Water Well Journal

February 2016

Water Well Journal

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Guest EDITORIAL N early every December the U.S. Congress heads home for the holidays, but not before making a mad dash to extend or renew expired or expiring provisions in the tax code. These "tax extenders" are generally tax credits placed in the tax code for a limited amount of time. As the expiration date for the tax credit approaches, many tax credits are given another look to determine whether or not they deserve to have their expiration date pushed back a few years. Several provisions throughout the tax code incentivize the use of geothermal heat pumps (GHPs), either by helping off- set the costs of installation through depreciation or with a tax deduction in support of renewable energy use. Many of these were put in place in the mid-2000s, includ- ing tax credits for GHP installations at the residential and commercial level, which was added to the tax code in 2006. These credits were given an expiration date of December 31, 2016 but the National Ground Water Association and allied organizations worked throughout 2015 to promote extending the tax credit in advance of its expiration, as well as to pro- mote other provisions in the tax code that would promote energy efficiency. Unfortunately, when the 2015 tax extenders bill was passed, an early extension of GHPs was not included. Con- gress extended provisions only for wind and solar under the false assumption provisions like geothermal, combined heat and power, and fuel cells among others did not need to be extended because they expire in 2016. However, solar also expires in 2016, refuting that argu- ment. NGWA worked quickly to make sure allies in Congress were aware of this oversight and continue to do so. Thankfully, several other provisions within the legislation NGWA advocated support for will be beneficial in stimulating markets for renewable energy systems, like GHPs as well. First, a key parameter for qualifying for the tax credit was modified. Rather than having renewable energy systems in- stalled and operational by the tax credits expiration date, the provision now only requires systems to be under construction rather than completed. A provision known as Section 179, which governs small business expensing, was made permanent in the final package. Section 179 allows for a business to deduct 100% of the full purchase price of property like a GHP system for items cost- ing up to $500,000. Next up, Congress also modified and extended bonus depreciation, extending it through 2017, with a phasedown beginning in 2018. The provision allows for 50% bonus depreciation for property placed in service through 2017. That number drops to 40% for 2018 and 30% in 2019. This provision could result in substantial tax savings for property owners, but is only eligible for new properties. A separate provision known as Section 179D was extended for two years, covering 2015 and 2016. This provision, which would retroactively apply to 2015, provides a tax deduction for the construction or retrofitting of energy efficient commer- cial buildings. So where do we go from here? Throughout December of last year, NGWA and its allies worked to ensure Congress was made aware of its oversight in extending only the solar investment tax credit. More than 50 organizations sent a letter to the House of Representatives and Senate leadership highlighting the oversight. Ways and Means Committee Chair Kevin Brady (R-Texas) acknowledged the oversight of other renewable technologies and agreed to continue discussions on the issue throughout 2016. Others involved in the negotiations described the exclu- sion of other technologies as a mistake. In addition, extension of GHP tax credits will be one of the four core issues NGWA advocates during its 2016 Groundwa- ter Fly-In, February 22-23 in Washington, D.C. Members of Congress need to hear from constituents like NGWA members who install and support the use of GHPs to generate momen- tum in support of extending tax credits for GHPs in residential and commercial applications. Outside of the tax incentives, Chair Lisa Murkowski (R- Alaska), who chairs the Senate Energy and Natural Resources Committee, has indicated she'd like to secure floor time to move a comprehensive energy package that passed out of her committee last summer. The legislation provides an opportunity to continue to pro- mote geothermal as a renewable energy technology, and NGWA has advocated geothermal's inclusion in the definition of "renewable." The bill that passed out of Murkowski's com- mittee did not include geothermal, so NGWA will continue to work with allies in the Senate in favor of this addition. Facing the headwinds a presidential election year typically brings, moving a large piece of legislation will be difficult, END-OF-YEAR TAX PACKAGE PROVIDES ADDITIONAL SUPPORT FOR GEOTHERMAL HEAT PUMPS Extension of GHP tax credits will be a core issue NGWA advocates during its 2016 Groundwater Fly-In. By Lauren Schapker 10 February 2016 WWJ waterwelljournal.com The legislation provides an opportunity to continue to promote geothermal as a renewable energy technology .

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