Geothermal heat pump tax credit, 42.47
Adopted and Filed
Rule making related to geothermal heat pump income tax credit
The Revenue Department hereby amends Chapter 42, "Adjustments to Computed Tax and Tax Credits," Iowa Administrative Code.
Legal Authority for Rule Making
This rule making is adopted under the authority provided in Iowa Code sections 422.12N and 422.68.
State or Federal Law Implemented
This rule making implements, in whole or in part, Iowa Code section 422.12N.
Purpose and Summary
This rule making implements the Iowa geothermal heat pump income tax credit enacted in 2019 Iowa Acts, House File 779, for geothermal heat pumps installed on residential property in Iowa.
Public Comment and Changes to Rule Making
Notice of Intended Action for this rule making was published in the Iowa Administrative Bulletin on February 24, 2021, as ARC 5469C. No public comments were received. No changes from the Notice have been made.
Adoption of Rule Making
This rule making was adopted by the Department on March 31, 2021.
This rule making has no fiscal impact beyond that of the legislation it is intended to implement.
After analysis and review of this rule making, no impact on jobs has been found.
Any person who believes that the application of the discretionary provisions of this rule making would result in hardship or injustice to that person may petition the Department for a waiver of the discretionary provisions, if any, pursuant to rule 701—7.28(17A).
Review by Administrative Rules Review Committee
The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rule making by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rule making at its regular monthly meeting or at a special meeting. The Committee's meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).
This rule making will become effective on May 26, 2021.
The following rule-making action is adopted:
Rescind rule 701—42.47(422) and adopt the following new rule in lieu thereof:
701—42.47(422) Geothermal heat pump tax credit. For tax years beginning on or after January 1, 2019, a geothermal heat pump tax credit is available for residential property located in Iowa as provided in Iowa Code section 422.12N and this rule. Information relating to Iowa geothermal tax credits available for tax years prior to January 1, 2019, can be found in prior versions of this rule. Prior versions of the Iowa Administrative Code are located here: www.legis.iowa.gov/law/administrativeRules/agencies.
42.47(1) Eligibility for the credit. To be eligible for the credit described in this rule, all of the following requirements must be met:
a. The geothermal heat pump must be eligible for the federal residential energy efficient property tax credit provided in Section 25D(a)(5) of the Internal Revenue Code.
b. The taxpayer must claim the federal residential energy efficient property tax credit provided in Section 25D(a)(5) of the Internal Revenue Code.
c. The geothermal heat pump must be installed on residential property located in Iowa and placed in service on or after January 1, 2019. In determining whether this requirement is met, the term "placed in service" has the same meaning as used in Section 25D of the Internal Revenue Code.
d. The taxpayer must submit a timely and complete application to the department in accordance with subrule 42.47(4).
42.47(2) Calculation of the credit.
a. The credit is equal to 20 percent of the federal residential energy efficient property tax credit allowed for geothermal heat pumps provided in Section 25D(a)(5) of the Internal Revenue Code. Thus, the Iowa credit rate equals the following percentage of the qualified geothermal heat pump property expenditures:
(1)For property placed in service during calendar year 2019, 6 percent.
(2)For property placed in service during calendar years 2020 through 2022, 5.2 percent.
(3)For property placed in service during calendar year 2023, 4.4 percent.
b. This credit is set to expire on January 1, 2024, in accordance with Public Law No. 116-260, Div. EE, Title I, Subtitle C, §148. If the federal residential energy efficient property tax credit for geothermal heat pumps provided in Section 25D(a)(5) of the Internal Revenue Code is extended by federal legislation into additional tax years, the Iowa credit will continue to be available for each year in which the corresponding federal credit is available, absent action by the Iowa general assembly.
42.47(3) Tax credit award program limitations. No more than $1 million in geothermal heat pump tax credits will be issued per calendar year. If the annual tax credit allocation cap is not reached, the remaining amount below the cap shall be made available for the following tax year in addition to, and cumulated with, the cap for that year.
42.47(4) How to apply for the credit—waitlist.
a. In general. Timely and complete applications shall be reviewed and approved on a first-come, first-served basis. Applications for the tax credit shall be submitted through the tax credit submission system, which applicants may access through the department's website.
b. Application deadline. The application must be filed by May 1 of the year following the year of the installation of the geothermal heat pump.
c. Contents of the application. The application must contain the following information:
(1)Name, address, and federal identification number of the taxpayer.
(2)Date of installation of the geothermal heat pump. This is the same as the date the installation was placed in service by the taxpayer.
(3)Copies of invoices or other documents showing the cost of the geothermal heat pump.
(4)Amount of federal income tax credit claimed for the geothermal heat pump.
(5)Amount of Iowa tax credit requested.
(6)Any other information requested by the department in order to verify eligibility for or amount of the Iowa tax credit requested.
(1)If the department receives applications for tax credits in excess of the annual aggregate award limitation, the department shall establish a waitlist for the next year's allocation of tax credits. Valid and complete applications will be placed on the waitlist in the order they are received by the department. However, in the event the department denies an application or part of an application, and upon appeal by the taxpayer a previously denied tax credit amount is allowed, the date the appeal is closed will be used to determine the placement of the allowed tax credit amount on the waitlist. Waitlisted applications are reviewed and, if approved, funded in the order they are listed on the waitlist. Only valid applications filed by the taxpayer by May 1 of the year following the year the geothermal heat pump was installed shall be eligible for the waitlist.
(2)If the annual aggregate cap is reached for the final year in which the federal credit is available, no applications will be carried over to the next year. Therefore, any geothermal heat pump tax credit request related to an installation completed prior to January 1, 2024, that does not receive a tax credit award by the time the 2023 aggregate award limitation is met shall expire and shall not be carried over on the waitlist to any future year.
(3)Placement on a waitlist shall not constitute a promise binding the state that persons placed on the waitlist will actually receive the credit in a future year. The availability of a tax credit and approval of a tax credit application pursuant to this rule in a future year is contingent upon the availability of tax credits in that particular year.
42.47(5) Claiming the tax credit.
a. Certificate issuance. If the application is approved, the department will send a letter to the taxpayer including the amount of the tax credit and providing a tax credit certificate.
b. Claiming the tax credit. The geothermal heat pump tax credit will be claimed on Form IA 148, Tax Credits Schedule. The taxpayer must include with any Iowa tax return claiming the geothermal heat pump tax credit federal Form 5695, Residential Energy Credits.
c. Nonrefundable. Any credit in excess of the taxpayer's tax liability is nonrefundable.
d. Carryforward. Any tax credit in excess of the taxpayer's tax liability for the tax year may be credited to the taxpayer's tax liability for the following ten years or until depleted, whichever is earlier.
e. Nontransferable. The tax credit may not be transferred to any other person.
This rule is intended to implement Iowa Code section 422.12N and 2019 Iowa Acts, House File 779.
[Filed 4/1/21, effective 5/26/21]
Editor's Note: For replacement pages for IAC, see IAC Supplement 4/21/21.