Federal and State incentives

Federal Incentives

The U.S. federal Energy Policy Act of 2005 (H.R. 6) expanded the federal business energy tax credit for geothermal energy property to include fuel cells and microturbines installed in 2006 and 2007. These provisions of the tax credit were later extended through December 31, 2008, by Section 207 of the Tax Relief and Health Care Act of 2006 (H.R. 6111). (A 10% federal energy tax credit was available to businesses that invested in or purchased geothermal energy property in the United States prior to January 1, 2006.)

Geothermal energy property includes equipment used to produce, distribute, or use energy derived from a geothermal deposit. It does not include geothermal heat pumps. For electricity produced by geothermal power, equipment qualifies only up to, but not including, the electrical transmission stage. Energy property does not include public utility property, passive solar systems, or pool heating equipment.

To qualify, the original use of the equipment must begin with the taxpayer or it must be constructed by the taxpayer. The equipment must also meet any performance and quality standards in effect at the time the equipment is acquired. The energy property must be operational in the year in which the credit is first taken.

If the project is financed in whole or in part by subsidized energy financing or by tax-exempt private activity bonds, the basis on which the credit is calculated must be reduced. (The formula is described in the tax credit instructions.) Subsidized energy financing means "financing provided under a federal, state, or local program, a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy." Therefore, a business must reduce the basis for calculating the credit by the amount of any such incentives received.

State Incentives

Many states offer a variety of tax incentives and rebates for homeowners who implement geothermal energy systems.   The specific details of the rebate are different from state to state. One of the best ways to find out more about the potential incentives in your state is to consult the DSIRE database.  This is a national database of renewable energy incentives that is maintained by the North Carolina Solar Center and the Interstate Renewable Energy Council (IREC) and funded by the U.S. Department of Energy.  You can find it at this link: http://www.dsireusa.org/searchby/searchtype.cfm?&CurrentPageID=2&EE=1&RE=1.