Iowa Passes Geo Tax Incentive Bill

Before the Iowa Legislature adjourned on May 9, it passed SF 2342, a measure that among other things provides a state tax credit for residential geothermal heat pump (GHP) installations equal to 20% of the federal residential energy efficient property tax credit. It can be used for tax liability for 10 years or until depleted.

Considering the federal GHP tax credit of 30% for residential installations, the Iowa GHP credit is equivalent to 6% of system cost. Once the bill is signed into law by the Iowa governor, it would be applic-able to any new or refitted construction or installation of a geothermal heating or cooling system on or after July 1, 2012, on property classified as residential.

The Iowa Geothermal Association (IGA) was instrumental in gaining the bill’s passage. According to IGA Executive Director Ron Marr, “An important part of the bill is a property tax exemption for 10 years on additional appraised cost of real estate by installing geo systems.” Installing a GHP in an Iowa residence increases the property tax about $300-$350 per year on the dwelling, he said.

According to the bill, “The exemption shall apply to any value added by the addition of mechanical, electrical, plumbing, ductwork, or other equipment, labor, and expenses included in or required for the construction or installation of the geothermal system, as well as the proportionate value of any well field associated with the system and attributable to the owner.”

IGA and other bill supporters hope that Iowa Gov. Terry Branstad (R) will sign the bill after his administration analyzes the collective impact of all budgetary bills passed by the 2012 Iowa Legislature. “The governor likes geothermal heat pumps,” said Marr. “He has geo in his house, and it is being installed in the governor’s mansion.” The bill’s provisions would be effective upon enactment, with property tax exemptions retroactive to Jan. 1, 2012.

The solar industry got a better deal in the act than geothermal. Solar energy system tax credits are 50% of the federal residential energy efficient property credit, not to exceed $15,000, residential or commercial. But the IGA isn’t complaining. “SF 2342 is a foot in the door for geothermal,” said Marr. “It is easier to amend a bill than pass it. The IGA will consider future legislative action to expand the tax credit and make permanent the property tax exemption.” Click to read the bill.