In what some commentators are calling the first of its kind, Maryland’s legislature has passed a bill that would allow taxpayers to claim a state income tax credit equal to 30% of the installed cost of an energy storage system.  The bill would cap the credit amount at $75,000 for a commercial installation or $5,000 for a residential application and would define “energy storage system” as any “system used to store electrical energy, or mechanical, chemical, or thermal energy that was once electrical energy, for use as electrical energy at a later date or in a process that offsets electricity use at peak times.”  See Maryland S.B. 758.  This means that more than just battery storage technologies will be eligible for the credit.  The credit would not be refundable, so a taxpayer could not receive a refund check for any credit amount in excess of tax liability.  Moreover, a taxpayer could not claim any unused credit amount on a previous or future year’s state income tax return.

To claim the credit, a taxpayer would have to apply for and receive a tax credit certificate from the Maryland Energy Administration, which would review applications on a first-come, first-served basis.  The bill would authorize the issuance of tax credit certificates allowing up to only $750,000 in total credits each year.  The bill will become law if signed by Governor Larry Hogan and would apply to systems installed on or after January 1, 2018, and before the end of 2022.

A Model for Other States to Follow?

Though relatively modest, Maryland’s income tax credit program could expand and serve as an important early model for incentives targeted at the growing energy storage industry.  This is a potential trend to watch as states evaluate how best to spur improvement in their energy infrastructure.  We will continue to follow this act and similar developments affecting the energy storage industry closely.

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Photo of Jason Johns Jason Johns

Jason Johns advises independent power producers, utilities, investors, and large users of gas and power resources with matters arising in power markets and state and federal energy regulatory arenas. Jason appears regularly in proceedings before the Federal Energy Regulatory Commission and in negotiations…

Jason Johns advises independent power producers, utilities, investors, and large users of gas and power resources with matters arising in power markets and state and federal energy regulatory arenas. Jason appears regularly in proceedings before the Federal Energy Regulatory Commission and in negotiations at the ISO/RTO level, where he represents independent power developers and utilities. His experience includes negotiating major facility contracts, such as interconnection, transmission, and power purchase agreements; prosecuting disputes at FERC; and counseling and defending clients on issues related to regulatory compliance.

Jason also works closely with large commercial and industrial users of electricity and gas, such as aerospace companies, pulp and paper mills, steel mills, and tech company data centers. In that role, Jason helps clients negotiate power and gas supply contracts, interstate pipeline capacity asset management agreements, and pipeline bypass agreements. Jason has also assisted these clients with demand management agreements, the installation of on-site resources (such as battery storage, fuel cells, and solar PV), and with retail and wholesale power purchase agreements for renewable energy and other resources. Jason also serves as a board member of The Climate Trust, a national leader in carbon offset projects and innovative climate change solutions.

Jason and his wife are parents to two growing boys, and they live just outside of Portland, Oregon.

Click here for Jason John’s full bio.

Photo of Dustin Swanson Dustin Swanson

Dustin Swanson advises on federal, state, and local tax issues that affect businesses and individuals. His transactional practice encompasses a wide variety of issues, including entity formation, taxable and tax-free mergers and acquisitions, transactions involving pass-through entities such as LLCs, partnerships, and S…

Dustin Swanson advises on federal, state, and local tax issues that affect businesses and individuals. His transactional practice encompasses a wide variety of issues, including entity formation, taxable and tax-free mergers and acquisitions, transactions involving pass-through entities such as LLCs, partnerships, and S corporations, and the development, financing, acquisition, and sale of tax credit projects. As part of his practice, Dustin regularly works with clients to identify and maximize federal, state, and local tax incentives.