Church Solar Projects in California: Elective Pay, PPAs and the 2027 Deadline

Own It or Lease It: The Fork Every Church Project Takes

Section 6417 lets an "applicable entity" elect to be treated as having paid tax equal to an applicable credit, which the IRS then pays out. The statute's list of applicable entities starts with "any organization exempt from the tax imposed by subtitle A," which covers a tax-exempt church, and it names the §48E clean electricity investment credit as an applicable credit.

The condition that decides everything is ownership. The IRS elective pay FAQ says that, apart from one manufacturing credit, "the applicable entity or electing taxpayer must both own the underlying eligible credit property and conduct the activities giving rise to the credit." If a developer owns the panels under a PPA or lease, the developer claims the credit and the congregation cannot. A lease is not a second route to the same payment.

So the choice is about capital and capacity, not about which deal "gets the credit." Owning means raising the full cost up front or borrowing it, handling IRS registration and a tax filing, and maintaining the equipment. Leasing means no capital outlay and no tax paperwork, in exchange for a long contract and a per-kWh or monthly price that may or may not pass much of the credit back to you.

How Elective Pay Works for a Congregation

The IRS describes a sequence that a finance committee should treat like a grant deadline. First, the system is placed in service; the IRS says pre-filing registration can be completed once you have all required information, including that placed-in-service date. Second, the church completes the IRS pre-filing registration, which the IRS calls "a required electronic process" for anyone making an elective payment election, and receives a registration number for the property.

Third, the election is made on a return. The FAQ says a tax-exempt organization that does not otherwise file a return uses Form 990-T, due on the organization's normal return due date, generally the 15th day of the fifth month after year end, with a six-month extension available. The IRS registration page asks filers to register "at least 120 days before the due date (including extensions) for the return where you report the credits." Build that 120 days into the calendar; waiting until the spring after installation is how a finished project misses its filing.

The church will also want a tax professional who has filed an elective pay return before. One statutory detail matters for larger campuses: for an elective pay claim on a facility of 1 MW AC or more whose construction began after December 31, 2025, §48E(d)(5) and §45Y(g)(12) reduce the credit to zero unless the domestic content requirement is met or a Treasury exception applies. A system under 1 MW AC is not reduced.

The Federal Deadline: What the Statute Says Now

Section 48E(e)(4) says the credit "shall not apply to any qualified property placed in service by the taxpayer after December 31, 2027, which is part of an applicable facility," meaning a wind or solar facility. The effective-date note from Public Law 119-21 applies that cutoff to facilities whose construction begins after July 4, 2026, twelve months after the law was enacted. As of September 23, 2026, a church that had not begun construction by July 4 must have its solar placed in service by December 31, 2027 to receive any credit.

What counted as beginning construction was set out in IRS Notice 2025-42, which required physical work of a significant nature and kept a 5% cost safe harbor only for solar facilities of 1.5 MW AC or less. On June 6, 2026, the U.S. District Court for the District of Columbia vacated that notice in full and remanded it to the IRS in Oregon Environmental Council v. Internal Revenue Service. If a congregation believes its project began construction before July 5, 2026, it should get a written position from a tax professional that accounts for the ruling and anything the IRS has issued since.

Two other statutory rules matter to church projects. For construction beginning after December 31, 2025, the credit is denied if the facility includes material assistance from a prohibited foreign entity; under §7701(a)(52), the required cost ratio is 40% for a solar facility beginning construction in 2026 and 45% in 2027. And an owner that is itself a specified foreign entity or foreign-influenced entity cannot claim the credit. Ask any installer how it documents the sourcing ratio, and who bears the loss if it fails.

If You Lease: Reading a Developer's PPA

A PPA or lease suits a congregation that lacks capital, does not want to carry equipment, or cannot take on the filing. A developer owns and maintains the system and sells the church electricity or charges a fixed payment. LBNL's 2026 data update found third-party ownership roughly twice as common at tax-exempt sites as at commercial ones in 2025, with the highest rates at "other" tax-exempt sites, many of them houses of worship. Leasing is the common path for churches, not the exception.

The risk is in the contract terms, not the concept. Read the starting rate and escalator against the church's own tariff over the whole term, the buyout dates and prices, what happens if the developer sells the project, who removes the system if the roof needs replacing, and what happens if the congregation sells or repurposes the property. Confirm the developer's own tax position too: a PPA priced on a credit the developer cannot get is a PPA that may be repriced or abandoned.

What California Church Solar Projects Look Like

Houses of worship are a visible share of the state's tax-exempt solar market. LBNL's Tracking the Sun 2024 summary says tax-exempt customers, including government, schools, religious and other nonprofits, made up 15% of U.S. non-residential installations in 2023. Its 2026 update puts roughly half of 2025 non-residential installs on commercial buildings, a third on agricultural land and the rest at tax-exempt sites.

A church campus usually offers three surfaces. The sanctuary roof is often steep, visible and architecturally sensitive. The fellowship hall, offices or school buildings tend to have simpler roofs. The parking lot can take a canopy, which adds structure cost but shades cars on hot Sundays. Many campuses also have several utility meters, one per building, so ask whether one array can serve several accounts under the utility's aggregation or virtual net billing rules before sizing each building separately.

New construction changes the question. The California Energy Commission's 2025 nonresidential solar guidance lists religious worship among the building types that Section 140.10(a) of the 2025 Energy Code requires to have solar PV when newly constructed, generally with battery storage unless an exception applies. A congregation building a new sanctuary or hall should plan for solar in the design, not as an add-on.

When you ask bidders for references, ask specifically for completed projects at other congregations with a similar roof and meter setup, and call them. Ask what the church's bill looked like in the first full year compared with the proposal.

Sizing for a Weekend Peak Under Net Billing

Since April 15, 2023, customers of PG&E, SCE and SDG&E who apply for interconnection take service on the CPUC's net billing tariff. The CPUC says export compensation reflects the value of that generation to the grid and "is usually lower than the retail rate," using values from its Avoided Cost Calculator.

That matters more for a church than for most buildings. Many congregations use little power Monday through Friday and a lot on the weekend. A system sized to cover the weekend peak will export most of its weekday output at those lower export values instead of offsetting power bought at retail. For most churches on an investor-owned utility, the better starting point is weekday baseline load, with the weekend covered partly by solar and partly by the grid or a battery.

Publicly owned utilities such as LADWP and SMUD are outside the CPUC tariff and set their own export terms, so a church served by one should get that utility's current rules before sizing.

Batteries: What the Statute Allows and Why SGIP Won't Help Now

The Self-Generation Incentive Program's own metrics page, checked September 23, 2026, showed the Large-Scale Storage budget closed at Step 5 ($0.25/Wh) and Non-Residential Storage Equity closed at Step 5 ($0.85/Wh) for PG&E, SCE, SoCalGas and the Center for Sustainable Energy. The categories still taking waitlist entries are residential equity budgets, which a church would not normally fit. Do not budget a storage project around an SGIP payment.

Federal treatment of storage differs from solar. Section 48E(e)(4)(C) excepts energy storage placed at a solar facility from the December 31, 2027 cutoff. Instead, storage follows the §48E(e) phase-out: using the "applicable year" of 2032 set in §45Y(d)(3), storage whose construction begins in 2033 keeps the full credit, 2034 gets 75%, 2035 gets 50%, and later starts get nothing. The prohibited-foreign-entity cost ratio for storage is stricter than for solar: 55% for construction beginning in 2026 and 60% in 2027 under §7701(a)(52). A church that owns a battery can take the storage credit through elective pay on the same terms as solar equipment, subject to the same ownership requirement.

A battery earns its keep by storing weekday solar for weekend use or by cutting demand charges. Get it priced as its own line, compare bids in dollars per usable kWh, and run the math on your own interval data.

Cost and Property Tax: The Two Numbers to Budget Against

No public source publishes a California church solar price. The closest primary figures are LBNL's. Its Tracking the Sun 2024 summary reports that large California systems (over 100 kW) at tax-exempt sites had a 2023 median price of $4.1 per watt, against $2.3 for commercial sites, and the full report lists domestic-content or prevailing-wage requirements, the prevalence of shade or parking structures, and lower borrowing costs as possible reasons. For smaller systems, the same summary reports state-level medians of $2.6 to $4.1 per watt for small non-residential systems. Use these to read a quote, not as a quote.

On property tax, most sanctuaries already use California's religious exemption. The Board of Equalization says it covers property owned by a religious organization and used exclusively for religious worship and school purposes, under Revenue and Taxation Code section 207, and it requires a claim filed with the county assessor. Separately, the new-construction exclusion for active solar energy systems in section 73 becomes inoperative on January 1, 2027; systems excluded before then remain excluded until the property changes ownership, according to BOE Letter to Assessors 2026/034. That matters for parts of a campus that are not exempt and for developer-owned equipment on church land, which may not share the church's exemption. Ask the county assessor before signing a PPA.