Tax Extenders are Vital to the GHP Industry
Geothermal heat pumps—a heating and cooling technology that harvests renewable energy from the ground—efficiently and significantly reduce the energy consumption of buildings. Yet because they are a relatively young technology and have higher installation costs than less efficient and polluting standard equipment, they claim less than 2% of the U.S. heating and air conditioning market.
Geothermal heat pumps typically save 50% and more on energy bills, for American industry, business and homeowners. Those energy savings are commensurate with savings in polluting emissions from fossil fuel electricity generation and conventional heating and air conditioning equipment. These are public goods that should not be ignored.
Congress can guide citizen behavior toward efficient geothermal heat pumps and help the industry increase its market share by permanently reinstating several business tax incentives that expired at the end of 2014. The following expired tax provisions are vital to the continuing success and growth of the U.S. geothermal heat pump industry:
Bonus Depreciation Taxpayers are allowed an additional first-year depreciation deduction of 50% (bonus depreciation) of commercial GHP equipment.
Business-Related Expensing A taxpayer may deduct up to $500,000 per year—indexed for inflation—for GHP equipment and other property used in a trade or business.
Energy Efficient Homes A contractor may take a credit for each new energy-efficient home used as a residence. Homes must meet a reduction in annual heating and cooling energy consumption compared to a comparable residence constructed in accordance with standards of the 2006 International Energy Conservation Code. The credit is $1,000 for new homes that meet a 30% reduction in annual heating and cooling energy consumption, and $2,000 for new homes that meet a 50% reduction in annual heating and cooling energy consumption.
Energy Efficient Commercial Buildings The energy efficient commercial building deduction (section 179D). A building owner is allowed a deduction for equipment installed as part of a plan to reduce total annual energy and power costs of a building with respect to interior lighting systems; heating, cooling, ventilation; and hot water systems by 50% or more compared to a building that meets the mini-mum requirements for energy-efficient commercial building expenditures under American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) / Illuminating Engineering Society of North America (IESNA) Standards 90.1-2001 in 2014 and 90.1-2007 in 2015. The deduction is $1.80 per square foot of property for which the expenditures were made. The deduction is allowed in the year the property is placed into service. Tribal governments and non-profit organizations can allocate the deduction to the person primarily responsible for designing a property.