Clean Energy Production Tax Credit (Personal)

Summary

NOTE: Senate Bill 936 (Maryland Clean Energy Incentive Act of 2016) extended production tax credit for two years, from December 31, 2015 to December 31, 2018. 

Maryland offers a production tax credit for electricity generated by wind, solar energy, hydropower, hydrokinetic, municipal solid waste and biomass resources. Eligible biomass resources include anaerobic digestion, landfill gas, wastewater-treatment gas, and non-hazardous segregated waste material derived from forest-related resources (excluding old-growth timber and mill residues consisting of sawdust or wood shavings)*, from waste pallets and crates, or from agricultural sources. The list of eligible resources is generally the same as those eligible for the federal renewable electricity production tax credit (PTC), except the Maryland law contains added provisions related to biomass and biogas technologies. To qualify for the tax credit, the facility that uses qualified energy resources to generate electricity must be placed in service on or after January 1, 2006, but before January 1, 2019. 

The tax credit has been in place since 2000, and has been amended several times since the initial enactment. The most recent substantive amendments were made in May 2016 by S.B. 936 (effective July 1, 2016), which extended the tax credit for 2 years, from December 31, 2015 to December 31, 2018. On May 2011, the definition of eligible waste materials was amended by S.B. 958 to remove language requiring that such materials be "solid" and "cellulosic".

An individual or corporation that applies for and receives certification from the Maryland Energy Administration (MEA) may claim a credit equal to 0.85 cents per kilowatt-hour ($0.0085/kWh) against the state income tax, for a five-year period, for electricity generated by eligible resources. As a result of H.B. 494, effective July 1, 2010 the MEA is no longer permitted to issue initial credit certificates for amounts of less than $1,000. At the general renewable energy credit rate of $0.0085/kWh, a facility would need to produce 23,530 kWh annually to meet this minimum. The electricity generated must be sold to an unrelated person during the taxable year. The MEA indicates that a net metering or interconnection agreement is sufficient documentation for this requirement.

Certificates issued by the Maryland Energy Administration will state the maximum amount of credit over a five-year period; the earliest tax year for which the credit may be claimed; and the five-year period during which qualifying electricity generation qualifies for the tax credit. The maximum amount of credit is based on estimated annual energy production during a five-year period, or $2.5 million. Formerly, credits exceeding a taxpayer's state income tax for a taxable year could be carried forward to succeeding taxable years for up to 10 years. However, as a result of H.B. 494, credits in excess of income tax for a taxable year are now refundable.

The program previously included yearly $25 million statewide cap to fund the program, however, starting 2016, the program will be funded through the reserve fund established by S.B. 958. The amount of credits the Maryland Energy Administration can award will depend on the amount of money appropriated to the reserve fund. There is no requirement for any specific amount of funds to be appropriated for the reserve fund. 

Applications for credit certificates will be approved on a first-come, first-served basis. If, over a three-year period, a taxpayer does not claim on average at least 10% of the maximum credit amount stated in the certificate, the Maryland Energy Administration may cancel part of the certificate. 

Further information on certificate applications and other program rules is available from the program website link at the top of this page.

* Eligible mill residues include bark, chips, slabs, and edging, although slabs and edging are usually made into chips.