Clean Energy Production Tax Credit

The Clean Energy Incentive Tax Credit, enacted in 2006, offers Marylanders a state income tax credit for electricity generated by qualified resources of 0.85 cents per kilo-watt hour, and 0.50 cents per kilo-watt hour for electricity generated from co-firing a qualified resource with coal. These credits can be claimed over a period of five years. Annual tax credits cannot exceed one fifth of the initial credit certificate issued by the Maryland Energy Administration. This credit is available to individuals and corporations that build and generate electricity from qualified resources operational on or after January 1, 2006, but before January 1, 2016.

Notes:

  • MEA is prohibited from issuing Initial Credit Certificates after December 31, 2015.
  • Maryland Clean Energy Incentive Tax Credit Program Regulations are being drafted and will be issued soon.
  • The $1,000 floor on the program will require a PV system of approximately 20 KW.
  • Geothermal heating and cooling systems do not qualify.

In order to receive these credits, eligible participants must apply for an Initial Credit Certificate with the MEA. The Administration shall issue these certificates on a first-come, first-served basis. Total Initial Credit Certificates will not exceed $25,000,000 by 2016, with each Initial Credit Certificate not exceeding $2,500,000 and no less than $1,000 to any eligible taxpayer. To apply, please follow the instructions and guidelines below.

If you have questions about the program, contact Chris Rice at (410) 260-7207 or chris.rice@maryland.gov

How to Apply

Please use the following instructions to apply:

1. Download the Initial Credit Certificate application. (Last updated Jan. 18, 2013)
Having Trouble Downloading the Application? Tip: Try right-clicking on the link and save it to your desktop. Some internet browsers may have difficulty opening PDF Forms.
2. Attach related documentation, as specified in the application.
3. Send the application and documentation to:

Attention - Clean Energy Incentive Act Program
Maryland Energy Administration
60 West Street, Suite 300
Annapolis, MD 21401

Claiming Your Clean Energy Tax Credit

For taxable year beginning after December 31, 2012, taxpayers must file their Maryland income tax return electronically (Form 500 for Corporations, Form 510 and Form 510 Schedule K-1 for Pass-Through Entities, and Form 502 or 505 for Individuals) in order to claim a Business Income Tax Credit.  They must complete the Business Tax Credit Form 500CR section of the electronic return and include a binary attachment or PDF of the certification received from the Maryland Energy Administration. 

A Maryland Form 510 Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach the credit certificate provided by MEA to Form 500CR submitted with their personal (Form 502), corporate (Form 500) or pass-through entity (Form 510) income tax returns.

Note: In general, 500CR is used by business taxpayers but individuals may use it to claim certain individual tax credits. The Clean Energy Production Tax Credit Program falls under this scenario. 

Credit Certificates must be attached to your tax return for Comptroller processing.

*Generally, pass-through entities, including, but not limited to, partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit once certified.   

Filing questions should be directed to the Comptroller: http://www.marylandtaxes.com/default.shtml

Application Guidelines

  • Applications must be complete, including any relevant documentation as specified in the application, before being considered.
  • An individual or corporation must produce electricity from the qualified facility during the 5-year period specified in the Initial Credit Certificate.
  • Qualified facilities must be placed in service on or after January 1, 2006, but before January 1, 2016.
  • Qualified facilities may not sell electricity generated to a related person. Net-metering or interconnection agreements can serve as sufficient documentation.
  • The annual tax credit may not exceed one fifth of the maximum amount of credit stated in the Initial Credit Certificate.
  • If the credit in any taxable year exceeds the State income tax the applicant may claim a refund in the amount of excess
  • Cancellation of tax credits may occur if:
  • On average, at least 10% of tax credits must be reported by the third year of the 5-year period stated in the Initial Credit Certificate. Forfeited funds will be calculated by the average amount not claimed over a 3-year period multiplied by the remaining number of eligible tax years. An extension may be requested but will be approved at the discretion of the MEA.
    • Example:
      Producer ABC
      Initial tax year 2007
      Five year period of credit eligibility through 2016
      Maximum tax credit $2.5 M, annual tax credit max = $500 K

      2007 ABC claims $250,000 = 10% of $2.5 M ($250,000 unused)
      2008 ABC claims $125,000 = 5% of $2.5 M ($375,000 unused)
      2009 ABC claims $125,000 = 5% of $2.5 M ($375,000 unused)
      2010 ABC claims $125,000 = 5% of $2.5 M ($375,000 unused)

      2011 MEA may take the 3 year average between 2008 and 2010 = 5% of maximum credit used. Therefore MEA may cancel $375,000 (three year average of unclaimed credit) x 1 year remaining = $375,000 for 2011
    • Proof is not submitted (e.g., power purchase agreements) that projects are operational within the 12-month period. Awarded projects that are not operational within 12 months of the issuance of the Initial Credit Certificate may forfeit a portion of or all of their tax credits.

The decision of MEA for cancelled tax credits can be appealed to the Office of Administrative Hearings.

Request an Extension

Requests for an extension will be determined on a case by case basis and approved at the discretion of MEA. Any awarded project that a) may generate less electricity than originally projected, or b) has difficulty in becoming operational within the 12-month timeframe after issuance of its Initial Credit Certificate should notify MEA immediately. Failure to do so will be just cause for forfeiture or reduction of tax credits.

To request an extension, send a letter stating the reason for the request for extension and any pertinent documentation to:

Attention - Clean Energy Incentive Act Program
Maryland Energy Administration
60 West Street, Suite 300
Annapolis, MD 21401

Extension requests will be processed within 60 days of receipt. Appeals to these decisions may be forwarded to the Office of Administrative Hearings.

Eligible Renewable Energy Sources

1. Wind

2. Open- and closed-loop biomass, including:

  • Any non-hazardous, cellulosic waste segregated from other waste materials and derived from any of the following forest-related resources:
    • Mill residues, forest thinnings, slash, brush, waste pallets, crates, and dunnage and landscape or right-of-way trimmings, or;
  • Agricultural sources including but not limited to orchard tree crops, vineyard, grain, legumes, sugar, and other crop byproducts and residues
  • Methane gas or other combustible gases resulting from the decomposition of organic materials from an agricultural operation, or from a landfill or wastewater treatment plant using one or a combination of the following processes:
    • Anaerobic decomposition
    • Thermal decomposition
  • Biomass facilities may NOT use old growth timber, or mill residues consisting of sawdust or wood shavings.

3. Geothermal

4. Solar

5. Small Irrigation

6. Municipal solid waste

7. Qualified hydropower

Note: Although a qualified Maryland facility may use an alternative fuel source as a backup during emergencies or routine maintenance, it must produce electricity from one of the above qualified energy resources as its primary source of generation.