Maryland and Virginia have several attractive tax credits and incentives that are designed to encourage businesses located within the states to ‘go green’, as well as encourage businesses located outside the states to relocate.
The centerpiece of Maryland’s green tax credit program is the green building credit. Individuals and corporations can claim an income tax credit, equal to 8 percent of “allowable costs” for the construction or rehabilitation of green buildings. The credit can be carried forward for up to ten years to the extent that the credit goes unused. Allowable costs include capital expenditures incurred after July 1, 2001 for the construction or rehabilitation of the building, excluding land costs. Also excluded from “allowable costs” are telephones, computers (not used for electrical wiring), legal fees, and site costs. Allowable costs are capped at $120 per square foot. There is also a component of the credit that is available for the installation of fuel cells that are qualifying alternative energy sources.
The Maryland Energy Administration also administers a solar grant program, equal to the lesser of $2500 per kilowatt of installed electricity generating capacity or $10,000; or the lesser of $3000 or 30% of the total installed cost of solar water heating property. Corporations can also claim a Maryland income tax credit of $.85 per each kilowatt hour of electricity it produces at a qualified facility over a five year period specified in a credit certificate, which would be granted by the Maryland Energy Administration. The credit is limited if the facility uses qualified energy resources that are co-fired with coal.
Virginia, a leader in jobs credits, has two green jobs credits of note. The first, and newer, credit is a credit of $500 for each new green job created with a salary of at least $50,000. A taxpayer can take a credit for up to 350 jobs created. A ‘green job’ must be continuously performed in Virginia during the taxable year, entail at least 35 hours a week, 48 weeks a year, or at least 1,680 hours per year. A green job is one in the field of renewable, alternative energies, including manufacturing jobs and jobs involved in generating energy from renewable sources. The credit for each job is taken in increments of $100 a year for five years, and the credit is available to corporations and can also pass through S corporations and partnerships to the benefit of their shareholders, partners or members.
Virginia also has a $700 credit for creating jobs created for the manufacture or production of clean fuel vehicles. The credit is taken ratably over three years, and applies to jobs for the manufacture of green vehicles or their components, including the generation of advanced biofuels. For this credit, a job must require 40 hours of work for at least 40 weeks a year, without a minimum salary requirement. Like the other Virginia jobs credits, it can either be taken by a corporation or a pass-through entity, with the benefit passing through to shareholders or members.
Some of these credits are reaching their expiration dates, but given the sluggish state of the economy, the political value of retaining credits such as these, and the recent bad press as a result of the environmental disaster in the Gulf of Mexico, it is reasonable to expect that the credits will be extended or replaced with different green credits.
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