Report Title:
Energy Tax Credit
Description:
Extends deadline for energy conservation income tax credits to July 1, 2010; allows tax credits for solar energy systems and heat pumps for single-family residential buildings to be awarded per unit; includes combined heat and power systems in tax credit; defines combined heat and power systems. (SD1)
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1282 |
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TWENTY-FIRST LEGISLATURE, 2001 |
H.D. 2 |
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STATE OF HAWAII |
S.D. 1 |
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A BILL FOR AN ACT
RELATING TO ENERGY CONSERVATION TAX CREDITS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Hawaii remains heavily dependent on petroleum fuel as its main source of energy. While oil accounts for forty per cent of the energy needs of the United States, it accounts for ninety per cent of Hawaii's energy needs.
As a result, the need to reduce our vulnerability to disruptions in oil supplies is an urgent one. One way to reduce this dependency on oil is by encouraging the use of indigenous resources as our sources of energy. The energy conservation income tax credit (tax credit), which has been in effect since 1977, is a proven strategy to meet this objective.
For example, according to papers on solar systems presented at the energy efficiency policy task force's energy symposium in November 2000, the tax credit contributes net economic and fiscal benefits and has been effective in stimulating investment in solar systems. Among other things, the papers found that:
(1) The tax credit serves as a market signal to consumers that stimulates investment in solar systems. Without the tax credit, it is estimated that the number of solar systems purchased would decrease by ninety per cent;
(2) With the tax credit, there is a positive fiscal impact to the State over the life of a purchased solar system at $1,842 per system. This is due to the energy savings from solar systems, the value of which is exogenous to Hawaii's economy;
(3) The tax credit employment impact over the life of a solar system is also positive; and
(4) If the tax credit is eliminated and the solar industry shrinks to ten per cent (close to three thousand systems are installed annually), the State will suffer a net fiscal loss of approximately $3,165 per solar system in the first year.
The legislature finds that in addition to the current systems that are provided a tax credit there are other emerging energy efficient technologies, generally referred to as combined heat and power (CHP) systems that will reduce Hawaii's consumption of fossil fuels by using these fuels more efficiently, similar to heat pumps. CHP systems are extremely energy efficient because they simultaneously produce electricity and thermal energy, which is used to make steam and hot water, or both, with a single energy conversion device. By locating CHP equipment at or near a customer’s business the thermal energy, which is normally lost as waste heat by central power plant generation, can be captured and used for various water heating purposes and for absorption chillers to provide air conditioning. CHP systems include fuel cells, solar thermal collectors, micro turbines, small combustion turbines and internal combustion engines.
The purpose of this Act is to extend the energy conservation income tax credit to July 1, 2010, and to include CHP systems in the tax credit.
SECTION 2. Section 235-12, Hawaii Revised Statutes, is amended as follows:
1. By amending subsections (b) and (c) to read:
"(b) For taxable years beginning after December 31, 1989, each individual or corporate resident taxpayer who files an individual or corporate net income tax return for a taxable year, may claim a tax credit under this section against the Hawaii state individual or corporate net income tax. The tax credit may be claimed as follows:
(1) For wind energy systems that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, the credit shall be twenty per cent of the actual cost;
(2) For solar energy systems that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, on new and existing single family residential buildings, the credit shall be in an amount not to exceed thirty-five per cent or $1,750, per building unit, whichever is less, of the actual cost of the solar energy system;
(3) For solar energy systems that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, on new and existing multiunit buildings used primarily for residential purposes, the credit shall be in an amount not to exceed thirty-five per cent or $350 per building unit, whichever is less, of the actual cost of the solar energy system;
(4) For solar energy systems that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, in new and existing hotel, commercial, and industrial facilities, the credit shall be in an amount not to exceed thirty-five per cent of the actual cost of the solar energy system;
(5) For heat pumps that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, in new and existing single-family residential buildings, the credit shall be in an amount not to exceed twenty per cent or $400, per building unit, whichever is less, of the actual cost of the heat pump;
(6) For heat pumps that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, in new and existing multiunit buildings used primarily for residential purposes, the credit shall be in an amount not to exceed twenty per cent or $200 per building unit, whichever is less, of the actual cost of the heat pump; provided that a licensed professional engineer reviews the design of the system and provides a written opinion that the system, in accordance with recognized engineering practice, is designed to provide not less than ninety per cent of the daily annual average hot water needs of all of the occupants of the building;
(7) For heat pumps that are installed and placed in service after December 31, 1989, but before July 1, [2003,] 2010, in new and existing hotel, commercial, and industrial facilities, the credit shall be in an amount not to exceed twenty per cent of the actual cost of the heat pump; [and]
(8) For ice storage systems that are installed and placed in service after December 31, 1990, but before July 1, [2003,] 2010, the credit shall be in an amount not to exceed fifty per cent of the actual cost of the ice storage system[.]; and
(9) For combined heat and power systems that are installed and placed in service after December 31, 2000, but before July 1, 2010, in new and existing single-family residential buildings, the credit shall be in an amount not to exceed twenty per cent or $400, per building unit, whichever is less, of the actual cost of the combined heat and power system;
(10) For combined heat and power systems that are installed and placed in service after December 31, 2000, but before July 1, 2010, in new and existing multiunit buildings used primarily for residential purposes, the credit shall be in an amount not to exceed twenty per cent or $200 per building unit, whichever is less, of the actual cost of the combined heat and power system; provided that a licensed professional engineer reviews the design of the system and provides a written opinion that the system, in accordance with recognized engineering practice, is designed to produce electric and thermal energy at an average combined efficiency rating of not less than seventy-five per cent; and
(11) For combined heat and power systems that are installed and placed in service after December 31, 2000, but before July 1, 2010, in new and existing hotel, commercial, and industrial facilities, the credit shall be in an amount not to exceed twenty per cent of the actual cost of the combined heat and power system.
The per unit of actual cost of a solar energy system [or], heat pump, or combined heat and power system referred to in subsection (b)(3) [and], (6), and (10) shall be determined by multiplying the actual cost of the solar energy system [or], heat pump, or combined heat and power system installed and placed in service in the multiunit building by a fraction, the numerator being the total square feet of that unit in the multiunit building, and the denominator being the total square feet of all the units in the multiunit building.
If federal energy tax credits similar to any of those provided in paragraphs (1) to [(8)] (11) are established after June 30, 1998, but before July 1, [2003,] 2010, then the state tax credit provided in the respective paragraph or paragraphs shall be reduced by the amount of the applicable federal energy tax credit.
(c) Tax credits shall apply only to the actual cost of the solar or wind energy system, heat pump, [or] ice storage system, or combined heat and power system, including their accessories and installation, and shall not include the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system or heat pump. The tax credit shall be claimed against net income tax liability for the year in which the solar or wind energy system, heat pump, [or] ice storage system, or combined heat and power system was purchased and placed in use in Hawaii. Tax credits that exceed the taxpayer's income tax liability may be used as credit against the taxpayer's income tax liability in subsequent years until exhausted."
2. By amending subsection (e) to add a new definition to be appropriately inserted and to read:
""Combined heat and power system" means any single energy conversion device using a single energy source that simultaneously produces electricity and thermal energy that is used for further processes."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2000.