REPORT TITLE:
Income Tax; Water Conservation


DESCRIPTION:
Establishes a credit against income tax liability for taxpayers
who install water conservation equipment that results in a 10%
reduction in water use.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           218
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO WATER CONSERVATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "§235-    Water conservation credit.  (a)  Each resident
 
 5 taxpayer, who files an income tax return for a taxable year, and
 
 6 who is not claimed or is not otherwise eligible to be claimed as
 
 7 a dependent by another taxpayer for Hawaii state income tax
 
 8 purposes, may claim a water conservation credit against the
 
 9 resident taxpayer's income tax liability for the taxable year for
 
10 which the income tax return is being filed.  The credit may be
 
11 claimed only in the taxable year following the year in which a
 
12 modified manufacturing process or new or expanded water
 
13 conservation facility was placed in service; provided that:
 
14      (1)  The taxpayer has financially participated in the
 
15           qualified water conservation investment; and
 
16      (2)  The water conservation facility reduces or transfers at
 
17           least ten per cent of the taxpayer's annual permitted
 
18           use of water.
 
19      (b)  The amount of the allowable credit shall be based on
 

 
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 1 the total water conservation investment.  For water conservation
 
 2 investments:
 
 3      (1)  Between $10,000 to $499,999, the credit shall be ten
 
 4           per cent of the amount paid by the taxpayer;
 
 5      (2)  Between $500,000 to $799,999, the credit shall be eight
 
 6           per cent of the amount paid by the taxpayer;
 
 7      (3)  Between $800,000 to $999,999, the credit shall be six
 
 8           per cent; and
 
 9      (4)  $1,000,000 or more, the credit shall be five per cent.
 
10 The credit may be carried forward up to a maximum of ten years;
 
11 provided that the water conservation equipment remains in
 
12 service, the reduction in use of water permit is maintained and
 
13 the equipment continues to be used by the taxpayer.  The amount
 
14 of the credit which may be used in any tax year shall not exceed
 
15 fifty per cent of the taxpayer's income tax liability as
 
16 determined without regard to any other credits.
 
17      (c)  The credit granted under this section shall be subject
 
18 to the following conditions and limitations:
 
19      (1)  In order to qualify as a basis for the credit, the
 
20           modified manufacturing process or the new or expanded
 
21           water conservation facility must not be placed in
 
22           service before January 1, 1999.  The credit may be only
 
23           taken with respect to qualified water conservation
 

 
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 1           investment in a project costing $50,000 or more.  For
 
 2           every year in which the taxpayer claims the credit, the
 
 3           taxpayer shall attach a schedule to the taxpayer's
 
 4           income tax return setting forth as a minimum the
 
 5           following information;
 
 6           (A)  The amounts, dates, and nature of the qualified
 
 7                water conservation investments which have allowed
 
 8                a modified manufacturing process or a new or
 
 9                expanded water conservation facility to be placed
 
10                in service in the prior taxable year;
 
11           (B)  The amount and date of reduction in permitted
 
12                ground-water usage occurring as a result of this
 
13                investment;
 
14           (C)  The amount of tax credit claimed for these
 
15                investments for the current taxable year;
 
16           (D)  The amounts of qualified water conservation
 
17                investment reported for tax years preceding the
 
18                prior taxable year;
 
19           (E)  The amounts of tax credit which have been claimed
 
20                in prior taxable years;
 
21           (F)  The amount of tax credit which has been carried
 
22                over from prior years;
 
23           (G)  The amount of tax credit allowed under this
 

 
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 1                section being claimed by the taxpayer in the
 
 2                current taxable year; and
 
 3           (H)  The amount of tax credit to be carried over to
 
 4                subsequent years;
 
 5      (2)  In the initial year in which the taxpayer claims the
 
 6           credit granted in this section, the taxpayer shall
 
 7           include in the description of the project required by
 
 8           paragraph (1)(A) information which demonstrates that
 
 9           the project completed with the qualified water
 
10           conservation investment had an aggregate cost of
 
11           $50,000 or more.  The taxpayer shall also include a
 
12           copy of the certification by the county of water supply
 
13           agency;
 
14      (3)  Any lease for a period of five years or longer of any
 
15           real or personal property resulting from qualified
 
16           water conservation investment shall be treated as
 
17           qualified water conservation investment by the lessee.
 
18           The taxpayer may treat the full value of the leased
 
19           property as qualified water conservation investment in
 
20           the taxable year in which the lease becomes binding on
 
21           the lessor and the taxpayer if all other conditions of
 
22           this section have been met;
 
23      (4)  Claiming the credit granted in this section shall have
 

 
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 1           no effect on the taxpayer's ability to claim
 
 2           depreciation for tax purposes on assets acquired by the
 
 3           taxpayer, nor shall the credit have any effect on the
 
 4           taxpayer's basis in those assets for the purpose of
 
 5           depreciation; and
 
 6      (5)  If, after receiving approval for the water conservation
 
 7           credit, the consumption of water usage from the same
 
 8           water source is increased, any unused credits shall
 
 9           expire immediately.
 
10      (d)  For the purposes of this section:
 
11      "Machinery and equipment" means all tangible personal
 
12 property used directly in a minimum ten per cent reduction in
 
13 permit by relinquishment or transfer of annual permitted water
 
14 usage from existing permitted water sources.
 
15      "Qualified water conservation investment" means all spending
 
16 by a taxpayer for use in this State for the modification of
 
17 existing manufacturing processes, for the construction of a new
 
18 water conservation facility, or for the expansion of an existing
 
19 water conservation facility; provided that the modification,
 
20 construction, or expansion results in a minimum ten per cent
 
21 reduction in permit by relinquishment or transfer of annual
 
22 permitted water usage from existing permitted water sources and
 
23 has been certified pursuant to rules and regulations adopted by
 

 
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 1 the department of land and natural resources as necessary to
 
 2 promote its water management efforts for areas with a multiyear
 
 3 record of consumption at, near, or above sustainable use signaled
 
 4 by declines in ground-water pressure, threats of salt-water
 
 5 intrusion, need to develop alternate sources to accommodate
 
 6 economic growth and development, or any other indication of
 
 7 growing inadequacy of the existing resource.
 
 8      "Water conservation" means a minimum ten per cent reduction
 
 9 in permit by relinquishment or transfer of annual permitted water
 
10 usage from existing permitted water sources due to increased
 
11 efficiencies or recycling of water which results in reduced water
 
12 usage, or a change from a ground-water source to a surface-water
 
13 source or an alternate source.
 
14      "Water conservation facility" means any facility, buildings,
 
15 and machinery and equipment used in the water conservation
 
16 process resulting in a minimum ten per cent reduction in permit
 
17 by relinquishment or transfer of annual permitted water usage
 
18 from existing water sources; provided that up to ten per cent of
 
19 any building that is a component of a water conservation facility
 
20 may be used for office space to house support staff for the
 
21 operation.
 
22      (e)  The director of taxation shall prepare forms as may be
 
23 necessary to claim a credit under this section.  The director may
 

 
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 1 also require the taxpayer to furnish reasonable information in
 
 2 order that the director may ascertain the validity of the claim
 
 3 for credit made under this section.  The director may adopt rules
 
 4 necessary to effectuate the purposes of this section pursuant to
 
 5 chapter 91.
 
 6      (f)  All claims for tax credits under this section,
 
 7 including any amended claims, shall be filed on or before the end
 
 8 of the twelfth month following the close of the taxable year for
 
 9 which the credits may be claimed.  Failure to comply with the
 
10 foregoing provision shall constitute a waiver of the right to
 
11 claim the credit."
 
12      SECTION 2.  New statutory material is underscored.
 
13      SECTION 3.  This Act, upon its approval, shall apply to
 
14 taxable years beginning after December 31, 1998.
 
15 
 
16                           INTRODUCED BY:  _______________________