Solar for California Churches: Elective Pay, PPA, and the December 2027 Deadline

Own It or Lease It: The Fork Most Pitches Skip

Section 6417 elective pay lets an "applicable entity" — 501(c)(3) nonprofits, including churches, plus state and local governments, tribes, and rural electric co-ops — receive the value of the federal solar Investment Tax Credit as a direct cash payment instead of a credit against tax owed, because a tax-exempt entity owes no tax to credit against. The base rate is 30% of eligible system cost. Source: IRS elective pay FAQ, irs.gov, and corroborated by BDO's June 2024 procedural summary and Lawyers for Good Government's Elective Pay 101 guide.

The eligibility condition that changes everything: the church has to own the solar equipment. If a third party owns the system under a PPA or lease, that third party has the tax liability, so that third party claims the credit, not the congregation. Source: Citadel RS, April 2026, corroborated by SunwiseUSA. A church cannot do both. Elective pay requires ownership; a PPA is the fallback for a congregation that can't or doesn't want to own the system, not a second way to reach the same tax credit.

That framing matters because a lot of solar sales conversations blur the two together, presenting a lease as just another way to "get the tax credit." It isn't. If a church owns the system, files the paperwork, and waits for the IRS payment, it gets the 30% directly. If it leases, the third-party owner keeps the 30% and (in a competitive market) passes some of that value through as a lower per-kWh rate. Those are different deals with different risks, and the right one depends on whether the church has the capital and the administrative capacity to file, not on which one a sales rep is pushing that week.

How Elective Pay Actually Works, Step by Step

Assuming the church owns the system, the elective pay process runs in five steps, per Lawyers for Good Government's Elective Pay 101 and Citadel RS's 2026 guidance. First, complete construction and place the system in service, documented with a permission-to-operate or interconnection agreement from the utility. Second, pre-register the project at irs.gov/EPTRegister — this has to happen at least 120 days before the planned filing date, and the IRS itself can take up to 120 days to issue the registration number, so this is not a step to leave until the last quarter. Third, receive a unique registration number tied to the specific property and project. Fourth, file Form 990-T — even if the church has never filed one before — along with Form 3468 (or the relevant source-credit form) and Form 3800, by the standard return due date. For a calendar-year filer that is May 15, with a six-month automatic extension available under Rev. Proc. 2024-39. Fifth, wait for the payment, which one source states generally arrives within about 45 days of the filing deadline — treat that turnaround as a working estimate, not a guarantee, since it comes from a single source.

The practical takeaway: a church's finance committee or bookkeeper needs to own this timeline the same way they'd own a grant application. Missing the 120-day pre-registration window, or discovering in April that nobody has ever filed a 990-T for the organization, is how an elective-pay project stalls after the panels are already up and the capital is already spent.

The Deadline That Already Passed: OBBBA's Construction-Start Cliff

This is the most time-sensitive fact on this page, and it is more urgent than most solar marketing lets on. The One Big Beautiful Bill Act, signed July 4, 2025, eliminates the Section 48E investment tax credit for solar facilities that begin construction on or after July 4, 2026, unless the project is placed in service by December 31, 2027. Facilities that began construction before July 4, 2026 still qualify under the older, more forgiving framework. Source: McGuireWoods (June 2026), corroborated by RSM (July 2025) and multiple solar-industry summaries.

As of today, September 5, 2026, that July 4, 2026 construction-start date has already passed. Any church that has not already broken ground, or established a construction safe harbor before that date, is now in the second bucket: the project has to be fully placed in service by December 31, 2027 — roughly 15 months from now — or it gets zero federal ITC through elective pay. That is not a soft planning target. A church exploring solar today needs contracts signed and equipment ordered soon enough to have a realistic shot at commissioning before the end of 2027, accounting for permitting, utility interconnection queues, and equipment lead times that regularly run 6-12 months on their own.

On top of the construction-start cliff, OBBBA also added foreign entity of concern restrictions that deny the 48E credit to projects with material ties to China, Russia, North Korea, or Iran, generally effective for tax years beginning after July 4, 2025, and applying to elective-pay filers the same as taxable ones (RSM, 2025). The specific compliance thresholds for panel and inverter sourcing have not been published clearly enough to state as fact here — a church should ask its installer directly which components are FEOC-compliant before signing, not assume.

The Small-System Safe Harbor Is Currently in Litigation

Before OBBBA, a project could establish that it had "begun construction" — locking in the more favorable pre-cliff treatment — either by starting physical work or by spending at least 5% of the total project cost. IRS Notice 2025-42, issued August 15, 2025, eliminated that 5% cost test for most solar and wind projects, leaving only the physical-work test, with one exception: it preserved the 5% safe harbor for small-scale solar projects of 1.5 MW AC or less. A church-scale rooftop or parking-canopy system is almost always well under that threshold.

Then, on June 6, 2026, a federal court vacated Notice 2025-42 in its entirety, which on its face restores the broader 5% safe harbor for everyone, not just small projects. But this is not settled law. Multiple law firms, including McGuireWoods and Foley Hoag, note in their June 2026 client alerts that the government will almost certainly seek a stay and appeal, meaning the restored safe harbor could be narrowed or reversed retroactively.

The practical read for a church: the 5% safe-harbor path may currently be available and may be a faster way to lock in favorable treatment before the physical-work test becomes the only option again, but any professional advising on this should flag it as an open legal question, not a settled rule. This is exactly the kind of program-status nuance worth getting from a CPA or tax attorney who tracks it in real time, not from a solar sales deck.

If You Can't or Won't Own: The PPA/Lease Route

A PPA or lease exists for the church that doesn't have the capital, doesn't want the 990-T filing burden, or doesn't want to carry the equipment on its books. Under this structure, a third-party developer owns and maintains the system, claims the federal 48E credit itself (subject to the same FEOC rules), and sells the church electricity at a rate typically pitched below the utility's retail rate — industry literature cites a 10-20% discount as a general illustrative range, though this figure isn't California-specific and should be treated as a starting point for negotiation, not a guarantee.

The real advantage for a church isn't the discount percentage, it's operational simplicity. A PPA sidesteps the IRS pre-registration, the first-time Form 990-T, and the 45-day-or-so wait for a federal payment entirely — the church just pays its monthly electric bill to the new provider instead of the utility, at (ideally) a lower rate. No capital outlay, no O&M responsibility, no tax paperwork.

The trade-off is contract length. PPAs typically run 15-25 years, during which the panels and their easement sit on the church's roof or land regardless of what else changes about the building or the congregation's plans for it. A church weighing a PPA should read the termination, escalation, and end-of-term buyout clauses as carefully as it reads the rate, and should confirm the developer's FEOC compliance and financial stability before signing — a lesson underscored by Freedom Forever's move from Chapter 11 to full Chapter 7 liquidation on July 31, 2026, which left more than 150,000 homeowners with contracts and no operating counterparty.

Sizing for a Sunday Peak Under California's Net Billing Tariff

Since April 15, 2023, new solar interconnections in PG&E, SCE, and SDG&E territory go on the Net Billing Tariff (NBT) under CPUC Decision D.22-12-056, which replaced NEM 2.0. Under NBT, exported electricity is credited using an Avoided Cost Calculator (ACC) value that varies by hour and month, generally low at midday and higher in the early evening, rather than a flat retail-rate credit. Source: CPUC's net energy metering page and PG&E's NBT tariff sheet. Commercial and nonresidential exports run on the same ACC-based structure as residential NBT, in the same rough 5-8 cents per kWh band cited across the industry, though each utility publishes its own hourly schedule rather than one fixed number — a church wanting a precise figure should pull the current advice letter from its own utility rather than rely on a blended average.

This matters directly for church sizing. A congregation's electric load is usually low Monday through Saturday and spikes hard one day a week for services, education programs, and events. It's tempting to size the system to fully cover that Sunday peak, but doing so means the system generates far more than the church uses on every other day of the week — and under NBT, that weekday surplus exports at the low ACC rate instead of offsetting retail-rate consumption the church would otherwise pay for. Publicly owned utilities such as LADWP, SMUD, MID, Anaheim, Roseville, Lodi, Imperial ID, and Turlock ID are not subject to CPUC's NBT rules and set their own export terms, so a church served by one of those should ask directly about its terms rather than assume NBT economics apply. For everyone else, the right-sized system usually tracks weekday baseline load, not the Sunday spike, with export economics as a secondary consideration rather than the design target.

Battery Storage: What It Costs and Why SGIP Won't Help Most Churches

The Self-Generation Incentive Program (SGIP), California's ratepayer-funded battery rebate administered through selfgenca.com, closed its General Market, Equity, and Equity Resiliency budgets to new applications as of December 31, 2025. The only budget still open is the income-qualified Residential Solar and Storage Equity track created under AB 209, and it is waitlist-only, funded as existing reservations cancel — and it targets income-qualified households, not nonprofit or commercial entities like a church. Source: CPUC's SGIP program page, corroborated by multiple 2026 industry summaries. In plain terms: a California church should not plan around an SGIP rebate for storage. Confirm current status directly at selfgenca.com before budgeting, since program status can shift.

Standalone or paired battery storage remains eligible for the federal investment tax credit under Section 48/48E on its own, independent of whether it's paired with solar, which should still flow through to elective-pay filers the same way solar equipment does — though this wasn't independently re-verified against a fresh 2026 primary source this pass, so a church's tax preparer should confirm before filing.

On cost: commercial lithium battery installations run roughly $400-700 per kWh installed, and adding storage typically increases total project cost by roughly 30-60%. Source: ratereliefca.com's own cost-per-watt page, April 2026 — a single internal source, not independently cross-checked this session, so treat it as directionally right rather than externally audited. Given NBT's low export credits, a battery that shifts weekday solar surplus into Sunday's peak load, rather than exporting it at 5-8 cents per kWh, can pencil out even without a rebate — but the math has to be run for the specific building, not assumed.

Cost Per Watt and Property Tax: The Two Numbers to Budget Against

For a typical church-scale system, 10-50 kW on a rooftop or small lot, installed pricing runs $1.83-3.50 per watt DC before any incentive. Mid-market systems in the 50-500 kW range run $1.40-2.00 per watt. For context, SEIA's 2025 national benchmark put average commercial installed cost around $1.72 per watt, up roughly 10% year over year. All three figures come from ratereliefca.com's own cost-per-watt page (April 2026), which itself notes that California-specific pricing hasn't been independently verified across three outside public sources — so use these as a planning range, not a quote.

Separately, California's active solar energy system property tax exclusion (Rev. & Tax. Code § 73) is scheduled to sunset. Under SB 710, signed October 2025, systems completed and placed in service before January 1, 2027 keep the exclusion for as long as the current owner holds the property; systems already under construction as of January 1, 2026 qualify if completed by that same January 1, 2027 deadline. Source: DMA and Cox Castle, both referencing SB 710 and Board of Equalization guidance.

Most sanctuaries already carry a religious or welfare property tax exemption under the California Constitution and aren't assessed regardless of this exclusion. But it matters in two situations: any commercial or rental space on the same parcel, and third-party-owned PPA equipment sitting on church land, which may not automatically inherit the church's religious-use exemption and could fall under this sunset timeline instead. A church considering a PPA should raise this specifically with its county assessor rather than assume the existing exemption covers leased equipment.