STAND. COM. REP. NO. 590

Honolulu, Hawaii

RE:    S.B. No. 772

       S.D. 2

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 772, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO BIOFUEL FACILITIES,"

begs leave to report as follows:

     The purpose and intent of this measure is to expand renewable energy production in the State by:

     (1)  Renaming the "ethanol facility tax credit" to the "biofuel production facility tax credit" and expanding application of the tax credit to include various biofuels;

     (2)  Changing the determination of the biofuel production facility tax credit from thirty per cent of nameplate capacity to 30 cents per gallon of production;

     (3)  Requiring qualified facilities to be located within the State and to utilize locally grown feedstock for at least seventy-five per cent of its production output;

     (4)  Changing the amount of certified credits from $12,000,000 to an unspecified amount;

     (5)  Revising the reporting requirement for taxpayers claiming the tax credit to include type of biofuel and percentage of Hawaii-grown feedstock used; and

     (6)  Removing the forty million gallon production cap per year.

     Your Committee received written comments in support of this measure from Richard Lim, Interim Director, Department of Business, Economic Development, and Tourism; and Warren Bollmeier II, President, Hawaii Renewable Energy Alliance.

     Your Committee received comments on the measure from the Tax Foundation of Hawaii.

Your Committee finds that this measure encourages higher levels of renewable energy production, while balancing possible tax revenue losses against revenue gains and growth from industry expansion.  Although the ethanol facility tax credit was established in 2004, the production costs of ethanol and biofuel have risen steeply, forcing the closure of production facilities throughout the nation.

     Your Committee further finds that this measure supports growth in the renewable energy industry and enables a broader variety of companies to take advantage of the tax benefits of a biofuel production facility tax credit.

     Your Committee has amended this measure by changing the amount of the biofuel production facility tax credit from 30 cents to an unspecified amount to facilitate further discussion on the issue.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 772, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 772, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DAVID Y. IGE, Chair