Green Building Tax Credit

NOTE: This information reflects Maryland law regarding the Green Building Tax Credit. However, all credits have been allocated through the current program's end. Unless the program is extended or receives additional funding, no additional credits may be authorized.

Description:

Businesses that construct or rehabilitate a building that conforms to specific standards intended to save energy and to mitigate environmental impact may take a credit for a portion of the cost. The total amount of credits certified for all taxpayers each year is subject to certain limitations.

The credit may be taken against corporate income tax or personal income tax.

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:

A business must construct or rehabilitate a building located in Maryland with at least 20,000 square feet of interior space that is:

• Used primarily for non-residential purposes; or
• A residential, multi-family building with at least 12 dwelling units; or
• Any combination of the above.

The building must be located in a priority funding area or qualified "brownfields" site and not on wetlands.

If the building has been rehabilitated, but is not located in these areas, the business will still qualify for the credit if the increase in the building's square footage is 25 percent or less. You can find out if your building or site is located in a priority funding area online at www.mdp.state.md.us/pfa_imf.htm or by calling Stephanie Martins at 410-767-4562 at the Maryland Department of Planning.

If the building is newly constructed, a certificate of occupancy must have been issued on or after July 1, 2001.

The business must submit an initial credit certificate application to the Maryland Energy Administration. Upon approval, the applicant will receive an initial credit certificate stating the amount of the tax credit. Upon completion of construction, the applicant must submit an eligibility certificate from a Leadership in Energy and Environmental Design (LEED) accredited professional architect or engineer licensed in Maryland. The Maryland Energy Administration will then issue a final credit certificate (based on final costs) stating the amount of the tax credit to which the applicant is entitled. A copy of the initial and final credit certificates and the eligibility certificate must be filed with the taxpayer's income tax return

How the credit is calculated:

Allowable costs may not exceed in the aggregate:

• $120 per square foot for that portion of the building that comprises the building; and
• $60 per square foot for that portion of the building that comprises the tenant space.

The credit is the sum of the four credit components described below:

• Building credit component: A percentage of the allowable costs paid by the owner or tenant to make some portion of the building "green." Each credit is limited by a dollar amount per square foot.
• Whole building: 8 percent of the allowable costs paid for or incurred by the owner or tenant, or,
• If not a whole green building:
  • Base building (areas not intended to be occupied):6 percent of the allowable costs. The maximum credit amount is $7.20 per square foot for the area that comprises the base building, and;
  • Tenant space: 6 percent of the allowable costs. The maximum credit amount is $3.60 per square foot. The credit cannot be claimed by the owner if the owner occupies less than 10,000 sq. ft. of the building or by the tenant if the tenant occupies less than 5,000 sq. ft.
• Fuel cell credit component: 30 percent of the costs paid by the owner or tenant to purchase and install a fuel cell in a green whole building, base building or tenant space. The credit cannot exceed $1,000 per kilowatt hour of capacity and is reduced by non-taxable government grants used to purchase and install the fuel cell.
• Photovoltaic module credit component: 25 percent (20 percent if building-integrated) of the cost paid by an owner or tenant to purchase and install a photovoltaic module in a green whole building, base building or tenant space. The costs used to determine the credit amount cannot exceed $3 per watt of capacity, and are reduced by non-taxable government grants used to purchase and install the modules.
• Wind turbine component: 25 percent of the cost to purchase and install wind turbines that qualify as alternative energy sources and will serve a green whole building, base building or tenant space.

The total amount of credits approved for all taxpayers in each year is also subject to certain limitations.

If the credit is more than the tax liability, the unused credit may be carried forward for the next 10 tax years.

Documentation required:

Corporate income tax:

Form 500CR must be completed and submitted with the income tax return (Form 500).

Personal income tax:

Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A Form 510 Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500), or pass-through entity (Form 510) income tax returns.

A copy of the required certificate must be filed with the taxpayer's income tax return.

For more information, contact:

or:

Revenue Administration Division
Comptroller of Maryland
Annapolis, MD 21411-0001
Phone: 410-260-7980 from Central Maryland,
1-800-MD TAXES from elsewhere
E-mail: taxhelp@comp.state.md.us