diff --git a/dcaf/project/_compiler.py b/dcaf/project/_compiler.py
index 77ffc42..0e306dd 100644
--- a/dcaf/project/_compiler.py
+++ b/dcaf/project/_compiler.py
@@ -293,6 +293,7 @@ def compile(self) -> ProjectAnalysis:
             tax_rate=self.config.tax_rate,
             levelized_revenue_basis=CashFlowGroup(levelized_revenue_basis.streams),
             levelized_cost_escalation_rate=self.infer_levelized_cost_escalation_rate(),
+            tax_allow_refund=self.config.tax_allow_refund,
         )
 
     def validate_generation_revenue_configuration(self) -> None:
diff --git a/dcaf/project/analysis.py b/dcaf/project/analysis.py
index 4660cdb..30d567b 100644
--- a/dcaf/project/analysis.py
+++ b/dcaf/project/analysis.py
@@ -227,6 +227,9 @@ class ProjectAnalysis:
         Inferred constant annual escalation rate used to construct a synthetic
         unit-price revenue basis when no market revenue basis is configured and
         the caller does not supply an explicit escalation policy.
+    tax_allow_refund : bool
+        Whether negative taxable income generates a tax refund. This policy is
+        preserved when computing counterfactual taxes for the interest tax shield.
     """
 
     timeline: ProjectTimeline
@@ -238,6 +241,7 @@ class ProjectAnalysis:
     tax_rate: float | None
     levelized_revenue_basis: CashFlowGroup[str] | None = None
     levelized_cost_escalation_rate: float | None = None
+    tax_allow_refund: bool = False
 
     @property
     def cashflows(self) -> CashFlowStream:
@@ -459,7 +463,10 @@ def _interest_tax_shield(self) -> CashFlowStream:
             taxable_revenue, deductions_without_interest, label="Taxable Income Before Interest"
         )
         taxes_without_interest = tax_liability(
-            taxable_income_without_interest, tax_rate=self.tax_rate, label="Taxes Before Interest"
+            taxable_income_without_interest,
+            tax_rate=self.tax_rate,
+            label="Taxes Before Interest",
+            allow_refund=self.tax_allow_refund,
         )
         actual_by_date = self.taxes.group_by(lambda flow: flow.date).aggregate(lambda s: s.sum())
         hypothetical_by_date = taxes_without_interest.group_by(lambda flow: flow.date).aggregate(
diff --git a/tests/unit/test_project.py b/tests/unit/test_project.py
index aa9878a..fe040b8 100644
--- a/tests/unit/test_project.py
+++ b/tests/unit/test_project.py
@@ -1192,6 +1192,49 @@ def test_project_pro_forma_groups_categories_and_computes_subtotals():
     assert "project:tax_liability" not in row_map
 
 
+@pytest.mark.parametrize(
+    ("annual_rate", "expected_refund", "expected_shield"),
+    [(0.0, 20.0, 0.0), (0.10, 22.0, 2.0)],
+)
+def test_project_pro_forma_interest_tax_shield_preserves_refund_policy(
+    annual_rate,
+    expected_refund,
+    expected_shield,
+):
+    schedule = AmortizationSchedule.build(
+        principal=100.0,
+        annual_rate=annual_rate,
+        term=1,
+        start_date=date(2026, 1, 1),
+        frequency="year",
+    )
+    analysis = (
+        EnergyProject()
+        .add_cashflow_stream(
+            name="deduction",
+            stream=CashFlowStream(
+                [
+                    CashFlow(
+                        -100.0,
+                        date(2026, 1, 1),
+                        pro_forma_category="operating_cost",
+                        tax_treatment="deductible",
+                    )
+                ]
+            ),
+        )
+        .debt_schedule(schedule=schedule)
+        .tax(rate=0.20, allow_refund=True)
+        .analyze()
+    )
+
+    row_map = analysis.pro_forma().row_map()
+
+    assert row_map["Taxes"] == pytest.approx((expected_refund,))
+    assert row_map["Financing Interest"] == pytest.approx((-100.0 * annual_rate,))
+    assert row_map["Interest Tax Shield"] == pytest.approx((expected_shield,))
+
+
 # --- Multiple named cost items ---