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CASE STUDY
Making the most of every dollar
Nicolet Union High School District leveraged Wipfli’s knowledge of energy incentives and tax credits to help fund sustainable energy projects and facility upgrades.
ARTICLE
What’s not going away: Energy tax credits and incentives that survived the OBBB
With the passage of the One Big Beautiful Bill (OBBB) Act, many energy-related tax incentives are being reduced or phased out entirely . That’s led to understandable confusion — and in some cases, hesitation — among schools , tribal governments , construction and real estate firms, and nonprofit entities that were considering energy efficiency projects. But here’s the good news: Not all incentives are going away . Several key programs remain in place, such as credits for geothermal and battery storage systems. Other credits have a significant off-ramp before they go away. Public and nonprofit entities can still leverage these programs to substantially lower their energy costs, improve their infrastructure and save money. The key now is to understand what incentives are still available — and how to pursue them. Here’s what you need to know: Energy production tax credits or incentives that are still available under the OBBB The OBBB sunsets wind and solar energy tax credits by the end of 2027 or 2030, with deadlines depending on when a project began construction. However, tax credits for geothermal energy projects and battery storage systems remain largely in place. Geothermal energy tax credits Geothermal energy systems remain fully eligible for clean energy tax credits under the Investment Tax Credit (ITC) or the Production Tax Credit (PTC), depending on the project size and structure. What’s the same: Projects can qualify for a 6% base credit through 2032, plus bonus credits for meeting prevailing wage, apprenticeship and other requirements. For most organizations, the maximum available credit is 50%-60%. Public and tax-exempt entities can claim energy incentives via direct pay, meaning they receive the full value as a cash payment from the IRS. The credit applies to both new construction and retrofits that install ground-source geothermal systems for heating and cooling. What’s changed: The 6% ITC will phase down after 2032. Filers will be able to claim a base credit of 5.2% in 2033 and 4.4% in 2034. The credit will sunset after 2034 (unless extended). Battery storage tax credits Standalone battery storage systems continue to qualify for the technology-neutral ITC. Battery storage systems can be installed on their own or in conjunction with renewable generation systems such as solar or geothermal. What’s the same: Battery storage qualifies for a 6% base credit through 2032, with bonus credits available for meeting prevailing wage, apprenticeship and other requirements. For most organizations, the max rate is around 50%, although it could be as high as 70%. For tax-exempt entities, the credit can be claimed via direct pay. Storage systems are eligible whether they’re installed with or without renewable generation, as long as they meet technical and operational requirements (e.g., at least 5 kWh of capacity for commercial installations). What changed: Material assistance restrictions start to apply in 2026, disqualifying projects that use battery components or receive support from designated foreign entities of concern (FEOCs). Because many battery components are currently manufactured overseas, it’s critical to work with vendors or contractors who can source U.S.-made systems — especially if projects start in or after 2026. The ITC for battery storage will phase down after 2032. Filers will be able to claim 75% of the full value in 2033 and 50% in 2034. The credit will sunset after 2034 (unless extended). Bonus credits for domestic content may be available, but eligibility depends on sourcing and manufacturing. Energy efficiency tax credits or incentives that are phasing out The OBBB largely eliminates tax incentives aimed at making buildings more energy efficient. But the new rules don’t kick in until July 1, 2026, so there is a small window left to still claim them. Section 179D: Energy-efficient commercial buildings tax deduction Section 179D allows a tax deduction for qualifying energy-efficient improvements to commercial buildings, such as interior lighting, HVAC systems and the building envelope. To claim the deduction, the building or system must be placed in service during the tax year in which the deduction is claimed. The OBBB sunsets 179D for construction that starts after June 30, 2026. But for now, organizations that move quickly can still take advantage of the credit : The deduction is $5.65 per square foot (as of 2025) and will increase to $5.94 in 2026. Public and nonprofit entities cannot claim the deduction directly, but they can allocate it to the design firm or contractor responsible for the qualifying systems. Section 45L: New Energy Efficient Home Credit Section 45L offers a per-unit tax credit for the construction of new energy-efficient homes, including single-family and multifamily dwellings. The credit applies to homes that are sold or leased as residences during the tax year in which the credit is claimed. The OBBB eliminates 45L for homes acquired after June 30, 2026, including leased apartment units. Under the law, “acquisition” requires not just construction but also possession by the end user, so residential owners or tenants must move in by this date. Until then: The credit remains available — up to $5,000 per unit for homes that meet Zero Energy Ready Home standards, and $2,500 per unit for Energy Star–qualified homes. The builder (or developer) claims the credit directly. Public entities typically partner with eligible developers to leverage the incentive. IRA eligibility restrictions still apply. To receive the full deduction, projects must meet prevailing wage and apprenticeship requirements. Domestic content rules do not apply to 179D. What we’re waiting to learn: new details on FEOC energy credits restrictions Additional restrictions around FEOCs were a major change introduced by the OBBB. Broadly, FEOC rules prohibit certain foreign entities that are designated as national security threats from claiming energy tax credits or incentives. The OBBB added new restrictions around FEOCs that go into effect in 2026, but exactly how they’ll be applied remains uncertain. The current statute bars credits for projects that receive material assistance from prohibited entities — but it’s unclear how far up the supply chain the rule goes. That uncertainty makes it difficult to evaluate risk for long-lead-time components, like batteries and inverters. Treasury guidance is expected, likely before the end of the calendar year. In the meantime, organizations should keep detailed records of procurement discussions and vendor sourcing decisions and flag high-risk components during early planning. Your legal counsel may suggest adding FEOC clauses to new contracts with vendors or subcontractors. How to move forward — and make the most of what’s left Claiming these incentives requires more than simply checking boxes. Organizations need to plan carefully, collaborate early and evaluate the broader value of energy investments. As you assess your next steps, remember: the old rules may still apply, depending on when construction began. 1. Don’t assume new rules automatically disqualify you Some incentives, like clean energy tax credits for wind and solar are still available as long as construction begins before July 5, 2026. Even if a wind or solar system is placed in service years from now (e.g., in 2028), it may still qualify under the older, more generous provisions. 2. Don’t assume you’re ineligible Schools and nonprofits often assume energy tax credits aren’t for them — especially now that incentives for solar projects are phasing out. But updates to the law have made direct pay, deduction allocation and public-sector eligibility more accessible. If you’re installing high-efficiency HVAC, building affordable housing or adding energy storage, you may still qualify. 3. Energy savings still matter, even without full credits In some cases, equipment sourcing or FEOC restrictions could make it harder to qualify for the full credit. That doesn’t mean the investment isn’t worthwhile. Take battery storage as an example. Even if a system doesn’t earn credits, it could generate enough electricity to store, which could help save on utility costs or meet peak demand. Energy-efficient systems could pay off in energy savings or resilience, even when credits don’t apply. 4. Act before phaseouts accelerate Geothermal and battery storage credits remain fully available through 2032 — but begin to phase down after that. Your best bet is to evaluate and prioritize energy projects now, before incentives diminish or disappear. 5. Start early, with the right team Incentives come with complex eligibility rules, labor requirements and technical thresholds. Engaging a team early in the process helps ensure everything is properly certified and documented — and filed and allocated in a timely manner. (Many incentives must be claimed on the original tax return.) To get it right, clean energy advisors, engineers, legal counsel and tax professionals should all be involved in early planning. Read more How public schools can still secure clean energy tax credits after the One Big Beautiful Bill Act The One Big Beautiful Bill is phasing out energy incentives, but there’s still time to act How the OBBB just changed R&D deductions under Section 174
ARTICLE
How public schools can still secure clean energy tax credits after the One Big Beautiful Bill Act
The One Big Beautiful Bill (OBBB) Act, signed into law on July 4, 2025, has reshaped the landscape of clean energy incentives for public institutions. For public schools, this legislation presents a rare and time-sensitive opportunity to still receive direct payments (think cash) for investing in solar and geothermal energy systems. Here’s what school districts need to know — plus what to do over the next two years to take full advantage of these credits before they expire. What is direct pay, and why does it matter for schools? Under the Inflation Reduction Act (IRA), tax-exempt entities like public schools became eligible for direct pay (also known as elective pay) for certain clean energy tax credits. This means that instead of needing tax liability to benefit from credits, schools can receive a cash payment from the IRS equal to the value of the credit, which could be as high as 60%. The OBBB preserves and modifies this provision, but it also introduces new deadlines and phaseouts. For solar electric projects, there are two key takeaways: To claim a tax credit for projects that will begin construction after July 4, 2026, the system must be placed in service by December 31, 2027. Projects that begin construction before July 5, 2026, do not face a placed-in-service deadline, but do face the regular four-year phaseout of the credit generally beginning in 2032. Guidance on the beginning of construction is in a state of flux. However, we anticipate that it will require work of a physical nature on the solar system to commence and continue throughout the construction process. Another complication for solar systems is the material assistance from prohibited foreign entities rule. Starting with systems beginning construction in 2026, material assistance means that no more than 60% of the district’s direct costs of manufactured products and components can be mined, produced or manufactured by a prohibited foreign entity. A prohibited foreign entity includes entities organized under the laws of China, which is from where many solar components or products are sourced. And the allowed percentage decreases by 5% every year through 2029. If there is excess material assistance from a prohibited foreign entity, the property is not eligible for the credit. Are geothermal energy systems affected by the OBBB? Unlike solar systems, which must provide electricity to qualify for the credit, geothermal energy systems generally provide heating and cooling. Geothermal energy systems use natural heat from the earth to provide heating and cooling. Think of it as a battery for heat. The geothermal energy system stores heat in the battery to make the building cooler and draws on stored heat to make it warmer. Also, unlike solar systems, geothermal systems do not face beginning-of-construction and placed-in-service deadlines, just the general phasedown starting in 2033. Finally, unlike solar systems, geothermal systems generally use domestically sourced components and are typically not subject to the material assistance rule. What should schools do to claim renewable energy tax credits before they phase out after 2027? The clock is ticking on your school or district’s ability to claim certain renewable energy tax credits, especially if you won’t start construction until after July 4, 2026. Here’s what you need to do to access solar and wind credits, specifically, while you still can: 1. Identify eligible projects Start by assessing your facilities for solar photovoltaic or geothermal heat pump potential. Projects that reduce energy consumption or replace fossil fuel-based systems are prime candidates. Consider rooftop solar, ground-mounted arrays or geothermal systems for heating and cooling. For solar projects, the timeline for beginning construction and how much will be sourced from China must be carefully considered. 2. Engage a qualified advisor Work with a tax advisor or energy consultant experienced in IRA credits and public sector projects. The right advisor can help you navigate the complex process to secure substantial credits for your school or district. 3. Apply for pre-filing registration Before claiming direct pay, schools must register the project with the IRS through the pre-filing registration portal. This step is mandatory and must be completed before filing a tax return to claim the credit. 4. Begin construction as soon as possible If you’re able to start construction before July 4, 2026, you’ll extend your eligibility window for certain energy tax credits by several years. And if you can’t start building until after July 4, 2026, you must bring the project online before 2028 to keep your credit eligibility. In either scenario, speed is essential. 5. Track construction start and service dates For solar projects, you must track the beginning of construction and placed-in-service dates carefully. Depending on the Treasury guidance, what constitutes the beginning of construction may differ between the material assistance rule and for other purposes. What happens after 2027? Solar projects that begin construction after July 4, 2026, are placed in service after 2027 or receive material assistance from a prohibited foreign entity may lose eligibility for the full credit. While geothermal and other non-solar technologies may still qualify under Section 45Y and Section 48E, the value of the credit will begin to phase down after 2032. The next 24 months are critical. With the right planning, public schools can transform their energy infrastructure, reduce utility costs and receive substantial federal funding — all while modeling sustainability for students and communities. However, you have to begin taking action right now. Solar projects, especially, can take only a few months to execute once work kicks off, but may require significantly longer than that due to delays or permitting issues. If you can, collaborate with experienced advisors and construction firms to help you move through the process as quickly as you can. Read more The OBBB is phasing out energy incentives, but there’s still time to act 8 major tax changes in the One Big Beautiful Bill Act Trump just withheld $7 billion in education grants. Now what?
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