If you’re considering solar, geothermal, or other clean energy improvements for a commercial or multifamily property in New Jersey, now is the time to act.
Thanks to the Inflation Reduction Act of 2022, the federal government currently offers historic Investment Tax Credits (ITCs) for solar and geothermal projects—covering up to 30% or more of project costs. But these incentives won’t last forever. Under current law, the credits will begin to phase out as early as July 2026.
Key Deadlines to Keep in Mind
- Begin construction before July 1, 2026, to qualify for full credit.
- Place the system in service before December 31, 2027, for the most generous benefit.
- Credits begin to decline after 2026 unless new legislation extends them.
These tax credits, combined with C-PACE financing, represent one of the best opportunities in this decade to upgrade commercial buildings with clean energy systems, reduce operating costs, and increase long-term property value.
Highlights of the Tax Credit Program
Under the Investment Tax Credit (ITC), eligible commercial clean energy projects can receive:
- 30% federal tax credit for solar, geothermal, energy storage, and more
- Additional 10% “bonus credits” for:
- Domestic content
- Siting in an energy or low-income community
- Meeting prevailing wage and apprenticeship requirements
Direct Pay for Nonprofits, Municipalities, and Tribal Entities
One of the most transformative features of the law is the Direct Pay (Elective Payment) option. Tax-exempt entities—such as nonprofits, schools, houses of worship, and local governments—can receive the equivalent of the tax credit as a cash payment from the IRS, even though they don’t owe federal income taxes.
This makes clean energy investment accessible to a much wider range of institutions in New Jersey.
How This Connects to C-PACE
The newly launched Garden State C-PACE Program provides long-term, fixed-rate financing for commercial building improvements that increase energy efficiency, resilience, or renewable energy generation. C-PACE is an ideal match for clean energy projects eligible for federal tax credits, allowing:
- No upfront capital required
- Project costs repaid over up to 30 years through a property tax assessment
- Financing that stays with the property if sold
By combining federal tax credits (and Direct Pay) with C-PACE financing, building owners and developers can significantly reduce the net cost of clean energy upgrades and start realizing savings immediately.
Other Key Opportunities in the Inflation Reduction Act / OBBB Framework
The broader “Our Better, Brighter Future” (OBBB) policy framework—New Jersey’s interpretation of federal climate investment—also encourages:
- Building electrification
- High-efficiency HVAC and heat pumps
- Electric vehicle infrastructure
- Resiliency measures (floodproofing, storm hardening)
- Decarbonization strategies for large buildings
Many of these improvements are C-PACE eligible and may also qualify for additional state or federal funding, such as grants, rebates, or utility incentives.
Act Now While the Window Is Open
Between now and mid-2026, New Jersey property owners and developers have a unique opportunity:
- Federal tax credits and incentives are at their peak
- The Garden State C-PACE Program is now open
- Interest in decarbonizing commercial real estate is growing rapidly
Waiting could mean missing out on the most generous support for clean energy projects in a generation.
NJPACE can help you navigate the process—from understanding tax credit eligibility and Direct Pay options to structuring your project for C-PACE financing and working with capital providers.
Contact us today to discuss your project:
📧 info@njpace.org
🌐 njpace.org