Establishes an income tax credit for taxpayers who install a renewable energy unit in a residential rental unit. Allows taxpayer to claim 20% of the total cost of the system as a credit against income tax for up to 5 years. Requires that the residential unit using the renewable energy system remain in the rental market for at least 5 years.

A BILL FOR AN ACT

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§235- Renewable energy technologies; income tax credit; residential rental units. (a) When the requirements of subsections (b) and (d) 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 into service by a taxpayer in a single-family residential rental unit or a multi-family residential rental unit during the taxable year. The tax credit shall be available for systems installed and placed in service after January 1, 2006.

(c) If the tax credit for a single system is claimed by multiple owners of a single-family residential rental unit or a multi-family residential rental unit, the multiple owners shall be entitled to a single tax credit. 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).

(d) The dollar amount of any new federal energy tax credit similar to the credit provided in this section that is established after January 1, 2006, and any utility rebate, shall be deducted from the cost of the qualifying system and its installation before applying the state tax credit.

(e) 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.

(f) 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.

(g) If, at any time during the period in which tax credits are earned under this section, the residential rental unit is taken out of the rental housing market, the tax credit claimed under this section shall be recaptured. The recapture shall be equal to one hundred per cent of the total tax credit claimed under this section for the preceding taxable year; provided that the amount of the credits recaptured shall apply only to the taxable year for which the residential rental unit is taken out of the rental housing market. The amount of the recaptured tax credits determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs under this subsection.

(h) By or before December 1, 2008, 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:

(i) 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."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2005.