Overview of Energy Tax Incentives

Transcription

1 Overview of Energy Tax Incentives Department of Legislative Services 2009

2 Overview of Energy Tax Incentives Department of Legislative Services Office of Policy Analysis Annapolis, Maryland December 2009

3 Contributing Staff Writers Matthew J. Bennett Michael Sanelli Erika S. Schissler Reviewers J. Ryan Bishop For further information concerning this document contact: Library and Information Services Office of Policy Analysis Department of Legislative Services 90 State Circle Annapolis, Maryland Baltimore Area: ! Washington Area: Other Areas: , Extension 5400 TDD: ! Maryland Relay Service: Home Page: The Department of Legislative Services does not discriminate on the basis of age, ancestry, color, creed, marital status, national origin, race, religion, gender, sexual orientation, or disability in the admission or access to its programs, services, or activities. The department s Information Officer has been designated to coordinate compliance with the nondiscrimination requirements contained in Section of the United States Department of Justice Regulations. Requests for assistance should be directed to the Information Officer at the telephone numbers shown above. ii

4 December 18, 2009 The Honorable Thomas V. Mike Miller, Jr., President of the Senate The Honorable Michael E. Busch, Speaker of the House of Delegates Members, Maryland General Assembly Ladies and Gentlemen: As state and local governments continue to look for ways to reduce costs through energy conservation methods and technologies, tax incentives have become increasingly popular as a way to encourage taxpayers to invest in products and properties that generate and/or conserve energy. In an effort to identify the incentives that are currently in place, the Taxes and Fiscal Planning Workgroup within the Office of Policy Analysis (OPA) prepared this report on energy tax incentives available to taxpayers in Maryland. Specifically, the report provides an overview of federal income tax incentives, State and local tax incentives, incentives in surrounding states, and a brief overview of energy tax incentive legislation introduced in the General Assembly since We trust that this report will prove useful to the General Assembly in future deliberations of energy tax incentives. If you would like additional information regarding this report, please contact J. Ryan Bishop of OPA at (410) Sincerely, WGD/JRB/eck Warren G. Deschenaux Director iii

5 iv

6 Contents Transmittal Letter... iii Overview of Federal Income Tax Incentives... 1 Overview of State Tax Incentives... 3 Overview of Local Property Tax Incentives... 9 Overview of Incentives in Surrounding States Review of Energy Tax Incentive Legislation Introduced from v

7 vi

8 Overview of Federal Income Tax Incentives Residential Energy Efficiency Tax Credit This credit applies to energy efficiency improvements for the building envelope of existing homes and for the purchase of high-efficiency heating, cooling, and water-heating equipment, as discussed below. Efficiency improvements or equipment must serve a dwelling that is owned and used by the taxpayer as a primary residence. The maximum amount of tax credit for all improvements combined is $1,500 for equipment purchased between January 1, 2009, and December 31, Performance and quality standards for tax credit eligibility vary by technology. Building Envelope Improvements A homeowner may receive a tax credit for 30% of the cost of upgrading the efficiency of the home s envelope. The following improvements are eligible for the tax credit: insulation materials and systems designed to reduce a home s heat loss or gain; exterior doors and windows (including skylights); and pigmented metal roofs designed to reduce heat gain, and asphalt roofs with appropriate cooling granules. credit. Costs of materials, but not installation (labor) costs, are included for purposes of the Heating, Cooling, and Water-heating Equipment A taxpayer who purchases qualified residential energy efficient property is eligible for a tax credit worth 30% of the total system cost, including labor costs. The credit may be applied to labor costs for assembly and original installation or for eligible property. The following types of equipment are eligible: electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heaters; 1

9 Overview of Federal Income Tax Incentives 2 natural gas, propane, or oil furnace or hot water boilers; advanced main air circulating fans; and biomass stoves that use plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers. Residential Renewable Energy Tax Credit A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit that is used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the placed in service date is the date of occupancy by the homeowner. Expenditures include labor costs for onsite preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. The types of property that may be eligible for the tax credit include solar-electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pumps. Certain eligibility requirements and maximum credit amounts may apply, based on the type of property. If the tax credit exceeds federal tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit can be carried forward until 2016, but it is unclear whether the unused credit can be carried forward after 2016.

10 Overview of State Tax Incentives Income Tax Clean Energy Incentive Tax Credit An individual or corporation may claim a credit against the State income tax for a taxable year in an amount equal to $ for each kilowatt hour of electricity produced by the individual or corporation from qualified energy resources at a qualified Maryland facility during the taxable year. If the electricity is produced from a qualified energy resource that is co-fired at a facility that produces electricity from coal, the credit is $.005 for each kilowatt hour of electricity produced from the qualified energy resource. Qualified energy resources include any solid, nonhazardous, cellulosic waste material that is segregated from other waste materials and is derived from any of the following forest-related resources, not including old-growth timber: mill residues, except sawdust and wood shavings, forest thinning, slash, or brush; waste pallets, crates, and dunnage and landscape or right-of-way trimmings; or agricultural sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues. Qualified energy resources also include methane gas or other combustible gases resulting from the decomposition of organic materials from an agricultural operation, or from a landfill or wastewater treatment plant using one or a combination of anaerobic decomposition or thermal decomposition. A qualified Maryland facility is a facility in the State that primarily uses qualified energy resources to produce electricity and is originally placed in service on or after January 1, 2006, but before January 1, 2011, or produces electricity from a qualified energy resource that is co-fired with coal and initially begins co-firing a qualified energy resource on or after January 1, 2006, but before January 1, 2011, regardless of when the original facility was placed in service. On application by a taxpayer, the Maryland Energy Administration (MEA) must issue an initial tax credit certificate if the taxpayer has demonstrated that the taxpayer will within the next 12 months produce electricity from qualified energy resources at a qualified facility. The maximum amount of credit stated in the initial credit certificate for an energy producer must be in an amount equal to the lesser of the product of multiplying five times the taxpayer s estimated annual tax credit, based on estimated annual energy production, as certified by MEA, or $2,500,000. MEA may not issue initial credit certificates for maximum credit amounts in the aggregate totaling more than $25,000,000. MEA must approve all applications that qualify for an initial credit certificate under this subsection on a first-come, first-served basis. MEA may not issue an initial credit certificate after December 31, If the credit in any taxable year 3

11 Overview of State Tax Incentives 4 exceeds the State income tax liability, any unused credit may be carried forward for up to 10 taxable years. Green Buildings An individual or corporation may claim a State income tax credit for green buildings and green building components. For the taxable year that is the credit allowance year, an owner or tenant may claim a credit in an amount equal to: 8% of allowable costs for the construction of a green whole building or the rehabilitation of a building that is not a green whole building; 6% of allowable costs for the construction of a green base building or the rehabilitation of a building that is not a green base building; 6% of allowable costs for the construction or completion of green tenant space or the rehabilitation of tenant space that is not green tenant space; 30% of the capitalized costs of the installation of a fuel cell to serve a green whole building, green base building, or green tenant space, not exceeding $1,000 per kilowatt hour of installed dc-rated capacity fuel cells, reduced by any federal, State, or local grant received and used for the purchase of the fuel cell and not included in federal gross income of the taxpayer; 20% of the incremental cost paid or incurred for building-integrated photovoltaic modules; 25% of the cost of the nonbuilding-integrated photovoltaic modules, to serve a green whole building, green base building, or green tenant space, including the cost of the foundation or platform and the labor costs associated with installation, not to exceed $3 multiplied by the number of watts included in the dc-rated capacity of these modules and then reduced by the amount of any federal, State, or local grant received and used to purchase or install the equipment, if not included in federal gross income; and 25% of the sum of the capitalized costs paid or incurred to install each wind turbine to serve a green whole building, green base building, or green tenant space, including the cost of the foundation or platform and the labor cost associated with installation. The taxpayer is required to obtain both an initial credit certificate and an eligibility certificate from MEA. A certificate of occupancy for the building is required and the property must be in service during the taxable year.

12 5 Department of Legislative Services Aggregate credit certificates may not be issued by MEA in excess of $25 million between tax year 2003 and 2011 to date, the full $25 million of credit certificates has been issued. The maximum credit issuances for each year in that period range from $1 million to $5 million. The credit allowed may not exceed the State tax liability but may be carried forward for up to 10 years. No initial credit component certificates may be issued after December 31, Cellulosic Ethanol Technology An individual or corporation may claim a credit against the State income tax in an amount equal to 10% of certain qualified cellulosic ethanol technology research and development expenses paid or incurred by the individual or corporation in the State during the taxable year. The credit does not apply to any qualified expenses paid or incurred after December 31, By September 15th of the calendar year following the end of the taxable year in which the qualified research and development expenses were paid or incurred, an individual or corporation shall submit an application to the Department of Business and Economic Development (DBED) for the tax credit. The total amount of credits approved by DBED may not exceed $250,000 for any calendar year. If the total amount of credits applied for by all individuals and corporations exceeds $250,000, DBED must approve a credit for each applicant in an amount equal to the product of multiplying the credit applied for by the applicant times a fraction where the numerator of which is $250,000, and the denominator of which is the total of all credits applied for by all applicants in the calendar year. If the credit in any taxable year exceeds the State income tax liability, any unused credit may be carried forward for up to 15 taxable years. Bio-heating Oil An individual or corporation may claim a State income tax credit for the purchase of bio-heating oil for use in space or water heating. To qualify, the bio-heating oil must contain at least 5% biodiesel. The amount of the credit is equal to three cents per gallon purchased, not to exceed $500 or the tax liability in that year. Individuals or corporations must apply to and be certified by the MEA in order to receive the tax credit. The tax credit is applicable through tax year Sales and Use Tax Geothermal Equipment or Solar Energy Equipment A sale of geothermal equipment, solar energy equipment, or residential wind energy equipment is exempt from the sales and use tax.

13 Overview of State Tax Incentives 6 Geothermal equipment means equipment that uses ground loop technology to heat and cool a structure. Solar energy equipment means equipment that uses solar energy to heat or cool a structure, generates electricity or generates electricity supplied to the electric grid, or provides hot water for use in a structure. Solar energy equipment does not include equipment that is part of a nonsolar energy system or that uses any type of recreational facility or equipment as a storage medium. Residential wind energy equipment means equipment installed on residential property that uses wind energy to generate electricity to be used in a residential structure on the property. Tax-free Period for Energy Efficient Appliances Beginning in calendar year 2011, the weekend that consists of the Saturday immediately preceding the third Monday in February through the third Monday in February each year is a tax-free weekend during which specified Energy Star products are exempt from the State sales and use tax. An Energy Star product includes an air conditioner, clothes washer or dryer, furnace, heat pump, standard size refrigerator, compact fluorescent light bulb, dehumidifier, boiler, or programmable thermostat that has been designated as meeting or exceeding the applicable Energy Star efficiency requirements developed by the United States Environmental Protection Agency and the United States Department of Energy. Solar water heaters are also exempt from the sales and use tax during the specified tax-free periods. Property Tax Solar, Geothermal, and Wind Energy Devices/Equipment Solar energy devices and residential wind energy equipment that are installed to heat or cool a structure, generate electricity to be used in the structure, provide hot water for the structure, or generate electricity supplied to the electric grid via net metering, are exempt from State and local property taxes. However, if a structure does not have a conventional heating or cooling system, then either a solar energy or geothermal heating and cooling system will be assessed at not more than the value of a conventional system. If the structure has both a conventional system and a solar or geothermal system, the combined system will also be assessed at no more than the value of a conventional system.

14 Overview of Local Property Tax Incentives Statewide Local Option Credits Energy Conservation Devices All local governments in Maryland are authorized to grant, by law, a tax credit against the county or municipal property tax imposed on a structure that uses a solar energy device, a geothermal energy device, or a qualifying energy conservation device to provide heating or cooling for the structure, or hot water for use in the structure. The generation of electricity to be used in a structure may also be eligible for a property tax credit. Currently, Anne Arundel, Harford, Howard, Montgomery, and Prince George s counties provide property tax credits for solar/geothermal or other energy conservation devices. The details of each county s program, including the types of devices eligible, are listed below. Notably unique are Anne Arundel County, which has no cap on the total overall amount of credits, and Montgomery County, which has two caps, one for solar and geothermal devices and one for other energy conservation devices. Anne Arundel Solar devices installed on or after January 1, 2007 but before June 1, 2012 Eligible costs: materials and installation cost, minus the amount of any federal or State grants/credits Available for residential dwellings only Credit amount is the lesser of: $2500 or 50% of eligible costs No countywide cap Harford Geothermal and solar devices Available for any structure 7

15 Overview of Local Property Tax Incentives 8 Credit amount is the lesser of: $2500 for the cost of materials and installation or the total amount of property taxes levied Countywide cap of $150,000 per year Howard Geothermal and solar devices Eligible costs: materials and installation costs incurred within 12 months prior to application for credit Available for any structure Credit amount is the lessor of: 50% of eligible costs or $5000 for heating system and $1500 for hot water system, not to exceed taxes owed, carryover allowed for two years Countywide cap of $250,000 per year Montgomery Energy conservation device includes solar, geothermal and other devices such as caulking and weather stripping, furnace efficiency modifications, programmable thermostat, insulation, storm windows and other window modifications, etc. Eligible costs: materials and installation costs incurred within 12 months prior to application for credit Available for owner-occupied single-family home Credit amount for solar or geothermal is the lessor of: 50% of eligible costs or $5000 for heating/cooling, $1500 for hot water, or $5000 for energy generating device; credit limited to 1 device Credit for other devices not to exceed $250 per property Countywide caps for solar/geothermal of $250,000 and for other devices of $250,000 Credit not to exceed taxes owed and carryover allowed for two years

16 9 Department of Legislative Services Prince George s Geothermal and solar devices Eligible costs: materials and installation costs incurred within 12 months prior to application for credit Available for residential structure Credit amount is the lessor of: 50% of eligible costs or $5000 for heating system or $1500 for hot water system Countywide cap of $250,000 Credit not to exceed taxes owed and carryover allowed for two years In fiscal 2009, total credits granted ranged from $5,000 in Harford County to $280,500 in Montgomery County (Anne Arundel County did not grant credits in fiscal 2009). High Performance Buildings Local governments are authorized to provide, by law, for a property tax credit for specified high performance buildings. A high performance building is defined as a building that (1) achieves at least a silver rating according to the U.S. Green Building Council s Leadership in Energy and Environmental Design (LEED) Green Building Rating System, as adopted by the Maryland Green Building Council; (2) achieves at least a comparable rating according to any other appropriate rating system; or (3) meets comparable green building guidelines or standards approved by the State. Currently, Howard and Montgomery counties have enacted property tax credits for high performance buildings. While Montgomery County has yet to issue any credits, Howard County has issued a total of $162,400 in credits in fiscal 2009 and Other County Property Tax Credit Programs Carroll County Chapter 143 of 2008 authorized Carroll County to provide a property tax credit for nonresidential property using environmentally friendly technologies, which includes conserving water, incorporating recycled or recyclable materials, and incorporating renewable and energy

17 Overview of Local Property Tax Incentives 10 efficient power generation. The county enacted this credit on April 30, 2009, with the credit slated to sunset on June 30, Prince George s County Chapter 256 of 2009 authorized Prince George s County to grant a property tax credit for green businesses. An eligible green business is defined as one that primarily distributes, manufactures, markets or sells green products, provides services relating to green products, or provides research and development relating to green products. Prince George s County must certify the business as a green business. To date, Prince George s County has yet to enact this credit.

18 Overview of Incentives in Surrounding States The following is a discussion of various energy tax incentives provided by Maryland s surrounding states. Delaware Delaware does not currently have income tax, property tax, or sales tax incentives for energy conservation products. Pennsylvania Income Tax Pennsylvania provides a 15% income tax credit for the total amount of all development, equipment, and construction costs paid for alternative energy production costs, not to exceed $1 million for a taxpayer that develops a project with a useful life of at least four years. The tax credit expires after tax year Property Tax A property tax exemption may be provided for wind turbine generators or related wind energy appliances and equipment used in the purpose of wind energy generation. Virginia Income Tax Individuals may deduct, on their income tax return, an amount equal to 20% of the sales tax paid on products that meet certain energy efficiency standards. The deduction may not exceed $500 for any taxable year. Sales Tax Virginia allows a four-day sales tax exemption on Energy Star products of $2,500 or less per product, purchased for non-commercial home or personal use. The exemption applies to sales occurring during the four-day period that begins each year on the Friday before the second Monday in October and ends at midnight on the second Monday in October. The exemption is available for any dishwasher, clothes washer, air conditioner, ceiling fan, compact fluorescent 11

19 Overview of Incentives in Surrounding States 12 light bulb, dehumidifier, programmable thermostat, or refrigerator designated by the U.S. Environmental Protection Agency and the U.S. Department of Energy as meeting or exceeding requirements under the federal Energy Star Program. Property Tax Virginia authorizes local jurisdictions to exempt or partially exempt solar energy equipment or recycling equipment from local property taxes. Solar energy equipment is any equipment that is designed and used primarily for the purpose of providing for the collection and use of incident solar energy for water heating, space heating, or cooling or other application which would otherwise require a conventional source of energy. Recycling equipment is defined as equipment which is integral to the recycling process and for use primarily for the purpose of abating or preventing pollution of the atmosphere or waters. Currently 21 cities and counties offer the exemption. Virginia also authorizes local jurisdictions to impose the property tax on energy efficient buildings at a reduced rate. Eligible energy-efficient buildings, not including the real property on which they are located, may be considered a separate class of property for local taxation purposes. The governing body of a local jurisdiction may, by ordinance, allow a special assessment of the property taxes for this class of property. An energy-efficient building is any building that exceeds the energy efficiency standards of the Virginia Uniform Statewide Building Code by 30%, meets performance standards of the Green Globes Green Building Rating System, the Leadership in Energy and Environmental Design System, or the Earth Craft House Program, or qualifies as an Energy Star home under federal Energy Star criteria. West Virginia Income Tax West Virginia allows a credit against the state income tax for 30% of the cost to purchase and install certain residential solar energy systems. The credit may not exceed $2,000. Eligible technologies include systems that use solar energy to generate electricity, heat or cool a residence, or provide hot water or solar process heat for use in the residence. The solar energy systems installed to provide hot water must derive 50% or more of its energy to heat or cool from the sun. Business and Occupation Tax West Virginia imposes a business and occupation (B&O) tax on newly constructed electricity generating units. The B&O tax is calculated by multiplying a pre-determined dollar amount by 40% of the nameplate capacity rating of the generating unit. However, the B&O tax

20 13 Department of Legislative Services on wind turbines is multiplied by only 12% of the nameplate capacity rating. This results in an effective B&O tax rate on wind powered turbines that is about 30% of the effective tax rate of most other types of newly constructed electricity generating units. Sales Tax West Virginia exempts from the sales tax certain Energy Star products of $5,000 or less purchased for home or personal use. The sales tax holiday is limited to purchases made September through November in 2009 and Property Tax West Virginia allows up to 79.0% of utility-owned wind projects to be assigned their salvage value. This lowers the property tax base on utility-owned wind turbines from 100.0% of fair market value to as little as 24.95% of fair market value. This results in an effective property tax rate on wind turbines that is 24.95% of the effective tax rate on most other types of newly constructed electricity-generating units.

21 Overview of Incentives in Surrounding States 14

22 Review of Energy Tax Incentive Legislation Introduced Session Income Tax Green Buildings House Bill 975 of 2005 (failed) would have expanded the existing State income tax credit for green buildings by allowing a building with at least 10,000 square feet of interior space to qualify for the tax credit. Maryland Clean Energy Incentive Act House Bill 1277 of 2005 (failed) would have made various changes to the existing tax credit for the renewable energy program. Hydrogen Fuel Cell Research and Development House Bill 1363 of 2005 (failed) would have allowed a tax credit against the State income tax for hydrogen fuel cell research and development conducted in the State. Electric and Hybrid Vehicles Senate Bill 12 of 2005 (failed) would have reestablished the vehicle excise tax credit for qualified electric and hybrid vehicles that expired in Sales Tax None. Property Tax None. 15

23 Review of Energy Tax Incentive Legislation Introduced Session Income Tax Maryland Clean Energy Incentive Act Chapter 129 of 2006 reauthorized the clean energy incentive tax credit by (1) authorizing the Maryland Energy Administration (MEA) to award a total of $25 million in credits until December 31, 2010; (2) altering the types of energy resources that can qualify for the credit; and (3) changing the dates a facility can qualify for the credit if it is originally placed in service or begins co-firing a qualified energy resource on or after January 1, 2006, but before January 1, Energy-efficient Residential Heating Systems House Bill 305 of 2006 (failed) would have allowed a tax credit against the State income tax for the costs of purchasing and installing certain energy-efficient residential heating systems. Green Buildings House Bill 411 of 2006 (failed) would have expanded the existing State income tax credit for green buildings by allowing a building with at least 10,000 square feet of interior space to qualify for the tax credit. Solar Energy Tax Credit House Bill 810 of 2006 (failed) would have reestablished the solar energy tax credit program for property placed in service from July 1, 2006 through December 31, Sales Tax Tax-free Periods for the Purchase of Energy Efficient Products Senate Bill 265/House Bill 1004 of 2006 (both failed) would have exempted from the State sales and use tax the purchase of specified Energy Star products or solar water heaters for the periods of October 1 through October 31, 2006 and April 1 through April 30, 2007.

24 17 Department of Legislative Services Property Tax None Session Income Tax Solar Energy Tax Credit House Bill 76 of 2007 (failed) would have reestablished the Solar Energy Tax Credit Program for property placed in service from July 1, 2007, through December 31, Cellulosic Ethanol Technology Research and Development House Bill 544 of 2007 (failed) would have allowed a State income tax credit for cellulosic ethanol technology research and development conducted in the State. Energy-efficient Residential Heating and Cooling Systems House Bill 595 of 2007 (failed) would have allowed a State income tax credit for the costs of purchasing and installing certain energy-efficient residential heating and cooling systems that meet specified energy efficiency standards. Green Buildings House Bill 778 of 2007 (failed) would have expanded the existing State income tax credit for green buildings by (1) allowing nonprofit organizations to claim the credit; (2) making the tax credit transferable; (3) expanding the buildings eligible by allowing buildings with at least 10,000 square feet of interior space to qualify; and (4) allowing MEA to authorize an additional $25 million in credits in tax years 2008 through Hybrid and Electric Vehicles Senate Bill 776 of 2007 (failed) would have allowed a credit against the State income tax for the purchase of qualified electric and hybrid vehicles.

25 Review of Energy Tax Incentive Legislation Introduced Sales Tax Tax-free Period for the Purchase of Energy Efficient Products House Bill 451 of 2007 (failed) would have exempted from the State sales and use tax the purchase of specified Energy Star products or solar water heaters made on October 5 and 6, Property Tax Solar Energy Devices Chapter 615 of 2007 provides a State property tax exemption for solar energy devices installed to heat or cool a dwelling, generate electricity used in the dwelling, or to provide hot water used in the dwelling Special Session Income Tax None. Sales Tax Tax-free Periods for Clothing and Energy Efficient Products Among its many provisions, Chapter 6 of the 2007 special session establishes one annual tax-free holiday for specified energy efficient appliances and another for clothing and footwear costing $100 or less beginning in fiscal Property Tax None.

26 19 Department of Legislative Services 2008 Session Income Tax Cellulosic Ethanol Technology Research and Development Chapter 139 of 2008 allows a State income tax credit for cellulosic ethanol technology research and development conducted in the State. Bio-heating Oil Chapter 140 of 2008 creates a tax credit against the State income tax for individuals or corporations who purchase bio-heating oil for use in space or water heating. Energy Star Appliances and Solar Water Heaters House Bill 1229 of 2008 (failed) would have allowed a tax credit against the State income tax for individuals who purchase specified Energy Star products and solar water heaters. Sales Tax Solar and Geothermal Tax Incentive and Grant Program Chapter 132 of 2008 increases specified grant limits under the Solar Energy and Geothermal Heat Pump grant programs, exempts the sale of specified solar energy and geothermal equipment from the State sales and use tax, and exempts specified solar energy property from State and local real property taxes. Chapter 132 also specifies that a geothermal heating and cooling system, either as a stand-alone system or as a combined geothermal and conventional system, is not to be assessed, for property tax purposes, at more than the value of a conventional system. Energy Star Product Exemptions Boilers Chapters 179 and 180 of 2008 add boilers to the list of specified Energy Star products eligible for a specified sales and use tax exemption enacted by Chapter 6 of the 2007 special session. Energy Efficiency Tax Credit and Surcharge Act House Bill 338 of 2008 (failed) would have required the Maryland Department of the Environment, by July 1, 2010, to develop energy-efficient replacement tire testing procedures; a related database; and a rating system to inform consumers of energy efficiency standards when

27 Review of Energy Tax Incentive Legislation Introduced purchasing tires. House Bill 338 would have also created a sales tax credit and premium fee structure for vehicles, energy systems, and tires based upon energy efficiency standards. Municipal Corporations Green Tax Reform House Bill 1278 of 2008 (failed) would have exempted the stock in business of a person engaged in a manufacturing or commercial business from municipal property taxes. The bill would also have authorized a municipality to impose a sales and use tax on electricity, gas, steam, coal, fuel oil, or liquefied petroleum gas used by commercial and industrial businesses in the municipality. Tax-free Weeks Senate Bill 908 of 2008 (failed) would have exempted from the State sales and use tax, after a specified refund period, the purchase of any (1) item of clothing or footwear, excluding accessories, if the taxable price of the item of clothing or footwear is $100 or less; and (2) specified Energy Star products or solar water heaters. Property Tax Geothermal Energy Chapter 132 of 2008 repealed Chapter 615 of 2007 and replaced it with an exemption for solar energy devices from State and local property taxes, not just State property taxes, and for structures, not just dwellings. Chapter 132 also specifies that a geothermal heating and cooling system, either as a stand-alone system or as a combined geothermal and conventional system, is not to be assessed at more than the value of a conventional system for property tax purposes. Programmable Thermostats House Bill 1302 of 2008 (failed) would have required counties and Baltimore City to grant a $100 property tax credit for real property that was equipped with a programmable thermostat.

28 21 Department of Legislative Services 2009 Session Income Tax Voltage Regulation Technology House Bill 320 of 2009 (failed) would have allowed a subtraction modification under the State income tax for 100% of the costs of purchasing and installing voltage regulation technology. Sales Tax Alternative Energy Tax Incentive Act of 2009 Chapter 444 of 2009 exempts residential wind energy equipment used to generate electricity for a residential structure on the property from the State sales and use tax; and exempts residential wind energy equipment used to generate electricity for a residential structure on the property from State and local real property taxes. Chapter 444 also clarifies that solar energy equipment, for property tax exemption purposes, includes equipment that uses solar thermal electric energy. Solar Energy Equipment and Property Chapter 574 of 2009 extends an existing State sales and use tax exemption for specified solar energy equipment and an existing property tax exemption for specified solar energy property to include solar energy equipment or property used to generate electricity supplied to the electric grid. Wind Energy Senate Bill 979/House Bill 699 of 2009 (both failed) would have exempted wind energy equipment used to generate electricity for a structure from the State sales and use tax and wind energy property used to generate electricity for a structure from State and local real property taxes. Property Tax Solar and Geothermal Assessments Chapter 574 of 2009 extends the existing property tax exemption for solar and geothermal energy property to include property used to generate electricity supplied to the electric grid via net metering.

29 Review of Energy Tax Incentive Legislation Introduced Wind Energy Senate Bill 979/House Bill 699 of 2009 (failed) was similar to Chapter 444 of 2009 in that it would have added wind energy property to the existing property tax exemption for solar energy property.