The recent passage of the One Big Beautiful Bill Act (OBBB) of 2025 has put restrictions on tax credits for renewable energy initiatives. However, Bali Kumar, COO of PACE Loan Group (PLG), doesn’t anticipate any slowdown in the adoption of C-PACE (commercial Property Assessed Clean Energy) financing as a result. In fact, he tells Connect CRE, the OBBB’s expansion of the Opportunity Zone program first enacted in the bill’s predecessor, the Tax Cut and Jobs Act of 2017, may spur more interest in C-PACE.
Q: Since the recently signed One Big Beautiful Bill (OBBB) targeted cuts to green funding and renewable energy initiatives, we were wondering how it impacts C-PACE financing. Do you expect a reduction in C-PACE financing as a result?
A: We don’t expect to see any reduction in opportunities to use C-PACE financing for new construction projects, renovations, or recapitalizations. In fact, we expect to see continued growth. The number of states where C-PACE financing can help get a deal done continue to increase, as Georgia, North Carolina, New Jersey, and New York continue to make C-PACE financing available more broadly. C-PACE is unaffected because there are no federal dollars being used, and there is no federal oversight, since C-PACE is made available under state law. As a private, direct C-PACE lender, we are seeing more and more applications come through the door every day.
One specific impact of the OBBB is that certain renewable energy projects need to start before July 4, 2026, and be in service by January 1, 2027 to qualify for certain federal tax credits. Those projects can be financed through C-PACE (and the tax credit can go directly into the borrower’s pocket, so they can “double dip” !), so we are seeing more projects that want to take advantage of the “double dip” of getting the tax credit in addition to getting 100% financing move more quickly toward the closing table.
Q: One area of the OBBB is the expansion of Opportunity Zones (OZ), which had been a temporary policy initiative and now will be made permanent. Will C-PACE financing opportunities also expand?
A: C-PACE financing works well in OZ deals, and we have done a number of those. Nowadays, deals require complicated capital stacks to get to the finish line, and this expansion of Opportunity Zones allows for these C-PACE/OZ deals to continue.
The CRE industry is still uncovering more of the details of the bill, specifically all of the OZ changes. What we do know is that OZs are ripe for significant redevelopment or new development, which is a great fit for C-PACE financing. Redevelopment deals often require upgrades to HVAC, windows, electrical, elevators, and plumbing, all of which can be financed via C-PACE.
OZ projects are allowed to defer taxes for up to 10 years, with the idea that the deferred taxes encourage investing in designated communities. Though we have seen fewer OZ developments in recent months, we expect that this legislation will encourage new commercial development in these areas.
Q: Interest rates haven’t been cut this year as many experts originally predicted. Is that a positive or a negative for C-PACE and PACE Loan Group?
A: C-PACE financing really does work in any market. In our current “higher for longer” market, C-PACE financing has been useful to blend down the cost of capital for projects that are forced to use more expensive construction debt. The one caveat is that all deals right now are DSCR constrained, so we work with our senior lender partners to ensure our joint capital stacks meet our joint DSCR requirements.
Q: How big a role has PACE financing played in OZ projects up until now?
A: When the original OZ legislation was enacted in 2017, C-PACE was in the early stage of adoption, but the savvier Opportunity Zone investors learned early to use C-PACE financing on each of their deals to juice their IRRs and to spread their investment over multiple deals. There is also duration alignment with these projects, since these projects are long-term holds, and C-PACE is long-term financing.
So, C-PACE wasn’t used as often in the original OZ program because it wasn’t as widely available, or as well known. Now that C-PACE is offered in more states, we expect to see many more qualifying projects during this version of the program.
Q: Are there other aspects of the OBBB that could affect the market for PACE financing, whether positively or negatively?
A: While some clean energy credits are expiring, C-PACE is a great way to finance improvements that otherwise would have qualified for clean energy credits. C-PACE has the dual mandate of funding “energy efficiency” projects which result in operational savings because of increased buildings efficiency.
One additional OBBB benefit we are aware of is that owners will be able to depreciate energy improvements 100% in year one. That’s a new benefit that may cause more sponsors to consider improvements that improve energy efficiency.
Bali Kumar, COO – PACE Loan Group, joined PLG in 2021 and has worked for nearly 10 years in C-PACE, first as the CEO of Lean & Green Michigan, where he developed the Michigan PACE program into one of the nation’s strongest PACE programs. He also served as a management consultant at Deloitte, a transactional attorney at Proskauer, and the Executive Director of Michigan’s Wayne County Land Bank. Bali graduated with a B.A. from Brown University, a M.Sc. from the London School of Economics, and a J.D. from Berkeley Law. He is a member of the NY and CA bar, and serves as Board Chair for the MNCIFA, Minnesota’s first Green Bank.
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