Baseload, Geothermal

Iowa Geothermal Tax Credit Provides Stopgap for Federal Incentive

On the last day of its 2016 session, the Iowa Legislature passed HF 2468, which provides for a 10 percent standalone tax credit for residential installations of geothermal heat pumps (GHP) 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 by the end of May, and it would take effect on January 1, 2017. The measure is not capped, and does not offer a tax credit for commercial installations, the Geothermal Exchange Organization (GEO) said in an April 29 statement.

GEO said that, 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 percent 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 percent state credit will expire as well. They will then be replaced with Iowa’s new 10 percent standalone credit.

Iowa Geothermal Association (IGA) President Rick Rockacy said in a statement that passage of the tax credit bill was the result of a huge effort by the IGA Board, staff, their lobbyist, members and supporters.

“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.

Doug Dougherty, president and CEO of GEO said: “The passion of our colleagues at the IGA in passing the Iowa GHP tax credit follows on the heels of geothermal tax credit legislation recently signed into law in in South Carolina,” he said. “They are good examples of the hard work it takes to pass legislation.”

Lead image: Geothermal heat pump. Credit: Dr Tzeferis Petros Wikimedia commons.