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Challenge #2:  Unlocking Elective Pay

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Environment, Great Lakes, and Energy

Challenge #2:  Unlocking Elective Pay

Unlocking Elective Pay is the second grant program under the MI Healthy Climate Challenge, launched in partnership with the Michigan Infrastructure Office Technical Assistance Center. This Challenge will provide grants to develop and deploy strategies that help nonprofits, local and Tribal governments, public school districts, electric cooperatives, houses of worship, and other tax-exempt entities access and utilize federal clean energy tax credits, specifically by using Elective Pay.

What is Elective Pay?

Certain federal clean energy tax credits offer the opportunity to receive a reimbursement of up to 30% to 70% on project costs. Historically, these incentives were largely unavailable to tax-exempt entities, including nonprofits, local governments, and low-income households. However, with the introduction of Elective Pay, tax-exempt entities can claim these same tax credits in the form of cash payments, unlocking significant savings for community-driven clean energy projects. These funds can be used for a range of eligible projects, including solar, energy storage, geothermal installations, and electric vehicles and charging infrastructure.

However, these incentives remain underutilized due to complex eligibility requirements, long timelines for reimbursement, and limited awareness or capacity among potential users. This Challenge will invest in strategies that address these barriers and make Elective Pay and clean energy tax credits more accessible and impactful.

This Challenge will support the creation and implementation of planning and/or financial support strategies that help tax-exempt community institutions in Michigan maximize federal clean energy tax credits. Funded projects may include strategies to aggregate and bundle clean energy upgrades across multiple sites, distribute tax credit benefits to low- and moderate-income households, enable tax credit uptake with low-cost financing solutions, support federal guideline compliance, and structure projects to access bonus incentives—ultimately making clean energy more affordable, accessible, and impactful across the state.

Challenge #2 Objectives 

  1. Maximize Utilization of Elective Pay in Michigan: Support Michigan’s tax-exempt entities such as nonprofits, local governments, schools, and tribal organizations in accessing and applying federal clean energy tax credits using the Elective Pay option under Sections 6417 and 6418, including with support navigating ongoing federal guidance changes. 
  2. Facilitate Cross-Sector Partnerships to Build Clean Energy Ecosystems Across Michigan: Support partnerships among public, private, nonprofit, tribal, and academic entities, as well as across industries and regions, to accelerate clean energy deployment in Michigan. These collaborations should enhance project development, expand access to tax credits and financing, align workforce and supply chain efforts, and promote scalable, community-driven solutions.
  3. Scale Replicable Clean Energy Projects and Financing Models Across Michigan: Support the development and deployment of clean energy projects through innovative aggregation and financing strategies, including Elective Pay, creative financing solutions (such as bridge financing or aggregated capital funds), and portfolio bundling. These portfolios may be across multiple buildings, communities, or property types, such as residential, commercial, or community-serving facilities, and may be across various project sponsors such as nonprofits, local governments, and tribal organizations to expand access and reduce barriers. 
  4. Expand Tax Credit Access for Households Without Tax Liability: Expand access to tax credits for households without federal tax liability by supporting nonprofit-led aggregation models and other inclusive financing approaches that benefit low- and moderate-income residents.
  5. Advance Access to Bonus Incentives: Ensure that projects in all communities, including low-income communities, can access available bonus credits, such as the Low-Income Communities Bonus Credit Program, the Energy Communities Bonus Credit, and the Domestic Content Bonus Credit, and comply with the Prevailing Wage and Apprenticeship Requirements.
     

Challenge #2 Program Priorities:

  • Eligible Entities and Properties: Maximize participation across a wide range of project sponsors, including nonprofit aggregators, local governments, developers, and community-based organizations, and eligible property types such as single-family homes, multifamily housing (individually or master metered), commercial buildings, and community-serving facilities. 
  • Innovative Aggregation and Financing Models: Support the development and scaling of innovative tax credit-driven project structures, such as portfolio bundling, shared systems, and community-scale investments, that reduce transaction costs and expand access for entities and individuals with limited tax liability. 
  • Scalability and Replicability: Prioritize projects that can serve as models for broader adoption, offering approaches that can be implemented by other organizations or replicated in different communities across Michigan. 
  • Integration with Public and Private Capital: Encourage projects that combine federal tax credits with other sources of public and private capital, such as grants, low-interest loans, or state or local clean energy programs, to enhance financial leverage, improve project viability, and maximize overall impact.
  • Geographic Access in Tax Credit Utilization: Ensure broad geographic distribution of tax credit-supported projects across Michigan, including rural, suburban, and urban areas in both the Upper and Lower Peninsulas, with a focus on access in low-income communities and communities with high energy burdens. 
  • Support for Hard-to-Reach Markets: Encourage projects that address barriers in underserved markets, including small multifamily buildings, manufactured housing, Tribal communities, and low-income households that have historically lacked access to clean energy programs. 
  • Maximizing Public Benefit and Financial Impact: Encourage projects that deliver meaningful community benefits through cost savings, local reinvestment strategies, such as revolving savings funds, or shared ownership models that distribute the financial value of tax credits to residents and communities. 
  • Rapid Deployment and Credit Utilization: Prioritize entities with the capacity to implement projects quickly to ensure timely utilization of available federal tax credits given federal phase out requirements. 

Total funding available:

A total of $2,000,000 is available through this one-time funding opportunity. Individual grant awards are expected to range from $250,000 to $1,000,000, with approximately 2 to 6 grants anticipated.

Funding requests should align with the scale, complexity, and replicability of the proposed project. This program is intended to support work that enables or accelerates clean energy deployment for tax-exempt or credit-ineligible entities, rather than funding individual projects alone.

Applicants are encouraged to demonstrate how they will leverage additional funding sources, such as Elective Pay tax credits, philanthropic grants, private financing, or in-kind support.

The State of Michigan may choose not to allocate all available funds and reserves the right to revise or reopen the application process at a later date.

Eligibility

Please note: This grant is not intended to fund individual clean energy projects that are individually applying for Elective Pay tax credits. Instead, it is designed to support project aggregation models, technical assistance, and financial mechanisms that enable broader access to Elective Pay for tax-exempt or credit-constrained entities that may not have the capacity to pursue these credits on their own.

Eligible applicants are not limited to those directly eligible for Elective Pay under federal tax law. Rather, this grant supports organizations that help enable, aggregate, finance, or facilitate Elective Pay deployment for public, nonprofit, and small-scale beneficiaries.

Eligible entities include:

  • Nonprofit organizations with the capacity to own and manage clean energy systems across multiple properties or entities.
  • Affordable housing developers or housing-focused nonprofits serving low-income households.
  • Community-based organizations (CBOs) with a focus on equitable clean energy access.
  • Regional or statewide nonprofits experienced in aggregating projects across geographies or sectors.
  • Organizations experienced in third-party ownership models, such as Power Purchase Agreements (PPAs) or leases, that allow nonprofits to claim Elective Pay and pass on benefits to others.
  • Community lenders, including Community Development Financial Institutions (CDFIs), green banks, and credit unions, that can offer or develop bridge or other financing solutions that enable Elective Pay projects.
  • Technical assistance providers or nonprofit intermediaries that support eligible Elective Pay entities, project developers, community lenders, or project aggregators.
  • Municipal governments or other public entities partnering with eligible nonprofits or lenders to participate in aggregated or facilitated Elective Pay projects.
  • Collaborative partnerships involving lenders, developers, aggregators, technical assistance providers, or community organizations that together support broader deployment models.

For-profit organizations may apply only in partnership with, or on behalf of, a nonprofit or public sector entity, and must clearly demonstrate how that entity will meaningfully benefit from and participate in the project.

Applicants based externally to Michigan may apply only in partnership with, or on behalf of, a Michigan-based nonprofit or public sector entity, and must clearly demonstrate how that entity will meaningfully benefit from and participate in the project.

To be considered, applicants must:

  • Submit a complete concept paper by the deadline
  • Receive encouragement to submit a formal application
  • Submit all required application materials and address all included prompts
  • Use the format and attachments provided in the appendices 

Application timeline:

This is a competitive, one-time funding opportunity. All applicants must complete a two-step application process, beginning with a required concept paper. Only those invited through this process may submit a full application. 

Key Dates:

  • Concept Papers Posted: Monday, August 4, 2025
  • Concept Papers Due: 11:59 PM EST, Sunday, August 31, 2025
  • Concept Paper Feedback Provided & Full Application Posted: Tuesday, September 15, 2025
  • Full Applications Due: 11:59 PM EST, Sunday, November 3, 2025.

Applications will be accepted until the deadline.

Please submit to EGLE-OCE@Michigan.gov with the subject line: MHC Challenge#2 Concept Paper Submission (ORGANIZATION NAME) 

Learn how to apply!

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Office Hours

Join us during our virtual office hours for live Q&A. More information on dates, times, and how to join will be shared soon.

Need assistance

If you have any questions or need help at any step of the process, please don’t hesitate to contact us at EGLE-OCE@Michigan.gov. Be sure to include “MI Healthy Climate Challenge” in the subject line to help us respond to your questions more efficiently.