Maryland Energy Administration

Clean Energy Production Tax Credit

Clean Energy Production Tax Credit

• Maryland Clean Energy Incentive Tax Credit Program Regulations 14.26.06

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 MEA. 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, 2011.

Note: MEA is prohibited from issuing Initial Credit Certificates after December 31, 2010.

In order to receive these credits, eligible participants must apply for an Initial Credit Certificate with the Maryland Energy Administration. The Administration shall issue these certificates on a first-come, first-served basis. Total Initial Credit Certificates will not exceed $25,000,000 by 2010, with each Initial Credit Certificate not exceeding $2,500,000 to any eligible taxpayer. To apply, please follow the instructions and guidelines below:

Instructions

1. Download the Initial Credit Certificate application.
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
        1623 Forest Drive, Suite 300
        Annapolis, MD 21403
4. Send documentation of tax credit claims to the address in #3 for each tax year that the credit is claimed. Tax credit claims must be reported to the Administration for each eligible tax year. Qualified facilities that do not report these claims may forfeit their tax credits at the discretion of the Administration.

Initial Credit Certificate 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, 2011.
• 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.
• 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 2011
      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.
  • Copies of tax records indicating the amount of tax credits reported are not submitted annually for each eligible tax year of the awarded project. Not reporting this information is grounds for forfeiture of tax credits at the discretion of MEA.

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

Request for 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
1623 Forest Drive, Suite 300
Annapolis, MD 21403

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 solid 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 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.