The 30%+ credit, and why who owns the battery decides who gets it.
The federal investment tax credit pays 30%+ of a commercial battery's eligible cost: a 30% base plus 10 points for domestic-content equipment, for projects that meet its conditions. It goes to whoever owns the system, which is why KEEL treats ownership as a pricing decision rather than a default. Here is how it works in 2026 for taxable owners, for tax-exempt owners, and under each lease structure.
The basics in 2026
- 30% of eligible cost for energy storage of 5 kWh or more, placed in service by a business or third-party owner (§48E). The 30% rate is conditional: projects of 1 MW AC and above must meet prevailing-wage and apprenticeship rules to earn it, and otherwise receive 6%.
- Plus 10 points for domestic content if the equipment meets the US-manufactured share in force when construction begins: 50% for 2026 starts, rising yearly. A second 10-point adder exists for designated energy-community census tracts; KEEL checks the address, and most metro-area sites do not qualify.
- Sourcing rules apply from 2026. Batteries with too much content from prohibited foreign entities are ineligible for the credit, and there is no small-project exemption from that test. KEEL requires the supplier's certification before the credit goes in the model.
- Full value through 2033 for projects that begin construction by then; 75% in 2034, 50% in 2035, nothing after. Storage is not subject to the 2027 wind-and-solar cutoff.
- Under 1 MW AC is the simple case. No prevailing-wage requirement to keep the full 30%, and no domestic-content haircut on direct pay. Almost every building-scale project KEEL prices is under 1 MW AC. Capacities on one site under related ownership add together, so a campus needs a plan.
- Depreciation on top. A taxable owner also takes accelerated depreciation on the basis, which is often worth as much again as the credit.
Who gets it under each structure
| Structure | Owner | Who claims the credit | Best for |
|---|---|---|---|
| Capital lease | The property, from signing | The property; can be applied to pay down the lease in the first 18 months | Owners with taxable income; tax-exempt owners using direct pay |
| Operating lease | The funding partner | The funding partner; priced into the monthly payment | Owners who cannot use the credit, newly formed entities, some co-ops and condos |
| Cash purchase | The property | The property, if it has the tax capacity in that year | Cash-rich owners with a facilities team |
Direct pay for churches, schools and nonprofits
A 501(c)(3), a school district, a municipality or a house of worship pays no income tax, so a tax credit sounds useless. Since 2023 it is not: under elective pay the organization owns the system, files a return for the year it is placed in service, and receives the 30% as a cash payment from the IRS. Under 1 MW AC the payment is not reduced for domestic content. Combined with the NYSERDA critical-facility block where the site qualifies, a nonprofit can see well over half of a system's cost covered by incentives.
The structure matters. An operating lease to a tax-exempt organization can disqualify the property under the tax-exempt-use rules, so KEEL routes these owners to a capital lease with direct pay, and works the filing with the organization's accountant.
Basis discipline. The credit is computed on the eligible cost, and 2026 case law has narrowed what can be included above a contractor's cost plus a reasonable margin. KEEL keeps the same basis across the proposal, the lease and the filing, and does not inflate it to make a rate work.
This page describes federal rules as KEEL reads them in 2026 and is not tax advice. Every owner should confirm treatment with their own tax adviser; KEEL provides the documentation to make that conversation short.
Common questions
Is the federal credit for batteries still available in 2026?
Yes, for commercial and third-party-owned storage under §48E. Storage was carved out of the 2027 wind-and-solar deadline; the full credit applies to projects that begin construction through 2033, then steps down. What ended after 2025 was the separate homeowner credit for a battery the homeowner buys and owns, which is one reason leases have replaced purchases in the residential market.
Who claims the credit under a lease?
The owner of the system. Under a capital lease that is the property, from signing. Under an operating lease it is the funding partner, and the credit is reflected in the monthly payment. KEEL places ownership where the credit is worth the most and prices both structures from the same bills.
How does a church or school get paid for a tax credit?
Through elective pay under §6417. A tax-exempt owner files a return for the year the system is placed in service and receives the credit as a cash payment from the IRS. Systems under 1 MW AC receive the full amount without the domestic-content haircut that applies to larger projects.
Can a nonprofit use an operating lease instead?
Generally no. Property leased to a tax-exempt organization under an operating lease can lose the credit and its depreciation under the tax-exempt-use rules. KEEL routes tax-exempt owners to a capital lease with direct pay.
What about the extra 10% adders?
Two exist for storage: the domestic-content adder, which requires a rising share of US-made components (50% for construction beginning in 2026), and the energy-community adder, which applies only to projects in designated census tracts (none in downstate New York, for example). The low-income bonus does not apply to storage at all.
Find out who should own your battery.
Send a bill. KEEL prices a capital lease and an operating lease side by side and shows where the credit lands in each.