Businesses that use a qualified energy resource to produce electricity that is sold to an unrelated person may be entitled to an income tax credit.
Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
This credit is allowed if a Maryland facility is originally placed in service or initially began co-firing, during the period of January 1, 2006 through December 31, 2015 and produces electricity during the tax year primarily using qualified energy resources derived from:
- Open-Loop and Closed-Loop Biomass, including:
- Any non-hazardous waste material that is segregated from other waste materials and is 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
- Agricultural sources, including but not limited to, orchard tree crops, vineyard grain, sugar, and other crop by-products and residues.
- Methane gas or other combustible gases resulting from the decomposition of organic materials from an agricultural operation or from a landfill or a 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.
- Geothermal Energy
- Solar Energy
- Small Irrigation Power
- Municipal Solid Waste
- Qualified Hydropower
The business must apply for and receive an initial credit certificate from the Maryland Energy Administration (MEA) before claiming this credit. The initial credit certificate must state the amount of electricity the taxpayer expects to produce in a qualified Maryland facility over a five-year period. The total amount of the credit specified in the initial credit certificate cannot exceed $2.5 million and must be a minimum of $1,000.
How the credit is calculated:
The credit is $0.0085 (85/100 of one cent) for each kilowatt hour (or 85 cents for every 100 kilowatt hours) of electricity produced at a Maryland facility using qualified energy resources during the five-year period specified in the initial credit certification.
If the facility produces electricity from qualified energy resources co-fired from coal, the credit is reduced to $0.0005 (one-half cent) per kilowatt hour (or 50 cents for every 100 kilowatt hours) of electricity produced and sold during the allowable five-year.
The annual tax credit may not exceed one-fifth (1/5) of the maximum amount of credit stated in the initial credit certificate.If the credit is more than the state tax liability, the excess credit may be refunded.
The MEA cannot issue an initial credit certificates after December 31, 2015, and may not issue an initial credit certificate for a credit amount less than $1,000.
For taxable years beginning after December 31, 2012, this credit is available only on an electronically-filed income tax return for the tax year in which the credit is being claimed. A copy of the initial credit certificate issued by the MEA must be included with the electronic return, and the Form 500CR section of the return must be completed..