Water Quality Improvement Tax Credit

Description:

A credit may be claimed for the additional commercial fertilizer costs necessary to convert agricultural production to a certified nutrient management plan. However, this credit cannot be earned for any tax year beginning on or after January 1, 2009.

The credit may be taken against corporate income tax or personal income tax only for expenses incurred before January 1, 2009.

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:

The business must submit a nutrient management plan and information related to the purchase and use of commercial fertilizer to the Maryland Department of Agriculture.

The business must receive the following certifications from the Maryland Department of Agriculture:

• The business has submitted a nutrient management plan
• The additional commercial fertilizer costs are necessary to comply with a nutrient management plan.
• The amount of the tax credit that the business is eligible to claim for the taxable year.

The business must submit a copy of the certification from the Maryland Department of Agriculture with its income tax return.

How the credit is calculated:

The credit allowed:

• Is 50 percent of the certified additional commercial fertilizer costs necessary to convert agricultural production to a nutrient management plan.
• May be claimed for up to three consecutive years.
• May not exceed $4,500 in any tax year.
• May not be earned for any tax year beginning on or after January 1, 2009.

If the credit is more than the tax liability, the unused credit may be carried forward for the next five 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 modified federal 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.

For more information, contact:

Maryland Department of Agriculture
Office of Resource Conservation
Annapolis, MD 21401
Phone: 410-841-5863
E-mail: lawren1@mda.state.md.us