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.

View Program Guide

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 was a competitive, one-time funding opportunity. Applications are now closed.