Geothermal Tax Parity Act
- Bill Number
- H.R. 6873
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-12-18: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-01-21T16:04:14Z
AI-Generated Summary
Purpose
The Geothermal Tax Parity Act aims to promote the exploration and development of geothermal energy resources by extending certain tax benefits—previously available only for oil and gas—to geothermal deposits. This creates tax parity between geothermal energy (a renewable resource) and traditional fossil fuels, encouraging investment in cleaner energy sources.
Key Provisions
- Short Title: The bill is titled the "Geothermal Tax Parity Act."
- Amortization of Expenditures (Section 2): Allows businesses to spread out (amortize) the costs of geological and geophysical surveys and studies over time for tax deduction purposes when exploring or developing geothermal deposits. This applies to expenses paid or incurred in taxable years starting after the bill's enactment.
- Exception to Passive Loss Rules (Section 3): Exempts "working interests" (active ownership stakes involving management or operations) in geothermal properties from passive activity loss limitations. These rules normally restrict deducting losses from investments where the taxpayer does not materially participate. The exemption applies to taxable years beginning after enactment.
Significant Changes to Existing Law
- Amends Section 167(h)(1) of the Internal Revenue Code (IRC) by inserting "or geothermal deposits" after "oil or gas," expanding amortization eligibility from fossil fuels to renewables.
- Revises Section 469(c)(3) of the IRC by replacing "oil or gas" with "oil, gas, or geothermal" in the heading and text, broadening the exception to passive loss limitations to include geothermal activities.
These changes align geothermal tax treatment with that of oil and gas, which has long enjoyed these deductions to offset high upfront exploration costs.
Potential Impacts
- On Citizens and Businesses: Geothermal companies and investors can deduct more expenses upfront or over time, reducing taxable income and lowering barriers to entry. This may spur job creation in renewable energy sectors and make geothermal power more economically viable, potentially lowering energy costs for consumers over time.
- On Government Agencies: The Internal Revenue Service (IRS) will need to administer these expanded deductions, possibly requiring minor updates to tax forms and guidance, but no major overhaul is anticipated.
- On International Relations: Minimal direct impact, though increased U.S. geothermal development could enhance energy independence and position the U.S. as a leader in renewable technologies, indirectly influencing global climate discussions.
- Broader Effects: Could accelerate geothermal project growth, contributing to reduced reliance on fossil fuels and supporting environmental goals like lower carbon emissions.
Main Stakeholders Affected
- Geothermal Energy Industry: Companies involved in exploration, drilling, and development benefit from cost recovery through tax deductions.
- Investors and Taxpayers: Individuals or entities with working interests in geothermal properties gain from eased loss deduction rules, making investments more attractive.
- Energy Sector Competitors: Oil and gas firms may face indirect competition as geothermal becomes more financially competitive.
- General Public: Benefits from potential expansion of domestic renewable energy, though higher-income energy investors see the most direct financial gains.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens tax equity in energy policy by treating renewables similarly to fossils, potentially reducing future litigation over unequal treatment under the IRC. No challenges to tax code authority are evident.
- Constitutional: Aligns with Congress's broad power to regulate taxation (Article I, Section 8), with no apparent free speech, due process, or equal protection issues.
- Political: Highlights bipartisan support (introduced by representatives from both parties) for renewable energy incentives amid debates on climate change and energy security. It could influence broader tax reform discussions by setting a precedent for extending fossil fuel subsidies to green alternatives, though critics might argue it favors specific industries without broader revenue offsets.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (5)
Rep. Garamendi, John [D-CA-8], Rep. Moore, Blake D. [R-UT-1], Rep. Fulcher, Russ [R-ID-1], Rep. Horsford, Steven [D-NV-4], Rep. Auchincloss, Jake [D-MA-4]
Recent Actions
- 2025-12-18: Referred to the House Committee on Ways and Means.
- 2025-12-18: Introduced in House
- 2025-12-18: Introduced in House
Bill Versions
- Geothermal Tax Parity Act — issued 2025-12-18 — PDF (2 pages)