim the use of renewable electricity or having reduced your carbon footprint."

In every structure above, the certificates stay with the owner or follow the contract, unless you negotiate them for yourself. You can accurately say how much you gave and how many kilowatts it paid for; you can't count the project's electricity as yours. Our guide to what a certificate lets you claim goes further into Scope 2 reporting.

Questions to ask before you fund

1. Who will own the system? Only an owner that qualifies can take elective pay.
2. What's the project's size in AC? At 1 MW or more, ask whether it meets the domestic content rules.
3. When did construction begin, or when will it? After July 4, 2026, it must be running by the end of 2027.
4. Is your money restricted to this project? If so, check the grant plus the expected credit against the project's cost.
5. Who holds the renewable energy certificates? Get it in writing, and don't claim what you don't hold.
6. Is the capacity new? Money toward a project that was already built, or would have been built anyway, adds no new capacity.
7. What will you report, and when? Keep built and planned capacity apart; our guide to embedded climate finance covers reporting on what you fund.

How Dyme funds solar

Dyme funds the developer-owned route. We earn a commission from travel providers on each booking and put part of it into catalytic funding for developers, who build and run solar for schools, hospitals and other institutions. The institutions buy the power under long-term fixed-price contracts. As of this writing, 5.5 MW is built and operating, with 20 MW more in the pipeline.

Some of the projects we fund are in the US, so the deadlines above apply to them too. Our page on why we invest in solar explains what the projects do for the institutions they serve.