Environmental Justice and Renewable Energy Supporters Call on Congress to Make the Residential Tax Incentive Accessible for Lower-Income Households

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A refundable credit would allow more American families to benefit from clean energy. Residential Renewables for All Coalition urges legislative action.

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More than 300 environmental justice advocates, environmental groups and renewable energy companies sent a letter to leaders of the Senate Finance and House Ways & Means Committees today supporting a direct pay option for the residential energy efficiency property tax credit (26 U.S.C. § 25D). Congressional action to make the credit refundable will enable disadvantaged communities and lower-income households – which spend a disproportionate amount of their income on energy – to access the economic, health and emissions benefits of clean energy.

Low- and moderate-income (LMI) households have the least ability of all American households to bear the costs of clean energy investments while waiting to receive federal incentives. It currently takes several years for LMI families with little to no tax liability to make full use of existing section 25D tax credits for residential clean energy purchases, deeply undermining their effectiveness. Direct pay allows LMI families to receive their entire subsidy in a single year, offering tremendous opportunities to expand rooftop solar to a more diverse group of families who desire the benefits of distributed renewable energy, but need a more equitable incentive structure to achieve it.

“A direct pay option for section 25D would put main street Americans on equal footing with their higher-income and corporate counterparts, which isn’t only the fair and equitable thing to do, it is also one of the best decarbonization policies available,” the letter reads. “Incentivizing households to reduce residential emissions both empowers individuals to make a difference and would have a profound effect on the U.S.’s overall greenhouse gas emissions profile.”

An independent report recently released by RAND found that inequities with the current residential tax credit could be ameliorated by making the credit refundable, also referred to as direct pay. Direct pay for 25D would help unlock energy savings for families in every zip code of the country, while also creating hundreds of thousands of new jobs and supporting small businesses. As the Senate and House of Representatives consider the extension and modification of several energy related tax provisions, signatories to the letter are calling on Members of Congress to include a direct pay or similar cash payment program for residential energy properties.

The latest landmark assessment released today by the UN’s Intergovernmental Panel on Climate Change (IPCC) underscores the urgency for governments to implement policy solutions that will help rapidly drive down greenhouse gas emissions.

“As the clean energy transition continues to build momentum, we cannot afford to leave anyone behind,” said Mustafa Santiago Ali, Vice President of Environmental Justice, Climate, and Community Revitalization for the National Wildlife Federation. “Making it easier for LMI households to access clean energy incentives will help families save on their energy bills, own their own power, build wealth, and participate in the urgent effort to decarbonize the U.S. economy.”

“The fight for environmental justice has many fronts. Making the residential clean energy tax credit refundable or direct pay is one of them,” said Denise Abdul Rahman, National NAACP, Field Organizer, Environmental and Climate Justice. “We are calling on Congress to address inequities in the federal incentive program that are preventing too many of our families from recognizing the benefits of clean energy.”

“Latinos have lacked access to clean energy technologies in their homes for too long. The incentives in place to soften the upfront costs of these technologies, which could potentially save thousands of dollars in energy use, have largely gone to households already able to bear those costs. It’s time that changed,” said Mark Magaña, Founding President & CEO of GreenLatinos. “By including a direct pay option for Section 25D, we would increase energy equity and open access to clean energy for lower income households and Latino communities across this country.”

“Time and again, we work with lower-income homeowners in Appalachia who could save a lot on their monthly bills by going solar, but they can't afford the installation because they're unable to take advantage of the tax benefits,” said Chelsea Barnes, Legislative Director Appalachian Voices. “Making the tax credit available as a direct-pay option is one of the easiest ways to ensure that the transition to clean energy benefits the most disadvantaged communities.”

“Achieving a just and sustainable energy system will happen only if and when we decide to enable access to rooftop solar and other residential clean energy resources for all,” said Paula García, Senior Bilingual Energy Analyst at the Union of Concerned Scientists. “Empowering more households to improve the health of their communities and reduce their emissions is not only the right thing to do, but it will also help to meet our nation’s climate goals.”

"Black families and entire communities might be left behind in the clean energy transition, thus losing out on the benefits of healthier, more resilient homes, and more income to build wealth,” said Ajulo E. Othow, Esq., Chair of the Leadership Council, Black Owners of Solar Services (BOSS). “Section 25D direct pay is a simple, yet incredibly impactful way to facilitate greater equity and remove barriers to renewable energy access, which will make a difference for all of us."

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Sarah Stryker
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