Church Buys a Tesla Car and Gets $7,500.00

By Raul Rivera

Pastor John and the Board of Directors have been thinking about upgrading the church’s vehicle for months. The church has grown, and the leadership team wants to replace the old 2014 Audi A6 with something modern, cost-efficient, and good on gas mileage. They have settled on a Tesla Model Y, which has a base price of $ $47,990. The decision made sense—the church was centrally located, and the pastor would always be near charging stations.

They were told they could get a tax credit for buying an electric car. Initially, they were doubtful about the credit because the church was tax-exempt, so applying for a tax credit wouldn’t have been helpful. The tax credit would only apply if the church owed any income tax, which they didn’t. However, the church recently discovered that the IRS now allows churches and nonprofits to use elective pay, a new option that changes everything. With elective pay, the church can transfer the value of the tax credit to the dealership, allowing them to get an immediate discount on the car—up to the total amount of the tax credit. For the Model 3, that meant a potential savings of up to $7,500, bringing the cost of the car down to $40,490.

How Can Churches Benefit from Electric Vehicle Tax Credits?

Like Pastor John’s church, many nonprofits and tax-exempt organizations are unaware of the savings they can unlock through federal tax credits when purchasing clean vehicles. Under IRC 45W, these organizations can qualify for a tax credit of up to $7,500 for electric vehicles under 14,000 pounds, including popular models like the Tesla Model Y. For larger vehicles, the credit can go up to $40,000.

But since churches and nonprofits often don’t owe taxes, how can they take advantage of this credit? That’s where elective pay comes into play.

What is Elective Pay?

Elective pay is a process that allows tax-exempt organizations to transfer the value of a tax credit (like the clean vehicle credit) to the seller instead of claiming it on their own tax return. In this case, Pastor John’s church can transfer the value of the $7,500 credit to the dealership, which then applies that amount as a discount on the vehicle’s purchase price. This way, the church benefits immediately rather than waiting to file a tax return they don’t normally file.

The Three-Step Elective Pay Process:

1. Credit Transfer: The church transfers the tax credit to the dealership. This allows the dealership to claim the tax credit on their taxes.
2. Price Discount: The dealership applies the value of the credit (up to $7,500) as a discount on the vehicle’s price.
3. Immediate Benefit: Instead of waiting to claim a nonrefundable tax credit, the church sees the price of the vehicle reduced right away.

Don’t Miss Out on Solar Panel Credits

Many churches are discovering the benefits of solar energy, not just as a way to reduce their power bill but also as a smart financial investment. This also applies if the church owns a Parsonage and wants to install solar panels there. Thanks to the Investment Tax Credit (ITC), nonprofit organizations like churches and ministries can now enjoy significant savings on solar installations through the direct pay option.

Typically, tax-exempt organizations wouldn’t be able to benefit from tax credits since they don’t owe taxes. However, under the Inflation Reduction Act (IRA), nonprofits can receive the total value of the ITC as a direct payment from the IRS. This means your church can get back 30% of the cost of installing solar panels, even if you don’t owe taxes. The savings could increase if your project qualifies for additional bonus credits, such as using domestically produced materials or being located in a low-income or energy community.

To take advantage of this credit, your church will need to follow a few steps:

1. Pre-Filing Registration: Register with the IRS to verify your church's eligibility to claim the tax credit through the direct pay option. This step ensures that the church is recognized for claiming the credit.
2. Prepare Documentation: Collect all necessary documents, such as proof of the solar panel installation, project costs, and any eligible bonus credits. Having this documentation ensures that everything is in order for a smooth filing process.
3. File Form 990-T: Submit Form 990-T, which is typically used for unrelated business income, but in this case, The IRS requires a 990-T to be filed to claim the direct pay option for the solar credit. This filing is critical to request the direct payment from the IRS.

Stay Compliant: Let StartCHURCH Do Your 990 Tax Return

Let StartCHURCH Help Your Ministry Reap the Benefits of Clean Energy

At StartCHURCH, we are always seeking new ways to serve churches, ministries, and nonprofits. We stay on top of developments that impact your organization, ensuring you're always informed and equipped to make the best decisions. Whether it's new legal requirements or tax-related updates, we are here to support you every step of the way.

When it's time to file your Form 990—whether it's a 990-T, 990-N, 990-EZ, the full 990 long form, or the 990-PF—we have the expertise to make sure it's done right. But we don’t just collect your data at the end of the year. We take the time throughout the year to educate and inform you about the steps you need to take now so that your tax return gives you the best possible outcome.

StartCHURCH is committed to helping you succeed. Whether you're exploring the benefits of clean energy or ensuring your tax filings are in order, we’ve got you covered. Give us a call at 770-638-3444, and let us help you build a solid foundation for your ministry’s future.

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