Water-Source Heat Pump Tax Credit
Under section 179D of IRS code, a tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50 percent of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001 for the 2015 tax year, and ASHRAE Standard 90.1-2007 for the 2016 tax year.
Partial deductions of up to $0.60 per square foot can be taken for measures affecting any one of three building systems; the building envelope, lighting, or heating and cooling systems. These tax deductions are available for systems “placed in service” from January 1, 2015 through December 31, 2016.
In early 2012, the IRS released a bulletin that changed the requirement to obtain a partial deduction for upgrades to HVAC and hot water systems. Retroactively effective to March 12, 2012, the energy savings threshold a building must reach to obtain a partial deduction was reduced to 15 percent with respect to a reference building that meets ASHRAE Standard 90.1-2001. Please see IRS Notice 2006-52 for specific computation and building certification requirements that must be satisfied to claim the deduction.
Geothermal Tax Credit
HR 1090 reinstitutes and extends through 2021 commercial and residential installation tax credits for geothermal heat pumps. Included are a 10% commercial Investment Tax Credit under Sec. 48 of the tax code under Sec. 25D.
The commercial tax credit will remain at 10% through 2021. The bill also changes “placed in service” language in the tax code to “construction of which begins before Jan. 1, 2022” for commercial projects, ensuring consumers can enjoy the tax credit benefits right up to their new expiration date.