In 2017, Maryland, with Governor Larry Hogan’s (R) support, became the first state in the country to launch a tax credit program for energy storage systems.  In September, 2018, Maryland Energy Administration adopted new regulations that clarified certain qualifications of eligible systems and established procedures for individuals and businesses to apply for tax credits.

The program will grant tax credits to taxpayers that install energy storage systems between January 1, 2018 and December 31, 2022.  The amount of tax credits granted from this program will not exceed 30 percent of the total installed costs of the energy storage system.  The amount of tax credits granted for a system installed on residential property is further capped at $5,000.  The cap amount of a system installed on commercial property is $75,000.  The tax credits will be granted on a first-come, first-served basis and are subject to a maximum limit of $750,000 each year.  Unused credits from this program cannot be carried forward or backward to offset taxpayers’ tax liability in another taxable year.  Please click here to read more on the original Senate Bill and our observations about the incentive tax credit program.

The regulations clarified that an energy storage system is a system that stores electrical, mechanical, chemical or thermal energy for use as electricity at a later date or to offset electricity use at peak times.[i]

The regulations set forth certain safety and operational requirements for qualifying systems.  Qualifying systems must use equipment certified by a nationally recognized testing laboratory and must be installed in Maryland.[ii]  If the system is an electric system, it must also be installed by a licensed electrician, be in compliance with all applicable building and fire codes and, if applicable, be compliant with Maryland regulations regarding interconnection with the electric utility grid.[iii]

Qualifications for these systems may be adjusted by the Administration across program years.[iv]

Both individual and business taxpayers can participate in this program.[v]  Businesses must be formed as associations or joint-stock companies to be eligible.[vi]  Taxpayers must provide information requested by the Administration in the application process.  The Administration has the sole discretion in determining what information to request.  Taxpayers may be asked to provide their names, addresses and contact information or those of their representatives, estimated gross income or revenue, estimated tax liabilities, physical addresses of the property, proof of ownership of the property, description of the proposed energy storage systems, explanation of how the proposed systems offset electricity when discharging, information on the developers or installers, whether the proposed systems will participate in wholesale energy markets, estimated costs of the proposed systems, expected life of the proposed systems, anticipated in-service dates of the proposed systems, anticipated capacity factor of the proposed systems, energy storage duration, the amount of energy that can be stored in the proposed systems, the rate of energy flux per unit of area of the proposed systems,  documentation verifying that the proposed systems are in service, among other information.[vii]

Taxpayers that have already claimed a tax credit in this program are not eligible for additional tax credits from this program for the same taxable year.[viii]  Addresses, including multifamily properties, where tax credits were already claimed in this program are ineligible for additional tax credits from this program in all taxable years.[ix]  Electric vehicles are ineligible for this program.[x]

[i] Md. Regs. Code § 14.26.07.04(A).

[ii] Md. Regs. Code § 14.26.07.04(B), (C).

[iii] Id.

[iv] Md. Regs. Code § 14.26.07.04(D).

[v] See Md. Regs. Code § 14.26.07.01.

[vi] Md. Regs. Code § 14.26.07.03(B)(4); Md. Code Ann., Tax-General § 10-101(c).

[vii] Md. Regs. Code § 14.26.07.07(A).

[viii] Md. Regs. Code § 14.26.07.05(B).

[ix] Md. Regs. Code § 14.26.07.05(C).

[x] Md. Regs. Code § 14.26.07.05(D).