SF 491 (LSB 2222XS (2) 86)

SENATE FILE 491

BY  ANDERSON

A BILL FOR

An Act creating a geothermal tax credit available against the individual income tax and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  422.10A  Geothermal tax credit.
   1.  For purposes of this section, unless the context otherwise requires:
   a.  “Qualified geothermal heat pump property” means any equipment that uses the ground or ground water as a thermal energy source to heat the dwelling unit of the taxpayer or as a thermal energy sink to cool such dwelling unit, which equipment meets the requirements of the federal Energy Star program in effect at the time that the expenditure for such equipment is made.
   b.  “Qualified geothermal heat pump property expenditures” means an expenditure for qualified geothermal heat pump property installed on or in connection with a dwelling unit located in Iowa and used as a residence by the taxpayer.
   2.  The taxes imposed under this division, less the credits allowed under section 422.12, shall be reduced by a geothermal tax credit equal to twenty-five percent of the qualified geothermal heat pump property expenditures made by the taxpayer during the tax year, not to exceed ten thousand dollars for each separate and distinct geothermal installation.
   3.  The department shall establish criteria, by rule, for determining what constitutes a separate and distinct geothermal installation. Qualified geothermal heat pump property expenditures shall be deemed to have been made on the date the installation is complete or, in the case of new construction or reconstruction, the date the original use of the structure by the taxpayer begins.
   4.  In the case of a taxpayer whose dwelling unit is part of a multiple housing cooperative organized under chapter 499A or a horizontal property regime under chapter 499B, the taxpayer shall be treated as having made the taxpayer’s proportionate share of any qualified geothermal heat pump property expenditures made by the cooperative or the regime.
   5.  The tax credit shall be claimed by way of a tax credit certificate issued by the department and included with the taxpayer’s tax return. To receive a tax credit, a taxpayer must submit an application to the department. The department shall issue certificates under this section on a first-come, first-served basis, which certificates may be claimed for tax credits.
   6.  The cumulative value of tax credits claimed annually by applicants pursuant to this section shall not exceed two million five hundred thousand dollars. If in a calendar year the aggregate amount of tax credits applied for exceeds two million five hundred thousand dollars, the department shall establish a wait list for tax credits. Applications that were approved but for which certificates were not issued shall be placed on the wait list in the order the applications were received and those applicants shall be given priority for receiving certificates in succeeding calendar years. Placement on a wait list pursuant to this subsection shall not constitute a promise binding the state. The availability of a tax credit and issuance of a tax credit certificate pursuant to this section in a future calendar year is contingent upon the availability of tax credits in that particular calendar year.
   7.  Any credit in excess of the tax liability is not refundable but the excess for the tax year may be credited to the tax liability for the following ten years or until depleted, whichever is earlier.
   8.  A tax credit shall not be transferable to any other person.
   9.  A taxpayer who is eligible to claim a credit under this section may also claim the geothermal heat pump tax credit under section 422.11I, if available, on the same expenditures.
    Sec. 2.  EFFECTIVE DATE.  This Act takes effect January 1, 2017.
    Sec. 3.  APPLICABILITY.  This Act applies to qualified geothermal heat pump property expenditures incurred on or after January 1, 2017.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill creates a geothermal tax credit available against the individual income tax equal to 25 percent of the expenditures for qualified geothermal heat pump property installed on or in connection with a dwelling unit located in Iowa and used as a residence by the taxpayer, not to exceed $10,000 for each separate and distinct geothermal installation. The bill requires the department of revenue (department) to adopt rules for what constitutes a separate and distinct geothermal installation. “Qualified geothermal heat pump property” and other related terms are defined in the bill. For purposes of the tax credit, expenditures are deemed to be made on the date the installation is complete or, in the case of new construction or reconstruction, the date the original use of the structure begins. If the taxpayer’s dwelling unit is part of a multiple housing cooperative (Code chapter 499A) or a horizontal property regime (Code chapter 499B) the taxpayer is treated as having made a proportionate share of any expenditures made by the cooperative or regime.
   In order to receive a tax credit, the taxpayer submits an application to the department and the department issues the taxpayer a tax credit certificate. No more than $2.5 million in geothermal tax credits may be claimed per year. If the applications for tax credits exceed that amount, the department is required to establish a wait list in the order the applications were received and those applicants will receive priority for receiving tax credits in succeeding years. The tax credit is nontransferable and nonrefundable, but any amount in excess of the taxpayer’s tax liability may be carried forward for up to 10 years.
   A taxpayer who claims the geothermal tax credit is also eligible to claim the geothermal heat pump tax credit under Code section 422.11I, if available, on the same expenditures. Code section 422.11I currently provides a tax credit equal to 20 percent of the federal residential energy efficiency property tax credit for geothermal heat pumps, but that federal credit is scheduled to expire after the 2016 tax year.
   The bill takes effect January 1, 2017, and applies to qualified geothermal heat pump property expenditures incurred on or after that date.