HB2746

SECTION 1. Hawaii aspires to be the nation's leader in the use of native sources of renewable energy and technologies such as solar panels and wind generators to produce clean energy. Fuel cells are an important part of the greater portfolio of renewable energy technologies that can serve as both an energy storage device and a source of power generation. Fuel cells are highly efficient, reliable, and commercially available today.

The utilization of fuel cells is important for building an infrastructure in a broader hydrogen economy. A hydrogen economy is not distinct from other renewable energy technologies such as wind and solar, but to the contrary, it is complementary. Hydrogen can be generated by electrolyzing water with low-cost, off-peak electricity, or with electricity obtained from renewable sources such as solar, wind, or biomass. This makes fuel cell systems both environmentally friendly and highly efficient.

Fuel cells also provide emergency backup power and support for critical infrastructural components. The legislature recognizes the need for backup power for emergency management and the overall safety of the general public.

Federal regulations will likely require telecommunications companies to provide eight hours of backup power at cell tower sites. The State has over one million mobile wireless telephone subscribers who depend upon the telecommunications infrastructure for communication in the event of a natural disaster or other emergency. The State should ensure that any mandates for providing backup power consider the dependence on, and expense of fossil fuels and the impact on our greatest asset ‑ our natural resources.

As hydrogen-fueled vehicles are marketed, there is a need to establish a hydrogen fuel infrastructure. Currently, fuel cells are replacing lead-acid batteries in lift trucks at warehouses and distribution centers. Industrial users are finding these fuel cells to be cleaner, more efficient, and cost effective. These vehicles and their accompanying fueling infrastructure are predecessors for automotive fuel cells, fleets of which are now being deployed on the mainland.

This Act provides the base for establishing an infrastructure to replace polluting technologies such as combustion engines, lead-acid batteries, and diesel generators with ultra-clean, efficient fuel cells. This infrastructure will form the foundation for a hydrogen economy in Hawaii and help mitigate risks of the current emergency power situation.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Hydrogen fuel tax credit. (a) There shall be allowed to each individual or corporate taxpayer who is not claimed, or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or state income tax purposes a hydrogen fuel tax credit that shall be deductible from the taxpayer's net income tax liability imposed by this chapter for the taxable year in which the tax credit is properly claimed.

(b) To qualify for the tax credit, the taxpayer shall be in compliance with all applicable federal, state, and county statutes, rules, and regulations.

The amount of the tax credit shall be equal to:

(1) Thirty-five per cent of all capital, operation, maintenance, or leasing costs related to investments in hydrogen-powered vehicles and hydrogen vehicle fueling stations in the State, including but not limited to the costs of constructing, installing, and equipping hydrogen fuel technologies; provided that the total amount of tax credits paid to all taxpayers per year under this paragraph shall not exceed $ ; and

(2) Thirty-five per cent of all capital, operation, maintenance, and leasing costs related to an investment in commercial stationary hydrogen fuel cells in the State, including but not limited to the costs of constructing, installing, and equipping these technologies in the State; provided that the total amount of tax credits paid to all taxpayers per year under this paragraph shall not exceed $ ; provided further that the tax credit per fuel cell shall not exceed $12,000 per taxpayer.

"Corporation" means a general partnership, limited partnership, limited liability company, unincorporated business, or other business entity in which a taxpayer owns an interest that is taxed as a partnership or is disregarded as a separate entity from the taxpayer for tax purposes.

"Fuel cell property" includes hydrogen fuel cell equipment using hydrogen or a hydrogen-rich fuel in an electrochemical process to generate energy, electricity, or the transfer of heat.

"Hydrogen fuel cells" means equipment using hydrogen or a hydrogen rich fuel in an electrochemical process to generate energy, electricity, or the transfer of heat.

(d) In the case of fuel cell property that serves a single-family dwelling, the tax credit shall be taken in the taxable year in which the property is placed in service. For all other fuel cell property, the tax credit shall be taken in five equal installments beginning with the taxable year in which the property is placed in service.

(e) If in one of the years in which the installment of a tax credit accrues, the fuel cell property with respect to which the credit was claimed is disposed of, taken out of service, or moved out of State, the tax credit shall expire and the taxpayer shall not take any remaining installment of the credit.

(f) No credit is allowed under this section to the extent the cost of the fuel cell property was provided by public funds.

(g) Any corporation or subsequent transferee allowed the tax credit, may transfer the tax credit, in whole or in part, to any taxpayer by written agreement, without the requirement of transferring any ownership interest in the property generating the tax credit or any interest in the entity that owns the property.

Transferees are entitled to apply the credits against the tax with the same effect as if the transferee had incurred the eligible costs.

To perfect the transfer, the transferor shall provide a written transfer statement providing notice of the assignor's intent to transfer the tax credits to the assignee. The statement shall include the:

(1) Date the transfer is effective;

(2) Assignee's name, address, federal taxpayer identification number, and tax period; and

(3) Amount of tax credits to be transferred.

The department shall issue, upon receipt of a transfer statement conforming to the requirements of this section, a certificate to the assignee reflecting the tax credit amounts transferred, a copy of which shall be attached to each tax return by an assignee claiming the tax credits.

Tax credits derived by entities treated as corporations under this section that are not transferred by the entities to other taxpayers under this subsection shall be passed through to the taxpayers designated as partners, members, or owners, respectively, in any manner agreed to by the persons, whether or not the persons are allocated or allowed any portion of the federal energy tax credit with respect to eligible costs.

(h) If the tax credit allowed under this section exceeds the taxpayer's net income tax liability, the excess of credit over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

All claims for tax credits under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credits may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(i) The director of taxation:

(1) Shall prepare forms as may be necessary to claim a tax credit under this section;

(2) May require proof of the claim for the tax credit; and

(3) May adopt rules pursuant to chapter 91 to effectuate the purposes of this section; including provisions with respect to:

(A) Establishing entitlement to the tax credit;

(B) Transferring of the tax credit; and

SECTION 3. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Exemption for hydrogen powered vehicles. (a) In addition to any other applicable exemption provided under this chapter, there shall be exempted from the measure of taxes imposed by this chapter, all of the value or gross income derived from the sale of:

(1) Hydrogen powered vehicles;

(2) Materials or parts incorporated into hydrogen powered vehicles; and

(3) Hydrogen fuel;

provided that the amount of the exemption shall not exceed $ in total annually.

(b) There shall be exempted from the measure of taxes imposed by this chapter, all of the value or gross income derived from the sale of commercial and residential stationary hydrogen fuel cells; provided that the amount of the exemption under this subsection shall not exceed $ in total annually.

(c) For the purposes of this section, "hydrogen fuel cells" means equipment using hydrogen or a hydrogen rich fuel in an electrochemical process to generate energy, electricity, or the transfer of heat."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2007.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2746
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII