STAND. COM. REP. NO. 2212

Honolulu, Hawaii

RE:    S.B. No. 2666

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2012

State of Hawaii

Sir:

     Your Committees on Energy and Environment and Economic Development and Technology, to which was referred S.B. No. 2666 entitled:

"A BILL FOR AN ACT RELATING TO ENERGY,"

beg leave to report as follows:

     The purpose and intent of this measure is to create a tax credit for investments in the development and construction of a biofuel production facility that may only be claimed after the production facility becomes commercially operational.

     Your Committees received testimony in support of this measure from the Office of Environmental Quality Control, Aina Koa Pono, Blue Planet Foundation, International Longshore and Warehouse Union Local 142, Hawaiian Electric Company, Hawaii Bioenergy LLC, and two individuals.  Your Committees received comments on this measure from the Department of Taxation, Tax Foundation of Hawaii, Hawaii Renewable Energy Alliance, Pacific Biodiesel, and two individuals.

     Your Committees find that the long-term benefits of a locally situated biofuel production facility merit the support of the people and State of Hawaii, despite the short-term costs associated with the development and construction of such a facility.  This measure proposes to set:  (1) the amount of the credit at fifteen percent of the qualified development and construction costs of a biofuel production facility; and (2) the maximum total tax credits claimed by a biofuel facility at $60,000,000.  Your Committees welcome the guidance of your Committee on Ways and Means as to the appropriate percentage of the tax credit and appropriate maximum amount of total tax credits that may be claimed.

     Your Committees further find that a tax credit would provide a substantial financial benefit to its recipient.  Your Committees believe it is appropriate to require a recipient of the credits to refund the State the full amount of any credits earned and claimed over a period of ten years after obtaining the full amount of the credit.

     Your Committees have amended this measure by:

     (1)  Amending section 2, which establishes the tax credit, as follows:

          (A)  Replacing references to the date on which a biofuel facility becomes "commercially operational" with references to the date on which a biofuel facility is "placed in service";

          (B)  Replacing the term "qualified production costs" with the term "qualified development and construction costs";

         (C)  Deleting language requiring a biofuel production facility to use locally grown feedstock for at least seventy-five percent of its production output;

          (D)  Making the tax credit non-refundable and allowing any unused tax credit to be carried forward until it is depleted; and

          (E)  Adding language that would require a recipient of the tax credit to refund the State of Hawaii the entire amount of the tax credit earned and claimed, in one payment in the tenth taxable year after the recipient obtains its final tax credit;

     (2)  Changing the effective date to July 1, 2050, to ensure further discussion; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Energy and Environment and Economic Development and Technology that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2666, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2666, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Energy and Environment and Economic Development and Technology,

____________________________ CAROL FUKUNAGA, Chair

____________________________ MIKE GABBARD, Chair