Industry News
Residential GHP Tax Credit - 25D
Business GHP Tax Credit 48(a)
Geothermal Legislation Allows Full 30 Percent Tax Incentive
Homeowners who install geothermal heating and cooling systems are eligible for increased tax incentives under the American Recovery and Reinvestment Act of 2009.Previous legislation offered a one-time tax credit of 30 percent of the total investment for residential ground loop or ground water geothermal heat pump installations, with a maximum credit of $2,000 for a single residence. The new bill, signed into law on Feb. 17, 2009, removes the $2,000 cap and offers homeowners the entire 30 percent tax credit.
The Emergency Economic Stabilization Act of 2008, H.R. 1424, which became law on October 3rd, contains long-term tax incentives to encourage the use of renewable energy technologies, including geothermal heat pumps, in homes and businesses. The bill also extends tax incentives for homes and commercial buildings that support the installation of highly-efficient heating, cooling, and water heating systems, such as geothermal heat pumps. All of the energy provisions in H.R. 1424 are fully “paid for,” primarily by the reduction of existing tax incentives enjoyed by the fossil fuel industry.
The passage of this bill, which creates the first significant tax incentives for geothermal heat pumps since 1980, will go down as a historic milestone in the development of the industry in the United States. By classifying geothermal heat pumps under federal renewable energy provisions with solar and wind, Congress has recognized the crucial role this 50-state technology can play in reshaping our energy future. The provision of long-term installation incentives will raise public awareness, improve the economics for purchasers, and create a foundation for investment in the job-creating infrastructure of our industry.
The new tax incentives for geothermal heat pumps are the culmination of an “all-out” federal legislative affairs effort unilaterally initiated by LSB Industries (Amex LXU) subsidiary, ClimateMaster, in April, 2007. Dan Ellis, president, with the support of a coalition of top-tier legislative consultants, embarked on a mission to educate Congress on the benefits of geothermal heat pumps and the role they could play in meeting our nation’s energy-efficiency and climate change goals. Ultimately, there were direct meetings with 34 members of Congress, including Majority Leader Reid, and with hundreds of staff members and other government and administration employees. This effort received vital support from:
Alliance to Save Energy American Council for an Energy Efficient Economy International Ground Source Heat Pump Association Geothermal Heat Pump Consortium Geothermal National & International Initiative Inc. National Ground Water Association Geothermal Energy Association National Rural Electric Cooperative Association And, crucial grass-roots support from many of you!
The specific provisions of the bill that directly or indirectly support geothermal heat pumps are:
Long-term Extension of Energy Credit.
The bill extends the 30% investment tax credit for solar energy property and qualified fuel cell property, as well as the 10% investment tax credit for microturbines. The bill increases the $500 per half kilowatt of capacity cap for qualified fuel cells to $1,500 per half kilowatt of capacity, and adds small commercial wind as a category of qualified investment. The bill also provides a new 10% investment tax credit for combined heat and power systems and geothermal heat pumps. The bill extends these credits through 2016 and allows them to be used to offset the alternative minimum tax (AMT). See attachment for final text.By including geothermal heat pumps within the definition of “energy property” in the Energy Credit language, geothermal heat pump systems placed in service after October 3, 2008 will now also be subject to a 5-year depreciation period.
Long-term Extension and Modification of the Residential Energy-Efficient Property Credit.
The bill extends the credit for residential solar property and removes the credit cap (currently $2,000) for solar electric investments. The bill adds residential small wind investment, capped at $4,000, and geothermal heat pumps, capped at $2,000, as qualifying property. The bill extends these credits through 2016 and allows them to be used to offset the AMT.Extension of Energy-Efficient Buildings Deduction.
Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50% energy savings target. The energy savings must be accomplished through energy and power cost reductions for the building’s heating, cooling, ventilation, hot water, and interior lighting systems. This bill extends the energy efficient commercial buildings deduction for five years, through December 31, 2013.Extension of Credit for Energy-Efficiency Improvements to New Homes.
Under current law, contractors receive a credit for the construction of energy-efficient new homes that achieve a 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling. The credit equals $1,000 for homes meeting a 30% efficiency standard, $2,000 for homes meeting a 50% standard. The bill extends the new energy efficient home tax credit through 2009.Download:
Residential GHP Tax Credit - 25D Business GHP Tax Credit 48(a)