House File 2174 - Introduced HOUSE FILE 2174 BY PETTENGILL A BILL FOR An Act creating a geothermal tax credit available against the 1 individual income tax and including effective date and 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5658HH (2) 86 mm/sc

H.F. 2174 Section 1. NEW SECTION . 422.10A Geothermal tax credit. 1 1. For purposes of this section, unless the context 2 otherwise requires: 3 a. “Qualified geothermal heat pump property” means any 4 equipment that uses the ground or groundwater as a thermal 5 energy source to heat the dwelling unit of the taxpayer or as a 6 thermal energy sink to cool such dwelling unit, which equipment 7 meets the requirements of the federal Energy Star program in 8 effect at the time that the expenditure for such equipment is 9 made. 10 b. “Qualified geothermal heat pump property expenditures” 11 means an expenditure for qualified geothermal heat pump 12 property installed on or in connection with a dwelling unit 13 located in Iowa and used as a residence by the taxpayer. 14 2. The taxes imposed under this division, less the credits 15 allowed under section 422.12, shall be reduced by a geothermal 16 tax credit equal to twenty-five percent of the qualified 17 geothermal heat pump property expenditures made by the taxpayer 18 during the tax year, not to exceed ten thousand dollars for 19 each separate and distinct geothermal installation. 20 3. The department shall establish criteria, by rule, for 21 determining what constitutes a separate and distinct geothermal 22 installation. Qualified geothermal heat pump property 23 expenditures shall be deemed to have been made on the date the 24 installation is complete or, in the case of new construction 25 or reconstruction, the date the original use of the structure 26 by the taxpayer begins. 27 4. In the case of a taxpayer whose dwelling unit is part 28 of a multiple housing cooperative organized under chapter 29 499A or a horizontal property regime under chapter 499B, 30 the taxpayer shall be treated as having made the taxpayer’s 31 proportionate share of any qualified geothermal heat pump 32 property expenditures made by the cooperative or the regime. 33 5. The tax credit shall be claimed by way of a tax credit 34 certificate issued by the department and included with the 35 -1- LSB 5658HH (2) 86 mm/sc 1/ 4

H.F. 2174 taxpayer’s tax return. To receive a tax credit, a taxpayer 1 must submit an application to the department. The department 2 shall issue certificates under this section on a first-come, 3 first-served basis, which certificates may be claimed for tax 4 credits. 5 6. The cumulative value of tax credits claimed annually 6 by applicants pursuant to this section shall not exceed two 7 million five hundred thousand dollars. If in a calendar year 8 the aggregate amount of tax credits applied for exceeds two 9 million five hundred thousand dollars, the department shall 10 establish a wait list for tax credits. Applications that were 11 approved but for which certificates were not issued shall be 12 placed on the wait list in the order the applications were 13 received and those applicants shall be given priority for 14 receiving certificates in succeeding calendar years. Placement 15 on a wait list pursuant to this subsection shall not constitute 16 a promise binding the state. The availability of a tax credit 17 and issuance of a tax credit certificate pursuant to this 18 section in a future calendar year is contingent upon the 19 availability of tax credits in that particular calendar year. 20 7. Any credit in excess of the tax liability is not 21 refundable but the excess for the tax year may be credited 22 to the tax liability for the following ten years or until 23 depleted, whichever is earlier. 24 8. A tax credit shall not be transferable to any other 25 person. 26 9. A taxpayer who is eligible to claim a credit under this 27 section may also claim the geothermal heat pump tax credit 28 under section 422.11I, if available, on the same expenditures. 29 Sec. 2. EFFECTIVE DATE. This Act takes effect January 1, 30 2017. 31 Sec. 3. APPLICABILITY. This Act applies to qualified 32 geothermal heat pump property expenditures incurred on or after 33 January 1, 2017. 34 EXPLANATION 35 -2- LSB 5658HH (2) 86 mm/sc 2/ 4

H.F. 2174 The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 This bill creates a geothermal tax credit available 3 against the individual income tax equal to 25 percent of the 4 expenditures for qualified geothermal heat pump property 5 installed on or in connection with a dwelling unit located in 6 Iowa and used as a residence by the taxpayer, not to exceed 7 $10,000 for each separate and distinct geothermal installation. 8 The bill requires the department of revenue (department) to 9 adopt rules for what constitutes a separate and distinct 10 geothermal installation. “Qualified geothermal heat pump 11 property” and other related terms are defined in the bill. 12 For purposes of the tax credit, expenditures are deemed to be 13 made on the date the installation is complete or, in the case 14 of new construction or reconstruction, the date the original 15 use of the structure begins. If the taxpayer’s dwelling 16 unit is part of a multiple housing cooperative (Code chapter 17 499A) or a horizontal property regime (Code chapter 499B) the 18 taxpayer is treated as having made a proportionate share of any 19 expenditures made by the cooperative or regime. 20 In order to receive a tax credit, the taxpayer submits 21 an application to the department and the department issues 22 the taxpayer a tax credit certificate. No more than $2.5 23 million in geothermal tax credits may be claimed per year. 24 If the applications for tax credits exceed that amount, the 25 department is required to establish a wait list in the order 26 the applications were received and those applicants will 27 receive priority for receiving tax credits in succeeding years. 28 The tax credit is nontransferable and nonrefundable, but any 29 amount in excess of the taxpayer’s tax liability may be carried 30 forward for up to 10 years. 31 A taxpayer who claims the geothermal tax credit is also 32 eligible to claim the geothermal heat pump tax credit under 33 Code section 422.11I, if available, on the same expenditures. 34 Code section 422.11I currently provides a tax credit equal 35 -3- LSB 5658HH (2) 86 mm/sc 3/ 4

H.F. 2174 to 20 percent of the federal residential energy efficiency 1 property tax credit for geothermal heat pumps, but that federal 2 credit is scheduled to expire after the 2016 tax year. 3 The bill takes effect January 1, 2017, and applies to 4 qualified geothermal heat pump property expenditures incurred 5 on or after that date. 6 -4- LSB 5658HH (2) 86 mm/sc 4/ 4