Tax credits for geothermal heat pumps are restored. Here’s how it happened and what it means for your business.
By Lauren Schapker
No good news coming out of Washington D.C. lately? Think again.
In early 2018, the National Ground Water Association and its members succeeded in a long-fought battle to restore an even playing field for geothermal heat pump tax credits. After years of advocacy, the U.S. Congress restored tax credits for the commercial and residential installation of geothermal heat pumps (GHPs) and other renewable energy technologies like fuel cells, small wind power, and combined heat and power through 2021.
The tax credits were originally established to provide home and business owners with an incentive to install renewable technologies into their homes and businesses. However, the recession and resulting housing crisis prevented the widespread adoption of these technologies. When established, the tax credits were to be temporary, expiring on December 31, 2016. NGWA and its allies argued the economic crisis prevented widespread adoption of the technologies, and thus, the tax credit should not expire that year.
Much of 2015 was spent arguing for an extension before Congress, urging members the technologies needed more time to take hold in the market. Feedback was positive, but GHPs suffered a blow just before Congress adjourned for the year when an extension of the tax credits was provided only to solar and wind technologies through 2021, while the remaining technologies—including GHPs—were left with the 2016 expiration date.
Why were these tax credits singled out after the technologies had worked together all year to secure an extension? Some in Congress claimed it was a mistake; others claimed it was deliberate. The real answer was never determined, but that didn’t stop NGWA and the other “orphaned” technologies from springing into action to work toward an even playing field.
Stressing Market Parity
At a base level, it seemed unfair certain technologies were signaled out for an extension, while others were left to expire. However, arguing fairness on Capitol Hill is rarely a winning strategy; so instead, NGWA focused on the importance of market parity in truly allowing these technologies to compete.
The mission to reinstate the tax credits became a centerpiece of NGWA’s government affairs strategy. From making the tax credit a key issue at NGWA Groundwater Fly-Ins to calling and writing their members of Congress about legislation that would reinstate GHP tax credits—NGWA volunteers were vital to this effort every step of the way.
To make a more effective case on Capitol Hill, NGWA joined with the other orphaned technologies and began an aggressive series of Hill visits each week, making the case GHP technologies should be able to compete with the same level of incentives that solar and wind technologies receive. NGWA even sent volunteers to a second Fly-In in September of 2016 solely focused on geothermal tax credits.
Our argument got traction quickly—members of Congress were interested in correcting this perceived oversight. Legislation was introduced, but finding the right timing, vehicle, and political will was not on our side. The 114th Congress concluded, and the tax credits for GHPs expired at midnight on December 31, 2016.
Despite the defeat and expiration of the tax credits, NGWA and its allies regrouped in 2017. We combined efforts with a larger coalition, joining more than 30 organizations in pursuit of reinstating these tax credits.
Throughout 2017 the same playbook that gained traction in 2016 was followed: relentless pursuit of congressional champions by NGWA staff in Washington, grassroots advocacy through letter-writing campaigns, and in-person constituent advocacy at the 2017 NGWA Groundwater Fly-In.
NGWA even created a new award presented to an “industry champion” to thank those in Congress standing up for geothermal heat pump tax credits. Congressman Tom Reed (R-New York) was the first member of Congress to receive the award, as he served as the lead champion of legislation to restore the tax credits.
A Pleasant Surprise
Despite the full-court press, another year went by with little action from Congress in pursuing our cause.
But when nearly all hope was lost, we received word in February 2018 that Congress was including the reinstatement of the tax credits in the Bipartisan Budget Act. This legislation was not previously discussed as a possible vehicle, so to say it was a pleasant surprise was an understatement. After several years of advocacy, we had a victory!
The tax credits are now in place through 2021. With an additional incentive to include GHPs in home and business plans, demand for GHPs should increase, boosting demand for qualified NGWA members for years to come.
NGWA thanks those volunteers who made calls, took meetings, and came to Washington to speak on the important role of these tax credits in helping your businesses. Hearing directly from constituents is one of the most powerful aspects of an advocacy program. We could not have achieved this victory without you.
Marketing the Tax Credits
As the economy continues its rebound and the housing market picks back up, the demand for GHP systems should increase. Installation of a GHP system in a home or business cannot be done without the assistance of drilling contractors.
When considering how to promote the tax credit to your customers, be sure to highlight the cost-benefit of GHP systems. While there is a higher up-front cost for their installation, the U.S. Department of Energy estimates the systems are up to 72% more efficient than electric resistance from standard air conditioning equipment. This efficiency translates to dollars saved on energy bills.
And when discussing the energy and dollar savings, mentioning the federal tax credit will sweeten the pot. Make sure your customers know this new tax credit will help them reach that break-even point on the installation of a system even sooner.
The tax credit is only available through 2021. Be sure your customers know if they’ve been on the fence, the additional savings is only around for a limited time. Their time to save is now!
Lauren Schapker started with NGWA in November 2014 as the director of government affairs. Prior to joining the Association, she served as director of government and political affairs for the Portland Cement Association and a senior policy adviser for Xenophon Strategies, a firm which provides government relations and public affairs services. Schapker can be reached at firstname.lastname@example.org.