I’m not sure if it was because our elected leaders were being deceitful or incompetent, but, at the end of the day, the HVAC industry — and, specifically, the geothermal segment — just got the fuzzy end of a legislative lollipop.

There has been much talk recently about extending existing geothermal tax credits. Currently, geothermal heat pumps in commercial applications are eligible for a 10 percent income tax credit, and residential applications may receive up to a 30 percent incentive. If you’re scoring at home, these are listed under the 48a and 25d tax codes.

These credits are due to expire at the close of 2016. We’ve covered them extensively in The NEWS.

The geothermal folks have been lobbying in Washington, attempting to gain ground on the issue. They have a solid argument in that since the credits were enacted right before the great crash of 2008, this industry has not really been able to fully utilize them until the recent turnaround of the construction market. These credits are a big deal to the industry.

There was excitement when the Omnibus bill to extend the tax credits was nearing the finish line in mid-December. Some inevitable horse trading between both sides of the aisle was helping get the deal done. Republicans aimed to end the U.S. ban on crude oil exports while Democrats desired to extend the tax credits for renewables. A deal was struck, but, as the dust settled, the solar industry got their tax credits extended while the geothermal folks were left out in the cold.

The HVAC industry’s favorite member of Congress Nancy Pelosi (sarcasm intended) said, “We still have some unfinished business there, because the bill, through a drafting error, did not include fuel cells, geothermal, and some other renewables that are part of that tax credit.”

A drafting error? I guess I give more attention to detail on my fantasy football trades than the U.S. government does to passing legislation.

Doug Dougherty, president of the Geothermal Exchange Organization (GEO), has a much better attitude about this than I. Perhaps that is why I am a journalist and he is running a major industry organization. Dougherty is a glass-half-full kind of guy.

“At first blush, GHP exclusion from tax credit extensions in the Omnibus bill looked bad for the industry,” he said. “But, on further review, we now believe the situation has created an easier path for us to get 48A and 25D tax credits for GHPs extended to 2022. During the first quarter of the year, our goal is to include GHPs in an amendment that will give us parity with solar industry tax credit extensions. That is the opportunity that we are now focused on going forward.”

I guess that is the only attitude someone in his job can take. And, the silver lining is, the industry was looking to extend the credits to 2020, so he’s hoping to gain an extra two years out of the deal.

“Solar did clear the path for us and made the end of the path more generous than what we were originally asking for,” Dougherty said.

But, it’s important to note that, until these credits are actually extended, all the promises politicians are making on this subject are worthless. Even if we take them at their word and assume it was an honest mistake (not completely sure on that one), it just takes one unforeseen event to change the words coming out of Washington. If the economy takes a hit in January — and we hope it won’t — that would entirely change the stomach Congress has for extending tax credits.

Let’s hope the legislators stand behind their comments. Both sides of the aisle seem willing to revisit the issue. This is important because the government should not be in the business of picking winners and losers. That is not what the free market is all about. If one renewable energy gets its tax credit extended, they all should. Let the customers decide what works for them. If you are selling geothermal products, it might be a good time to contact your representatives.

Publication date: 1/11/2016

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