Commercial and Agriculture Renewable Energy Grants and Tax Credits

Renewable energy can reduce greenhouse gas emissions and increase American energy independence. It can also reduce long-term operation costs, including monthly electricity bills. For farms, ranches, agricultural producers, and businesses, that combination has increased renewable energy adoption.

Some otherwise viable projects stall simply because the owners do not understand the funding tools available. Understanding the options and how to combine them can significantly reduce the out-of-pocket project costs for renewable energy projects. With the right information and guidance, you can make the most of available programs. For guidance specific to your situation, contact an experienced agricultural lawyer in your area.

Renewable Projects Are Financially Feasible Now

Given the availability of public support programs, projects once considered too costly can be viewed as sound investments. The main categories of support include:

• Federal grants and loan guarantees. Primarily through the USDA Rural Energy for America Program (REAP)
• Commercial tax credits. This includes the Investment Tax Credit and Production Tax Credit, as well as their technology-neutral successors.
• State incentives and utility rebates. These vary widely by location.

In many cases, the most effective way to reduce your net cost is by combining, or “stacking,” these incentives when possible.

USDA Rural Energy for America Program (REAP)

The Rural Energy for America Program (REAP) is a federal program supporting agricultural producers and rural small businesses. REAP utilizes two main tools for providing support:

1. Grants covering a portion of eligible project costs
2. Loan guarantees that reduce lender risk and improve financing terms

Common Uses for REAP Funds

Common uses of funds for purchasing and installing renewable energy systems include:

• Biomass (biodiesel and ethanol, and solid fuel)
• Geothermal for electric generation or direct use
• Hydropower below 30 megawatts
• Small and large wind turbines
• Small and large solar energy systems and solar panels

A REAP grant may also be used for the purchase, installation, and construction of energy efficiency improvements, including:

• High-efficiency heating, ventilation, and air conditioning systems
• Insulation
• Lighting
• Doors and windows
• Inverters
• Electric, solar, or gravity pumps for sprinklers

Eligibility Criteria for REAP

To qualify for REAP support, applicants must generally be:

• Agricultural producers. Entities directly engaged in producing agricultural products must generate a set percentage of gross income (at least 50%) from agricultural operations.
• Run small businesses. The business must be located in an eligible rural area with a population of 50,000 or less and meet small-business standards. Small businesses include private companies, cooperatives, electric utilities, and tribal corporations.

In addition to meeting basic eligibility requirements, applicants must demonstrate that the project meets other requirements, such as having technically feasible and commercially available technology.

Funding Amounts

Under current program guidance, guaranteed loans may cover up to 75% of total eligible project costs. Grants may cover up to 50% of the total eligible project costs. And when a grant and a loan guarantee are combined, total funding is generally capped at 75% of total eligible project costs.

These terms can change, so confirm the latest limits before planning your financing.

The Application Process

To begin the application process, contact your State Rural Development Energy Coordinator. The application process generally involves:

1. Confirming eligibility
2. Gathering technical feasibility studies
3. Preparing and submitting the application during the open application period, before the deadline
4. Waiting for the USDA to score your application and make an award determination

Because REAP is competitive and scored, a well-prepared application makes a meaningful difference.

Federal Tax Credits After OBBBA (2025)

The Inflation Reduction Act (IRA) of 2022 created the largest renewable energy incentive initiatives in U.S. history. It included renewable energy credits, among other incentives.

However, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, significantly changed clean energy tax credits available under the IRA. It accelerated the phase-out for certain technologies while preserving credits for projects that meet specific construction and timing requirements.

The Federal Investment Tax Credits (ITCs) do not disappear at once. Several renewable energy technologies remain eligible for credits well beyond 2026. For many project owners, the clean energy credit landscape now requires more careful attention to timing, technology, and siting. Understanding the timelines is essential when you evaluate current plans and construction schedules.

Wind and Solar Timing Rules

The changes most directly affect the Clean Electricity Investment Credit (Internal Revenue Code § 48E) and the Clean Electricity Production Tax Credit (§ 45Y). For projects placed into service after December 31, 2027, unless construction begins before July 4, 2026, these tax credits generally do not apply.

Several technologies beyond solar and wind remain eligible for credits, including:

• Geothermal systems
• Stand-alone battery energy storage systems
• Fuel cells
• Combined heat and power systems
• Biogas projects
• Waste energy recovery property
• Certain thermal energy storage technologies

For these technologies, the law generally provides a longer phase-out schedule that extends into the 2030s. Projects beginning construction before 2034 can still qualify for the full credit, with gradual reductions after that point.

The Investment Tax Credit

The federal investment tax credit (ITC) is a percentage-based credit calculated on the eligible cost, or basis, of qualifying renewable energy property. The ITC is a one-time federal tax credit equal to a percentage of a project’s “qualified investment” when it’s placed in service. OBBBA amended the availability of these credits for wind and solar projects, tying eligibility to construction beginning by July 4, 2026, or placement in service before January 1, 2028.

The Production Tax Credit (PTC)

The federal production tax credit (PTC) is a federal tax incentive available for wind, solar, and certain other forms of renewable electricity production.

Rather than rewarding upfront investment, it is a per-kilowatt-hour incentive tied to the electricity your facility actually produces and sells. Taxpayers may receive the PTC for 10 years, starting with the date the facility is placed in service, for electricity generated by qualified energy resources and sold to an unrelated party during the tax year.

For facilities placed in service in 2022 or later, the PTC starts with a “base credit” of 0.3 cents per kilowatt-hour (kWh) of electricity production (in 1992 dollars), adjusted annually for inflation and then rounded to the nearest 0.05 cents. The base credit is then adjusted according to four additional factors:

• Technology. Wind, solar, geothermal, and closed-loop biomass facilities are eligible to receive the full credit, but open-loop biomass and municipal solid waste facilities receive half-credits.
• Placed-in-service date. This means the date the facility begins producing electricity.
• Prevailing Wage Apprenticeship (PWA) requirements. Base credit values are multiplied significantly if the facility pays prevailing wages and employs a certain number of apprentices during the facility’s construction phase (or if it has a maximum net output of less than 1 megawatt or began construction before January 29, 2023).
• Financing from tax-exempt bonds. Credit amounts can be reduced proportionally, up to 15%, if the financing comes from tax-exempt bonds.

The IRC § 45 PTC is an alternative to the IRC § 48 Investment Tax Credit. As with wind and solar under the newer rules, OBBBA tied continued availability to construction beginning before July 5, 2026, or placement in service before January 1, 2028.

Choosing Between the Credits

You cannot use the same facility to claim both the PTC and the ITC. Which credit to use depends on your project’s specific characteristics. On the one hand, the ITC delivers upfront, investment-based value.

It often works best for projects with high installation costs relative to expected output, or owners who prioritize immediate returns. On the other hand, the PTC delivers ongoing, production-based value over 10 years. It often favors facilities with strong, consistent electricity output, such as high-capacity wind projects.

Project size, technology, expected output, cash-flow goals, and potential bonus credits all factor into the decision. When evaluating depreciation treatment under the Modified Accelerated Cost Recovery System (MACRS), it’s critical to compare methods because depreciation can significantly affect the project’s total after-tax value.

Because the choice of credit carries long-term financial consequences and can be complex, a professional analysis can be beneficial.

The Potential for Stacking Incentives

If energy grants and tax credits apply to your situation, strategic layering can maximize the financial benefits. Consider the following steps:

1. Map out your project scope and costs
2. Identify federal grants and loan guarantees
3. Layer in any available federal tax credits, such as the ITC or PTC, to reduce federal tax liability
4. Research state incentives, such as state-level grants, tax credits, and rebate programs that may be available in your state
5. Add utility rebates that may be offered by local utilities for renewable and efficiency projects
6. Sequence and coordinate applications, as some programs require approval before construction begins

Careful coordination protects eligibility and maximizes the total value.

Seeking Legal and Professional Help

Agricultural law and the programs discussed above are incredibly complex. Overlapping programs, shifting requirements from legislative changes, and detailed compliance rules make professional guidance necessary in most cases.

A coordinated team can help avoid costly mistakes such as starting construction at the wrong time or assuming incentives are automatic. Even something like applying for programs out of order can create issues. A coordinated team can help.

• Tax advisors and CPAs. Modeling credits, making elections, and addressing depreciation and basis effects
• Agricultural attorneys. Structuring ownership, reviewing contract and grant terms, and managing compliance and reporting obligations
• Lenders, developers, and engineers. Confirming feasibility, arranging financing, and planning construction timelines.

Experienced legal and tax advisors can help prevent mistakes and protect your investment.

Consult an Attorney for Guidance

With the right guidance, you can determine which programs and incentives fit your situation. The information provided here is subject to change and is provided for general background.

Consult a qualified tax professional or experienced agricultural lawyer for the latest guidance for your individual situation. When you’re ready to take the next step, connecting with knowledgeable advisors will help you to move forward with clarity.