STAND. COM. REP. NO. 2062

Honolulu, Hawaii

RE:    S.B. No. 2766

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committees on Energy and Environment and Commerce, Consumer Protection, and Affordable Housing, to which was referred S.B. No. 2766 entitled:

"A BILL FOR AN ACT RELATING TO ETHANOL,"

beg leave to report as follows:

     The purpose of this measure is to allow an income tax credit for the owner of a retail station for the actual cost of installation of E-85 fueling facilities.

     Your Committees received testimony in support of this measure from the Department of Business, Economic Development, and Tourism; Hawai‘i BioEnergy; and Aloha Petroleum, Ltd.  Testimony in opposition was received from the Department of Taxation. Comments were received from the Tax Foundation of Hawaii.

     Your Committees find that the current obstacle to the establishment of E-85 fueling stations in Hawaii is most likely the required certification of the dispensing equipment by Underwriters Laboratory.  Testimony indicated that the Honolulu Fire Department denied a local fuel company's application for installation because the equipment had not yet been approved by Underwriters Laboratory.  The difficulty in obtaining certification of equipment may discourage dealers from installing equipment.  The provision of a tax credit may motivate the effort.

     Your Committees note the concerns of the Department of Taxation that the language of the measure is "underdeveloped and requires additional common requirements associated with other tax credits," which the Department is willing to provide language for, upon request.  Your Committees request the Department to provide such language for the next committee's consideration.

     In addition, your Committees note the concern of the Department of Business, Economic Development, and Tourism that the measure should include a recapture provision if an E-85 fueling facility is used for its intended purpose.  Your Committees believe that this particular issue is more appropriately addressed by your Committees in Economic Development and Taxation and recommend that it be brought to the Committees' attention as this measure progresses through the legislative process.

     Your Committees have amended this measure by changing the effective date to July 1, 2050, in the interest of facilitating continued discussion.

     As affirmed by the records of votes of the members of your Committees on Energy and Environment and Commerce, Consumer Protection, and Affordable Housing that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2766, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2766, S.D. 1, and be referred to the Committee on Economic Development and Taxation.

Respectfully submitted on behalf of the members of the Committees on Energy and Environment and Commerce, Consumer Protection, and Affordable Housing,

____________________________ RUSSELL S. KOKUBUN, Chair

____________________________ RON MENOR, Chair