Geothermal Tax Credits Excluded from Final Tax Reform Bill
Doug Dougherty, CEO, Geothermal Exchange Organization (GEO), is disappointed but remains optimistic
All too often, desire begets disappointment. That surely has been the case for the geothermal heat pump (GHP) industry and its national trade association, the Geothermal Exchange Organization (GEO), for the past two years as efforts to regain tax credit parity with the solar industry have been met with dashed hopes and unfulfilled promises by Congress.
On Dec. 15, a Senate-House Conference Committee released its agreed-upon tax reform bill. But, to the surprise and dismay of GEO, our hard-fought language to finally bring tax credit parity back to the GHP industry was not included within the bill.
Needless to say, we were extremely disappointed that the tax credit inequity created by
Congress in a solar incentive deal that was passed in late-2015 remains. Even so, we ended the week before Christmas with positive news from Congress for a fix that we hope will finally happen early next year.
The House Bill Gave Hope for Parity
Since early 2017, GEO and its allies were cheered by HR 1090 (cosponsored by Reps. Tom
Reed, R-N.Y., and Mike Thompson, D.-Calif., and companion legislation S 1409, sponsored by Sens. Tom Carper, D-Del., and Dean Heller, R-Nev. Both bills would have corrected this inequity by extending the residential and commercial tax credits for GHPs and other orphaned technologies until Jan. 1, 2022, just like they did for solar. The residential income tax credit would be retroactive to Jan. 1, 2017; the residential credit would be 30 percent of installed cost and continue at that level until 2020 when it would drop to 26 percent and then at 22 percent for 2021 and end on Dec. 31, 2021; and the 10 percent commercial investment tax credit would be extended until Jan. 1, 2022, and change the language for placed in service to “property the construction of which begins before Jan.1, 2022.”
Last month, the House of Representatives included the tax parity language of HR 1090 in its much vaunted tax bill. The language would correct the inequity created two years ago when Congress extended tax credits for solar and wind, but not for GHPs and several other “orphaned” clean energy technologies.
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GEO lauded Kevin Brady, R-Texas, chairman of the House Ways & Means Committee and Paul Ryan, R-Wis., Speaker of the House, for agreeing that Congress should not have picked winners and losers among renewable energy industries with its omnibus spending bill in December 2015.
Even though the Senate version of the tax bill did not address the tax credits, GEO remained confident that our tax credit language would survive conference committee deliberations. But those hopes were dashed when the Senate and the House passed their final tax reform bill, which had been purged of our provisions for tax credit parity for GHPs and orphaned clean energy technologies.
Good News on the Horizon
After being dropped from the tax reform bill, GEO’s strategy immediately pivoted to inclusion of S 1409’s tax credit parity in a bill to extend several popular business tax breaks. Our wish was fulfilled shortly after final passage of tax reform on Dec. 20, when the Senate released the Tax Extender Act of 2017. The measure includes GEO-supported language for reinstating and extending both residential (Section 25D) and commercial (48a) tax credits.
The Senate tax extender bill extends our credits for the full five years from Jan. 1, 2017, through Dec. 31, 2021, with a phaseout of 25D similar to solar with “placed in service” language changed to“construction commenced.”
Most importantly, we were successful in distinguishing the GHP tax credits from 33 other provisions in the legislation that are only granted a year retroactive to Jan. 1, 2017, and a one-year extension to the end of 2018.
Now, our challenge is to make sure that the language of S.1409 remains firmly in that legislation with no changes. Working in our favor is the Senate bill’s inclusion of a tax credit extension for the nuclear power industry and a provision for carbon sequestration to fight greenhouse gas emissions, putting in place a broad coalition of other industries that will be pushing for passage of the legislation.
In a recent interview with Beltway news outlet Politico, Brady said that when work accelerates on tax extenders, he is ready. So is GEO.
The GHP industry is bleeding jobs because Congress chose winners and losers among clean energy technologies. That decision is destroying a 100 percent domestic industry. Congressional leaders must understand that if our tax credits are relegated to a one-year retroactive and one-year forward fix, our jobs are not coming back.
At the time of this writing, it does not appear that the Senate bill will achieve passage before
Congress goes home for the holidays. More likely, it will be part of a continuing spending resolution scheduled for Jan. 19, 2018. Either way, it can’t come soon enough.
It’s high time that Congress lives up to its promises and legislates GHP parity with the solar industry. That means nothing less than equal tax credit treatment with the full five-year extension (2017-2021) of tax credits for GHPs now contained in the Senate Tax Extender Act.
For more information, visit www.geoexchange.org.
Publication date: 12/21/17
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