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Geothermal Heat Pump Tax Credits and 179D Commercial Buildings Energy Efficiency Tax Deduction Approved by Congress

On February 9, 2018, the U.S. geothermal heat pump (GHP) industry scored a victory for its workforce as federal legislation was passed to extend federal tax credits for residential and commercial installations of GHPs. The measure was included in the continuing resolution spending bill approved by Congress.

The reinstated GHP tax credits are retroactive to January 1, 2017, and extend to January 1, 2022. The language also changes an important consideration for commercial GHP projects, making them eligible if commenced by January 1, 2022 rather than placed in service.

“Todays action by Congress finally fixes the inequity created two years ago when tax credits for solar installations were extended through 2021,” stated Geothermal Exchange Organization (GEO) President and CEO Doug Dougherty. “Credits for technologies including GHPs, fuels cells, microturbines, small wind and combined heat and power were left to expire at the end of 2016.”

In addition to reinstating the GHP tax credits, the EPAct 179D (Commercial Buildings Energy Efficiency Tax Deduction) which enables building owners to claim a tax deduction for installing qualifying systems and buildings, has been retroactively extended to include projects completed in 2017. This tax deduction of $1.80 per square foot is available to owners of new or existing buildings who install (1) interior lighting; (2) building envelope, or (3) heating, cooling, ventilation, or hot water systems that reduce the buildings total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by The American Society of Heating, Refrigerating and Air-Conditioning Engineers. Deductions of $0.60 per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems that partially qualify by meeting certain target levels.

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