Tax Extenders Bill Sent to Obama

At the last moment of their lame-duck session, the U.S. Senate passed a “tax extenders” bill and sent the measure to President Obama for signature. The legislation extends several business tax breaks through the end of this year (2014).

For the past several months, the Geothermal Exchange Organization (GEO) has actively urged passage of federal tax extenders bills, to reinstate and extend several incentives that expired on Dec. 31, 2013, but are important to the geothermal heat pump (GHP) industry. Mid-term elections pushed Senate action on the bills until the end of this year, and political wrangling over immigration and tax reform killed hopes for a 2-year extension already passed last summer by the House of Representatives.

A last ditch, single-year tax extender bill drafted by the House (HR 5771) passed by a 378-46 vote on Dec. 3. The Senate voted/concurred on the House bill with a vote of 76-16 on Dec. 16. The Obama Administration raised no objections to the legislation, so it is widely assumed he will sign it. For the time being, the measure retroactively extends (among other things) the following direct benefits to the GHP industry for the current year through Dec. 31, 2014:

Bonus Depreciation  Taxpayers are allowed an additional (bonus) first-year depreciation deduction of 50% of commercial GHP system equipment that is placed into service after Dec. 31, 2013 but before Jan. 1, 2015.

Business-Related Expensing  A taxpayer can deduct up to $500,000 per year for GHP equipment and other property used in a trade or business during calendar year 2014.

Energy Efficient Homes  Contractors can take a credit for each new energy-efficient home used as a residence in calendar year 2014. 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% annual reduction.

Energy Efficient Commercial Buildings  Section 179D is extended for calendar year 2014. A deduction is allowed for equipment installed in 2014 as part of a plan to reduce total annual energy and power costs for interior lighting, heating, cooling, ventilation and hot water systems by at least 50% compared to a building that meets minimum ASHRAE requirements. The deduction is $1.80 per sq. ft. for which the expenditures were made. It’s allowed in the year the property is placed into service. Tribes and non-profits can allocate the deduction to the person responsible for designing a property.