By Melissa Wentarmini
Associate Editor
Small businesses and nonprofits across Michigan, including those in rural and small-town communities, may still qualify for federal clean energy tax credits that can significantly reduce the cost of building upgrades and equipment purchases.
According to the Michigan Department of Environment, Great Lakes and Energy, several of the most accessible incentives begin phasing out in the next two years, with deadlines arriving as early as mid-2026.
The credits are available to for-profit businesses and tax-exempt entities, including municipalities, school districts, nonprofits and houses of worship. Depending on the project, they can cover 30% or more of total costs, helping offset expenses tied to energy efficiency and infrastructure upgrades many businesses already face.
Despite that, these programs often feel out of reach for rural business owners who might assume they are designed for large companies or urban areas. EGLE’s public information officer, Jeff Johnston, said that reaction is common.
“If you just glance at something like this, it can feel like it’s geared toward big businesses,” he said. “But in fact, you don’t even have to be a business for some of these credits.”
Eligible projects can include installing solar panels or geothermal heating and cooling systems, upgrading aging HVAC or lighting in commercial buildings, adding electric vehicle charging stations or purchasing electric or hybrid vehicles for business use.
“Solar installations are an area of a lot of growth right now,” Johnston said, adding that geothermal systems, HVAC improvements, weatherproofing and battery storage are also commonly eligible.
One provision that has changed eligibility for many organizations is elective pay, sometimes called direct pay. Johnston said traditional tax credits don’t help organizations that don’t pay taxes.
“That’s great if you pay taxes,” he said. “But if you’re a nonprofit or a religious organization that’s exempt, it doesn’t do you any good.”
Elective pay, he said, “essentially gives you a payment equivalent to what a tax credit would offer.”
For small businesses that do pay taxes, the credits typically reduce federal tax liability, lowering overall project costs and shortening the time it takes to recoup an investment.
Understanding the timing of these incentives is critical. Johnston said the primary reason EGLE issued its recent notice was to alert businesses that “a number of these incentives are on a limited-time basis.” Some expire as soon as late June, while others have earlier purchase or construction deadlines.
Businesses purchasing electric, hybrid or fuel-cell vehicles must have acquired those vehicles by Sept. 30, 2025, even if they are placed in service later. Electric vehicle charging equipment must be installed and operational by June 30. Solar and wind projects generally must begin construction by July 4, while other zero-emission technologies such as geothermal and energy storage have longer timelines but will eventually phase down.
Owners of older commercial buildings may also qualify for the Energy Efficient Commercial Buildings Tax Deduction, which applies to HVAC, lighting and building-envelope improvements, provided construction begins before June 30.
Johnston emphasized that businesses don’t have to navigate the details alone. EGLE’s website includes program pages with frequently asked questions and contact information.
“We understand there are a lot of technical details people aren’t immediately going to understand,” he said. “We want to be there to help.”
For business owners already planning upgrades in the next two years, the advice is straightforward: Explore eligibility early before purchases are made or construction begins. For many rural Michigan businesses, the biggest barrier isn’t qualification — it’s realizing these programs were designed with them in mind.
For details, businesses and organizations can contact EGLE’s Environment Team at egle-assist@michigan.gov or 517-284-9278.