R362-2-10. Investment Tax Credit, Eligible Costs for Commercial and Residential Systems, Geothermal Heat Pumps

  (A) All eligible costs for geothermal heat pump systems must conform with Section R362-2-5, above. Geothermal heat pump systems must also meet the requirements in this Section.

  (B) In order to be eligible for residential or commercial tax credits, a geothermal heat pump system employed to heat and/or cool a building must derive at least 75% of the heating and cooling from the ground. Systems that provide more than an insignificant amount of energy to the building using combustion, cooling towers, air-source heat pumps, or any other mechanism not involving thermal ground coupling are not eligible.

  (C) In order to be eligible for residential or commercial tax credits, a geothermal heat pump system must conform with the design and practice guidelines described in the American Society of Heating, Refrigerating, and Air Conditioning Engineers' (ASHRAE) Applications Handbook, Chapter 32, or Air Conditioning Heating and Refrigeration Institute (AHRI) Certified Product Directory, Page 4-8.

  (D) In order to be eligible for residential or commercial tax credits, a geothermal heat pump system must have been designed by either:

  1. A professional engineer licensed in Utah;

  2. A person designated as a "Certified GeoExchange Designer" by the Association of Energy Engineers; or

  3. A person designated as a "Certified Energy Manager" by the Association of Energy Engineers; or

  4. For geothermal heat pump systems installed in a residential unit only, a person designated as an "Accredited Installer" by the International Ground Source Heat Pump Association (IGSHPA).

  5. For direct geoexchange systems, a person designated as a certified designer by an AHRI accredited direct geoexchange systems manufacturer.

  Proof of designer qualification may be required on the tax credit application.

  (E) In order to be eligible for residential or commercial tax credits, a geothermal heat pump system must have been installed by a plumber licensed (S210) or HVAC contractor (S350) in the State of Utah or by an installer certified by the International Ground Source Heat Pump Association (IGSHPA). Proof of installer qualification may be required on the tax credit application.

  (F) In the case of a system using a vertical bore (either ground source or water source), drilling must be performed by a water well driller licensed by the Utah Division of Water Rights. Wells drilled for a vertical bore must also obtain a non-production well approval from the Utah Division of Water Rights, Department of Natural Resources. Proof of driller qualifications and well approval may be required on the tax credit application.

  (G) Costs incurred for the drilling of wells or excavating trenches are eligible if actually used within the final system for the exchange of heat with the ground. The cost of exploratory wells or trenches that are not used within the final system are not eligible.

  (H) Design costs for a geothermal heat pump system are eligible but only for the components of the system that would not normally be associated with a conventional heating and air conditioning system. Tax credit applications should separate design costs for the geothermal and conventional components of the system.

  (I) For closed loop systems (both ground source and water source), the heat exchanging pipe loop shall be warranted by the installer against leakage or breakage for not less than three years from the date of installation.

  (J) For purposes of computing eligible costs for residential and commercial tax credits, the eligible cost of a geothermal heat pump system is considered to be no higher than $6,500 per ton of output capacity for residential systems and $5,500 per ton of output capacity for commercial systems for all eligible costs listed above and in Section R362-2-5 and prior to any cash rebates or incentives that the taxpayer may receive from a third party (such as a utility).

  1. For a residential tax credit application with total pre-rebate eligible costs exceeding $6,500 per ton of capacity, the amount of the tax credit shall be calculated as follows:

  Tax credit granted = (($6,500 x rated output capacity in tons) - rebates) x 0.25

  2. For a commercial tax credit application with total eligible costs exceeding $5,500 per ton, the amount of the tax credit shall be calculated as 10% of costs calculated as follows:

  Tax credit granted = (($5,500 x rated output capacity in tons) - rebates) x 0.10

  3. If the cost of a geothermal heat pump system exceeds $6,500(residential) or $5,500(commercial) per ton of capacity due to unusual and/or unavoidable circumstances (such as poor soil or drilling conditions) the taxpayer applicant may request that the reasonable cost limitation above be waived by OED. In order to do so, the applicant must provide written documentation and explanation from the designer or installer of the system as to why the final system cost exceeded this limit. Granting of such a waiver will be at the discretion of OED and OED after investigation as to the validity of the waiver claim.