H.F. 635 Section 1. NEW SECTION . 422.11Y Geothermal heat pump tax 1 credit. 2 The taxes imposed under this division, less the credits 3 allowed under sections 422.12 and 422.12B, shall be reduced by 4 a geothermal heat pump tax credit under section 473B.2. 5 Sec. 2. Section 441.21, subsection 8, Code 2011, is amended 6 to read as follows: 7 8. a. Any normal and necessary repairs to a building, not 8 amounting to structural replacements or modification, shall not 9 increase the taxable value of the building. This paragraph 10 applies only to repairs of two thousand five hundred dollars 11 or less per building per year. 12 b. Notwithstanding paragraph “a” , any construction or 13 installation of a solar energy system on property classified 14 as agricultural, residential, commercial, or industrial 15 property , or a geothermal heat pump on property classified 16 as residential, shall not increase the actual, assessed and 17 taxable values of the property for five full assessment years. 18 c. As used in this subsection , “solar energy system” means 19 either of the following: 20 (1) A system of equipment capable of collecting and 21 converting incident solar radiation or wind energy into 22 thermal, mechanical or electrical energy and transforming these 23 forms of energy by a separate apparatus to storage or to a 24 point of use which is constructed or installed after January 25 1, 1978. 26 (2) A system that uses the basic design of the building to 27 maximize solar heat gain during the cold season and to minimize 28 solar heat gain in the hot season and that uses natural 29 means to collect, store, and distribute solar energy which is 30 constructed or installed after January 1, 1981. 31 d. As used in this subsection, “geothermal heat pump” 32 means a system or equipment which uses the ground or ground 33 water as a thermal energy source to heat a residence or as a 34 thermal energy sink to cool a residence, which meets energy 35 -1- LSB 2648HV (4) 84 rn/nh 1/ 5

H.F. 635 efficiency standards and guidelines pursuant to the energy 1 star program developed and jointly administered by the United 2 States environmental protection agency and the United States 3 department of energy in effect at the time of construction or 4 installation. 5 d. e. In assessing and valuing the property for tax 6 purposes, the assessor shall disregard any market value 7 added by a solar energy system or a geothermal heat pump to a 8 building. The director of revenue shall adopt rules, after 9 consultation with the office of energy independence, specifying 10 the types of equipment and structural components to be included 11 under the guidelines provided in this subsection . 12 Sec. 3. NEW SECTION . 473B.1 Definitions. 13 As used in this chapter, unless the context otherwise 14 requires: 15 1. “Allowable costs” means amounts incurred in the 16 construction or installation of a geothermal heat pump which 17 are determined by the department by rule to qualify for the tax 18 credit issued pursuant to section 473B.2. 19 2. “Department” means the department of economic 20 development. 21 3. “Geothermal heat pump” means a system or equipment 22 which uses the ground or ground water as a thermal energy 23 source to heat a residence or as a thermal energy sink to 24 cool a residence, which meets energy efficiency standards 25 and guidelines pursuant to the energy star program developed 26 and jointly administered by the United States environmental 27 protection agency and the United States department of energy in 28 effect at the time of construction or installation. 29 Sec. 4. NEW SECTION . 473B.2 Tax credit. 30 1. A geothermal heat pump tax credit shall be issued for the 31 allowable costs incurred in the construction or installation 32 of a geothermal heat pump equal to five percent of the cost of 33 the construction or installation, subject to a maximum credit 34 of three thousand dollars. Any credit issued in excess of 35 -2- LSB 2648HV (4) 84 rn/nh 2/ 5

H.F. 635 tax liability for the taxable year during which construction 1 or installation occurs may be carried forward and applied in 2 future taxable years. 3 2. The credit shall be limited to allowable costs in 4 connection to a residence which is owned and used either as a 5 primary or vacation residence by a property owner applying for 6 the credit. Rental property shall not qualify as residential 7 property for purposes of the credit. 8 3. A geothermal heat pump shall not be required to include 9 water heating to qualify for the tax credit. 10 Sec. 5. NEW SECTION . 473B.3 Tax credit certificate —— 11 application and issuance. 12 1. To receive a geothermal heat pump tax credit as described 13 in section 473B.2, a taxpayer shall file an application 14 with the department, the form and content of which shall be 15 determined by the department by rule. If upon receipt of a 16 completed application, the department finds that the person is 17 qualified for a geothermal heat pump tax credit, the department 18 shall calculate the amount of the tax credit for which the 19 person is eligible and shall issue a geothermal tax credit 20 certificate to the person or notify the person in writing 21 of its refusal to do so. The tax credit certificate may be 22 applied against tax owed pursuant to chapter 422, division II, 23 for the year in which the allowable costs were incurred. 24 2. A person whose application for a geothermal heat pump 25 tax credit certificate is denied may file an appeal with the 26 department within sixty days from the date of denial pursuant 27 to the provisions of chapter 17A. 28 3. If a geothermal heat pump tax credit certificate is 29 allowed with respect to a residence, and such residence is 30 sold, the credit for the period after the sale which would have 31 been allowable under this chapter to the prior owner had the 32 property not been sold shall be allowable to the new owner. A 33 tax credit for the year of sale shall be allocated between the 34 parties on the basis of the number of days during such year 35 -3- LSB 2648HV (4) 84 rn/nh 3/ 5

H.F. 635 that the property was owned by each. 1 Sec. 6. NEW SECTION . 473B.4 Reporting. 2 On or before January 1, annually, the department shall 3 submit a written report to the governor and the general 4 assembly regarding the number and value of geothermal heat 5 pump tax credit certificates issued under this chapter, and 6 any other information the department may deem meaningful and 7 appropriate. 8 Sec. 7. EFFECTIVE AND RETROACTIVE APPLICABILITY 9 DATES. This Act, being deemed of immediate importance, takes 10 effect upon enactment and is retroactively applicable to tax 11 years beginning on or after January 1, 2011. 12 EXPLANATION 13 This bill relates to the impact of the construction and 14 installation of geothermal heat pumps on residential property 15 values, and provides income tax credits for such construction 16 and installation. 17 The bill defines a “geothermal heat pump” to mean a system or 18 equipment which uses the ground or ground water as a thermal 19 energy source to heat a residence or as a thermal energy sink 20 to cool a residence, which meets energy efficiency standards 21 and guidelines pursuant to the energy star program developed 22 and jointly administered by the United States environmental 23 protection agency and the United States department of energy in 24 effect at the time of construction or installation. 25 The bill adds geothermal heat pumps to current provisions 26 involving solar energy systems providing that their 27 construction or installation will not increase the actual, 28 assessed, and taxable property values for five full assessment 29 years. This is limited to residential property in the case of 30 a geothermal heat pump. 31 The bill additionally provides that allowable costs, as 32 determined by the department of economic development, incurred 33 in the construction or installation of a geothermal heat pump 34 shall be eligible for a personal income tax credit of 5 percent 35 -4- LSB 2648HV (4) 84 rn/nh 4/ 5

H.F. 635 of the cost of construction or installation, up to a maximum 1 of $3,000. The bill states that any credit issued in excess of 2 tax liability for the taxable year during which construction 3 or installation occurs may be carried forward and applied in 4 future taxable years, and that the credit shall be limited 5 to a residence which is owned and used either as a primary 6 or vacation residence, and shall not be applicable to rental 7 property. 8 The bill specifies tax credit certificate application and 9 issuance procedures, provides for the filing of an appeal in 10 the event an application is denied, and provides for credit 11 allocation in the event a residence is sold during the year in 12 which the tax credit applies. 13 The bill directs the department to submit a written report on 14 or before January 1 annually to the governor and the general 15 assembly regarding the number and value of geothermal heat pump 16 tax credit certificates issued and any other information the 17 department deems meaningful and appropriate. 18 The bill takes effect upon enactment and applies 19 retroactively to tax years beginning on or after January 1, 20 2011. 21 -5- LSB 2648HV (4) 84 rn/nh 5/ 5