Encourages use of alternative fuels by adjusting the fuel tax to reflect the energy content of alternative fuels and reducing the fuel tax rate of alternative fuels for several years. (HB1345 HD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that alternative transportation fuels could provide a substantial part of Hawaii’s transportation energy demand and that local production of these fuels could diversify energy supplies while producing environmental and economic benefits to the public.

The legislature also finds that vehicles that operate on fuels containing less energy per gallon require more gallons of fuel to travel the same distance as those using fuels with more energy. However, motor fuels other than liquefied petroleum gas are currently taxed at the same per-gallon rate. Therefore, several alternative fuels are put at a disadvantage on a cost-per-mile basis and would bear a disproportionate share of the highway tax burden.

The legislature finds and declares that there is a need to remove unnecessary disincentives to the use of alternative fuels, by adjusting transportation fuel tax rates to reflect energy content of alternative fuels, and to provide an incentive to the use of these fuels by providing reduced tax rates for several years.

SECTION 2. Section 243-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Alternative fuel" means methanol, denatured ethanol, and other alcohols; mixtures containing eighty-five per cent or more by volume of methanol, denatured ethanol, and other alcohols with gasoline or other fuels; natural gas; liquefied petroleum gas; hydrogen; coal-derived liquid fuels; biodiesel; mixtures containing twenty per cent or more by volume of biodiesel with diesel or other fuels; fuels (other than alcohol) derived from biological materials; and any other fuel that is substantially not a petroleum product and that the governor determines would yield substantial energy security benefits or substantial environmental benefits."

SECTION 3. Section 243-4, Hawaii Revised Statutes, is amended to read as follows:

"§243-4 License taxes. (a) Every distributor shall, in addition to any other taxes provided by law, pay a license tax to the department of taxation for each gallon of liquid fuel refined, manufactured, produced, or compounded by the distributor and sold or used by the distributor in the State or imported by the distributor, or acquired by the distributor from persons who are not licensed distributors, and sold or used by the distributor in the State. Any person who sells or uses any liquid fuel knowing that the distributor from whom it was originally purchased has not paid and is not paying the tax thereon shall pay such tax as would have applied to such sale or use by the distributor. The rates of tax hereby imposed are as follows:

If it is shown to the satisfaction of the department, based upon proper records and from such other evidence as the department may require, that liquid fuel other than fuel mentioned in paragraphs (1) and (2) is used for agricultural equipment that does not operate upon the public highways of the State, the user thereof may obtain a refund of all taxes thereon imposed by this section in excess of 1 cent per gallon. The department shall [prescribe] adopt rules to administer such refunds.

(b) Every distributor of diesel oil [shall], in addition to the tax required by subsection (a), shall pay a license tax to the department for each gallon of such diesel oil sold or used by the distributor for operating a motor vehicle or motor vehicles upon public highways of the State. The rates of the additional tax hereby imposed are as follows:

If any user of diesel oil furnishes a certificate, in such form as the department shall prescribe, to the distributor, or the distributor who uses diesel oil signs such certificate, certifying that the diesel oil is for use in operating a motor vehicle or motor vehicles in areas other than upon the public highways of the State, the tax as provided in paragraphs (1) to (4) shall not be applicable. In the event a certificate is not or cannot be furnished and the diesel oil is in fact for use for operating a motor vehicle or motor vehicles in areas other than upon public highways of the State, the user thereof may obtain a refund of all taxes thereon imposed by the foregoing paragraphs. The department shall [prescribe] adopt rules to administer the refunding of such taxes.

(c) The tax shall not be collected in respect to any [liquefied petroleum gas,] benzol, benzene, toluol, [or] xylol, or alternative fuel sold for use other than for operating internal combustion engines. With respect to these products, other than [liquefied petroleum gas,] alternative fuels, the department by [regulation] rule shall provide for the reporting and payment of the tax and for the keeping of records in respect thereto, in such manner as to collect, for each gallon of such product sold for use in internal combustion engines for the generation of power, or so used, the same tax or taxes as apply to each gallon of diesel oil. With respect to [liquefied petroleum gas,] alternative fuels, the only tax collected shall be that provided in paragraphs (1), (2), and (3) of this subsection. This subsection shall not apply to aviation fuel sold for use in or used for airplanes.

(d) No tax shall be collected in respect to any liquid fuel, including diesel oil and liquefied petroleum gas, shown to the satisfaction of the department to have been sold for use in and actually delivered to, or sold in, the county of Kalawao."

SECTION 4. Section 243-5, Hawaii Revised Statutes, is amended to read as follows:

"§243-5 County fuel tax. The amount of the "county of Hawaii fuel tax", "city and county of Honolulu fuel tax", "county of Maui fuel tax", and "county of Kauai fuel tax", respectively, shall be determined by resolution of the county or the city council of each county adopted in the manner provided by law relating to resolutions involving the expenditure of public money. The amount fixed by the resolution may be, per gallon, one or more cents or a fraction of a cent or both, or it may be zero. The amount fixed for alternative fuels may be proportional to the energy contents of the fuels, as determined by their lower heating values, times one-half. No resolution shall be adopted until the county or the city council shall conduct a public hearing on the amount of tax proposed. Public notice of the hearing shall be given in the county at least twice within a period of thirty days immediately preceding the date of hearing. If the resolution is adopted, it shall take effect on the first day of the second month following the date of adoption of the resolution. The county or the city council shall notify the department of taxation of any county fuel tax changes within ten days after the resolution is adopted.

Until and unless otherwise provided by resolution adopted as above provided, the amount of the "county of Hawaii fuel tax" shall be [for the period July 1, 1955, to June 30, 1957, 1 cent per gallon and thereafter] zero, the amount of the "city and county of Honolulu fuel tax" shall be 2-1/2 cents per gallon, the amount of the "county of Maui fuel tax" shall be [for the period July 1, 1955, to June 30, 1957, 3 cents per gallon and thereafter] 2 cents per gallon, and the amount of the "county of Kauai fuel tax" shall be [for the period July 1, 1955, to June 30, 1957, 3 cents per gallon and thereafter] 2 cents per gallon."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2001.