Iowa Geo Tax Credit Provides Stopgap for Federal Incentive
April 29 – On the last day of its 2016 session, the Iowa Legislature passed HF 2468, which provides for a 10% standalone tax credit for residential installations of geo-thermal heat pumps (GHPs) in lieu of federal tax incentives. Both the House and the Senate voted unanimously in favor of the measure. Gov. Terry Branstad is expected to sign the bill into law within 30 days. It will take effect on Jan. 1, 2017. The measure is not capped, and does not offer a tax credit for commercial installations.
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According to the legislation, the new Iowa tax credit “...shall not be available during any tax year in which the federal residential energy efficient property tax credit for geothermal heat pumps provided in section 25D(a)(5) of the Internal Revenue Code is available.” Per existing Iowa law, there is a 6% state tax credit that is tied to the current federal tax incentive for residential GHP installations. If the current federal tax credit expires at the end of this year, the 6% state credit will expire as well. They will then be replaced with Iowa’s new 10% standalone credit.
Iowa Geothermal Association (IGA) President Rick Rockacy (WaterFurnace) says passage of the tax credit bill was the result of a huge effort by the IGA Board, staff, their lobbyist, members and sup-porters. “The House approved a bill in April, but prospects still didn’t look good in the Senate,” he said. “We turned the tide, working in concert with our lobbyist, with a barrage of phone calls and emails, and the amended bill passed the Senate and then the House by unanimous vote, literally in the last hours of this year’s legislative session.”
Under the legislation, a “qualified geothermal heat pump property” means any equipment that uses the ground or groundwater as a thermal energy source to heat the dwelling unit of the taxpayer or as a thermal energy sink to cool such dwelling unit, which equipment meets the requirements of the federal energy star program in effect at the time that the expenditure for such equipment is made.
Expenditures for qualified geothermal heat pump property means an expenditure for qualified geothermal heat pump property installed on or in connection with a dwelling unit located in Iowa and used as a residence by the taxpayer, whose taxes shall be reduced by 10% of qualified geothermal heat pump property expenditures made by the taxpayer during the tax year.
According to the bill, “...such expenditures shall be deemed to have been made on the date the installation is complete or, in the case of new construction or reconstruction, the date the original use of the structure by the taxpayer begins.” The owner of the qualified geothermal property can apply the credit to his/her tax burden incrementally for a period of 10 years.
Rockacy believes passage of the Iowa geothermal tax bill is indicative of what the industry can achieve when it comes together for a common goal. “We believe that our accomplishment shows what we can do at the national level to extend federal tax credits for geothermal heat pumps,” he said.