Equipment that uses the ground or ground water as an energy source for heating and cooling a building is eligible for the tax credit. The system must be in the United States and only its owner can claim tax credits or depreciation deductions.1 After equipment is installed, the taxpayer must take legal title of the equipment and have all necessary licenses and permits needed for its operation. Starting in 2023, section 6418 allows for commercial taxpayers to transfer the credit to other taxpayers.
1. For the EPAct 179D tax deduction, the commercial building owner can take the deduction and for not for profit, government, or tribal government buildings, the designer can take the deduction. Equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property the construction of which begins before January 1, 2035.