Iowa Administrative Code › Agency 701 - Revenue Department › Title II - Property Tax › Chapter 110 - Property Tax Credits and Exemptions › Rule 701-110.29 - Geothermal Heating and Cooling Systems Installed on Property Classified as Residential

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In general.
An exemption from property tax shall be allowed
				for any value added to property by any new construction or refitted
				installation of a geothermal heating or cooling system if the geothermal
				heating or cooling system is constructed or installed on or after July 1, 2012,
				on property classified as residential. The exemption shall also be allowed for
				a residential dwelling on agricultural land. The exemption does not have to be
				claimed the year subsequent to the year the geothermal system is constructed or
				installed. However, every individual claiming the exemption under this rule
				shall file with the appropriate assessor, not later than February 1 of the year
				for which the exemption is requested, an application for exemption. The
				assessor shall then allow or disallow the exemption.
Upon the filing and allowance of the claim, the claim shall
				  be allowed on the property for ten consecutive years without further filing as
				  long as the property continues to be classified as residential. However, if the
				  property ceases to be classified as residential or if the geothermal heating
				  and cooling system ceases to exist before the ten years have expired, no
				  exemption is allowed for the year in which the change in classification took
				  place or for any subsequent years. The exemption amount shall remain fixed at
				  the same amount that was allowed in the first year the exemption was
				  allowed.
The property tax exemption applies to any value added by the
				  addition of mechanical, electrical, plumbing, ductwork, or other equipment,
				  labor, and expenses included in or required for the construction or
				  installation of the geothermal system that would not have been included in the
				  home if not for the installation of the geothermal heating and cooling system.
				  Additionally, the proportionate value of any well field associated with the
				  system and attributable to the owner is exempt.
(2)
Calculation of value
				added.
As used in this rule, the terms "any value added" and "value
				added" mean the amount of increase in the actual assessed value of the property
				that is directly attributable to the new construction or refit installation of
				a geothermal heating or cooling system as of the first year for which the
				geothermal heating and cooling system is actually assessed. "Any value added"
				does not include speculative or indirect increases in value which, for example,
				may be attributable to reductions in energy consumption or reductions in the
				negative impact to the environment. "Any value added" does not include changes
				in value which are attributable to general housing market fluctuations. Cost of
				the new construction or refit installation of the geothermal heating or cooling
				system is not determinative of the value added to a property. In the event the
				exemption is not filed in the same year the geothermal heating and cooling
				system is first assessed, the amount of the exemption, upon filing, shall be
				the same amount as it would have been had the exemption been filed in the year
				the geothermal heating and cooling system was first assessed.
In the case of new construction and refit installation of a
				  geothermal heating or cooling system, the value added is the value that would
				  not have been included in the home if not for the construction or refit
				  installation of the geothermal heating and cooling system. That is, the value
				  of mechanical, electrical, plumbing, ductwork, or other equipment, labor, and
				  expenses that would have been included with a standard heating and cooling
				  system shall not be considered in calculating the value added. To measure the
				  value added by a geothermal heating and cooling system, the assessor shall
				  compute the difference between the assessed value of the residential property
				  if the property were outfitted with a non-geothermal (standard) heating and
				  cooling system and the assessed value of the property outfitted with the
				  geothermal system. In the case that the new construction or refit installation
				  takes more than one year, the assessor shall make the comparison in the year
				  the new construction or refit installation is completed.
EXAMPLE A: Mrs. Smith wants to upgrade her current standard
				  heating and cooling system in her home with a geothermal system. The geothermal
				  system installation is completed on August 1, 2012. On January 22, 2013, Mrs.
				  Smith files a claim for exemption for the value added to her property that is
				  directly attributable to the refit installation of the geothermal system. To
				  determine the value added that is directly attributable to the geothermal
				  system, the assessor shall compare the value of the home as though it was
				  outfitted with the standard heating and cooling system which was upgraded with
				  the value of the home outfitted with the geothermal heating and cooling system;
				  the difference between the two values is the exemption amount. That exemption
				  amount will remain fixed for the next ten years, until Mrs. Smith's home ceases
				  to be classified as residential, or until the geothermal system ceases to
				  exist, whichever occurs first. For years subsequent to 2013, any increase in
				  the value of Mrs. Smith's home beyond the assessed value of the home outfitted
				  with the geothermal heating and cooling system is not attributable to the
				  geothermal system and is subject to property tax. The property tax exemption
				  amount for the geothermal heating and cooling system will remain the same as
				  the first year for which the exemption was received even if the assessed value
				  of Mrs. Smith's home drops.
EXAMPLE B: Same facts as Example A, except that on January 1
				  of year seven, Mrs. Smith's home is reclassified as commercial property. No
				  property tax exemption is allowed for the value added by the geothermal system
				  for year seven or any subsequent years.
EXAMPLE C: Mr. Larson is building a new home and plans to
				  construct a new geothermal system in lieu of a standard heating and cooling
				  system. The home and geothermal system are completed on October 24, 2012. To
				  determine the value added that is directly attributable to the installation of
				  the geothermal system, the assessor shall assess the home as though it had been
				  outfitted with a standard heating and cooling system and compare that value
				  with the assessed value of the home outfitted with the geothermal heating and
				  cooling system. The difference between the two amounts is the value added that
				  is directly attributable to the geothermal system and is the exemption amount.
				  In 2013, the assessed value of Mr. Larson's home with a standard heating and
				  cooling system is $200,000. The assessed value of Mr. Larson's home with the
				  geothermal system is $210,000. Therefore, the value added to the property that
				  is directly attributable to the geothermal system is $10,000. Mr. Larson may
				  claim an exemption amount of $10,000 starting in assessment year 2013. Mr.
				  Larson does not lose the exemption if he fails to claim the exemption by
				  February 1, 2013; he may claim the exemption in any year subsequent to the
				  completion of the construction of the home. An exemption amount of $10,000 will
				  continue for ten consecutive years after the exemption is claimed, until the
				  property ceases to be classified as residential, or until the geothermal system
				  ceases to exist, whichever occurs first.
EXAMPLE D: Same facts as Example C, except that Mr. Larson
				  claims the exemption in 2019. The exemption amount in 2019, and the nine
				  subsequent years, is the value added in the year the geothermal heating and
				  cooling system was first assessed; here, $10,000 in 2013. The value added and
				  exemption amount is not calculated in the year Mr. Larson claims the exemption.
				  The $10,000 exemption will then continue until 2028, until the property ceases
				  to be classified as residential or until the geothermal system ceases to exist,
				  whichever occurs first.
This rule is intended to implement Iowa Code section
				  427.1.