Increases tax credit for installation and purchase of photovoltaic systems.

A BILL FOR AN ACT

SECTION 1. The legislature finds that Hawaii is dependent on imported oil for more than ninety-two per cent of its energy needs, making it the most vulnerable state in the nation to economic disruption in the event of upheavals in the world oil market. Moreover, during periods of supply curtailment, the State’s need to ensure basic public emergency services to safeguard public health, safety, and welfare, such as police and fire protection, hospital and ambulance services, and utility emergency services, competes with the need to maintain Hawaii’s economy and employment levels, not to mention the continued operations of the State’s transportation, commerce, industry, construction, government, the military, and agriculture. Other factors, including Hawaii’s geographic isolation and lack of overland access to energy sources, make the State unique in its near total reliance on imported oil and vulnerability to supply disruptions. The recent catastrophic events of Hurricane Katrina underline the need for Hawaii to severely reduce its dependence on foreign oil. The legislature's enactment of wholesale gas price caps linked to Gulf Coast markets demonstrates Hawaii's vulnerability to events that occur off our island state.

The legislature further finds that Hawai`i is blessed with an abundance of renewable energy sources, including solar energy. While residents have taken advantage of the power of the sun to heat their water, using solar power to generate electricity through the use of photovoltaic systems is a more recent technology. The legislature also finds that the federal Energy Policy Act of 2005 allows a $2,000 federal tax credit for personal income tax payers for installation of photovoltaic systems, and a 30% tax credit for businesses that install photovoltaic systems. Both federal credits expire at the end of 2007. State law currently allows a tax credit of 35% of cost or $1,750, whichever is less, for single family homes, and 35% of cost or $250,000, whichever is less, for hotels, commercial, and industrial facilities. The dollar amount of the state credit represents approximately 15-20% of the cost to purchase and install a residential photovoltaic system.

Due to the nature of the technology and its relative youth when compared to solar water heaters, photovoltaic technology is more expensive. However, conversion of sunlight into electricity allows the power of the sun to be used for more than simply heating water. The purpose of this Act is to increase the amount of the credit for photovoltaic systems to provide financial incentives to increase the use of this technology.

SECTION 2. Section 235-12.5, Hawaii Revised Statutes, is amended to read as follows:

"§235-12.5 Renewable energy technologies; income tax credit. [Repealed January 1, 2008. L 2003, c 207, §4.] (a) When the requirements of subsection (c) are met, each individual or corporate resident taxpayer that 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 for every eligible renewable energy technology system that is installed and placed in service by a taxpayer during the taxable year. This credit shall be available for systems installed and placed in service after June 30, 2003. The tax credit may be claimed as follows:

provided that multiple owners of a single system shall be entitled to a single tax credit; and provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service by the entity. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a).

(b) For the purposes of this section:

"Actual cost" means costs related to the renewable energy technology systems under subsection (a), including accessories and installation, but not including the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system and costs for which another credit is claimed under this chapter.

"Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as wind, heat (solar thermal), or light (photovoltaic) from the sun into:

"Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts insolation or wind energy to useful thermal or electrical energy for heating, cooling, or reducing the use of other types of energy that are dependent upon fossil fuel for their generation.

(c) The dollar amount of any new federal energy tax credit similar to the credit provided in this section that is established after June 30, 2003, and any utility rebate, shall be deducted from the cost of the qualifying system and its installation before applying the state tax credit.

(d) The director of taxation shall prepare any forms that may be necessary to claim a tax credit under this section, including forms identifying the technology type of each tax credit claimed under this section, whether for solar thermal, photovoltaic from the sun, or wind. The director may also require the taxpayer to furnish reasonable information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(e) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims for the tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with this subsection shall constitute a waiver of the right to claim the credit.

(f) By or before December, 2005, to the extent feasible, using existing resources to assist the energy-efficiency policy review and evaluation, the department shall assist with data collection on the following:

SECTION 3. Act 207, Session Laws of Hawaii 2003, is amended by amending section 4 to read as follows:

"SECTION 4. This Act shall take effect on July 1, 2003[, and shall be repealed January 1, 2008]."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on approval, and shall apply to taxable years beginning after December 31, 2005.