STAND. COM. REP. 2478

Honolulu, Hawaii

, 2004

RE: S.B. No. 3207

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Energy and Environment, to which was referred S.B. No. 3207 entitled:

"A BILL FOR AN ACT RELATING TO ETHANOL TAX CREDIT,"

begs leave to report as follows:

The purpose of this measure is to expand the definition of "investment" under the ethanol investment tax credit statute to include certain enumerated costs.

Testimony in support of the measure was submitted by Clean Fuels Hawaii and Maui Ethanol LLC. Testimony in opposition to the measure was submitted by Tesoro Hawaii Corporation. The Department of Taxation, Tax Foundation of Hawaii, and Worldwide Energy Group submitted comments on the measure.

Your Committee appreciates the rationale for using the uniform capitalization rules of Section 263A of the Internal Revenue Code to define "investment" for ethanol investment tax credit purposes. Use of established terms and criteria, supported by extensive interpretive case law, provide uniformity in the application of statutes.

Your Committee has amended this measure by deleting its contents and inserting language that was drafted with the collaborative effort of the Department of Taxation and other stakeholders, that:

(1) Changes the ethanol investment tax credit to the ethanol facility tax credit (EFTC);

(2) Substitutes "taxpayer" for "owner";

(3) Specifies that the credit shall be equal to thirty per cent of the investment if the nameplate capacity of the facility is between 500,000 and 15,000,000 gallons;

(4) Bars other tax credits if the EFTC is claimed;

(5) Limits the EFTC to the amount invested in a qualified ethanol production facility;

(6) Specifies that the EFTC can be claimed only in years that the qualified ethanol production facility is operating at 75% of nameplate capacity or more, and the facility is in production on or before January 1, 2012;

(7) Clarifies the definitions of "credit period," "nameplate capacity," and "qualifying ethanol production";

(8) Clarifies the definition of "investment" by using the uniform capitalization rules of Section 263A of the Internal Revenue Code and specifying exceptions;

(9) Repeals the definition of "maximum annual credit allowable";

(10) Requires the Department of Business, Economic Development, and Tourism to maintain records, administer, and certify claims for the credit;

(11) Places an annual cap of $12,000,000 on the total aggregate amount allowed;

(12) Requires that information relating to a qualified ethanol production facility's ethanol production be made available to the public;

(13) Sets forth the manner in which partnerships, S corporations, estates, and trusts may claim the credit;

(14) Provides the Director of Taxation with independent audit and certification authority; and

(15) Makes numerous conforming changes to the ethanol investment tax credit statute.

As affirmed by the record of votes of the members of your Committee on Energy and Environment that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3207, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3207, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Energy and Environment,

____________________________

J. KALANI ENGLISH, Chair