An update on federal funding for school infrastructure
We shared this update with our network via email on November 21, 2024. Sign up here to receive these updates directly in your inbox.
The incoming new national Administration combined with Republican majorities in both houses of Congress represent a significant shift in the landscape. Here is our current best thinking on the potential impacts on federal funding for clean energy at schools.
Elective Pay
The tax credits for clean energy in the Inflation Reduction Act have received bipartisan support. There is no annual appropriation or vote required to fund the underlying tax credits or Elective Pay. The Inflation Reduction Act remains in effect as law and we encourage districts to continue to utilize the tools Congress provided.
However, there is no question that the durability of the clean energy tax credits and Elective Pay are at risk.
Republican leaders are sending strong signals that the new Administration is unlikely to attempt a full repeal of the Inflation Reduction Act, but is more likely to pursue targeted changes to parts of the law for which there is less Republican support and where significant revenue can be raised to pay for an extension of the 2017 tax cuts. The tax credits for electric vehicles, for example, are considered highly vulnerable. Conversely, there is substantial Republican support for other tax credits contained in the IRA; the tax credit for carbon sequestration, for example (not applicable to schools).
It is unclear how Elective Pay – the new mechanism established by the IRA on which schools rely for monetization of tax credits – will fare in the new Administration’s evaluation and how changes to underlying tax credits (for example, through an earlier sunset) might undermine their usability for districts.
The incoming Administration has indicated an intention to pass a tax bill within the first 100 days. Since changes to the IRA are expected to come as part of that tax package, we could know in the first half of 2025 whether this funding stream for school infrastructure improvements will continue to be viable.
If changes to Elective Pay are prescribed, the effective date of any new law is likely to be the start of a new tax year – January 1, 2026.
Districts pursuing projects today can reduce the risk associated with this funding by commencing construction on eligible projects as soon as possible. Historically, projects that have commenced construction before the effective date of a new policy have been protected against those changes.
Grants and Rebates
The situation is different for federal grants and rebates. Unobligated funds are at high risk of being rescinded by the 119th Congress. The path to secure those funds is different depending on whether they are grants or rebates.
Clean School Bus Program 2023 Rebate Awards: The EPA needs a proof of purchase order to release funds. Rebate recipients should submit payment request forms by the November 29th deadline.
Clean School Bus Program Grant Awards and Clean and Heavy Duty Vehicle Program Grant Awards: The EPA must have signed a legal contract that obligates the funds. We recommend signing a contract ASAP and certainly by January 19th. Historically, obligation (signing a contract) would be sufficient to protect funds. But in the case of this Administration, it may be prudent to commence expenditures.
We urge school districts that have won any federal awards to proceed with all haste before day one of a new Administration to secure any federal grant and rebate obligations. The Environmental Protection Network is offering pro bono assistance for EPA grant selectees working to get to agreement and full award with EPA.
In The News:
Check out recent articles in Reuters, Latitude Media, and The Hill for additional context on the politics of clean energy tax credits as we look toward 2025.
This fall, Caroline Preston at The Hechinger Report launched an email newsletter about the intersection of Climate and Education. Check out her recent piece on “What Trump Could Mean for Climate and Schools” which features perspectives from us and others around the country about what’s ahead – and sign up for the newsletter here.
This post represents our best understanding of certain Inflation Reduction Act tax provisions for general informational purposes only and is not itself tax guidance. Please consult qualified tax professionals about your specific circumstances and refer to guidance issued by the IRS for detailed information on the rules associated with Inflation Reduction Act tax provisions.
Updated: November 21, 2024
