Federal government extends 10% commercial geothermal tax credit and EPAct Tax Deduction 179D
At Denovo, we use renewable energy for breakthrough value-driven solutions, and we are very excited the federal government voted to approve an extension of the 10% geothermal tax credit that had sunsetted at the end of 2016. The reinstated tax credit is retroactive to January 1st, 2017 and will extend to all projects commenced by January 1, 2022.
The reinstatement of the 10% geothermal tax credit is great news for entities planning future work, but paramount for entities that proceeded with geothermal projects in 2017 without it. Denovo worked with clients throughout 2017 who proceeded with geothermal without the credit, basing their decision to use the renewable on performance advantages. This is a tremendous win for those who can now apply a 10% tax credit to their past investment.
In addition, geothermal solutions tie into another energy incentive extended by the federal government. Under Code Sec. 179D, as enacted by the Energy Policy Act of 2005 (EPAct), building owners or tenants who make qualifying energy-reducing investments can obtain immediate tax deductions of up to $1.80-per-square-foot. If the building project doesn’t qualify for the maximum deduction, there are tax deductions of up to $0.60-per-square-foot for each of the three major building subsystems: lighting, HVAC and the building envelope.
It should be noted that the federal tax credits for wind and solar stayed in effect this whole time. This geothermal extension achieves parity between the three renewables. Geothermal heat pumps can constitute a highly profitable investment, with a very attractive payback time. Financial advantages are not restricted to reducing annual energy bills, but also encompass reduced system replacement and maintenance costs.
We keep a close eye on all local, state, and federal renewable incentives where we work as almost all of our MEP construction projects involve renewable energy sources. Currently, we are utilizing solar thermal to significantly reduce the amount of propane used in the swine industry. In large commercial buildings and hotels, we utilize geothermal heat pumps as an energy-efficient alternative to traditional HVAC systems.