THE SENATE	S.B. NO.	623
TWENTY-SEVENTH LEGISLATURE, 2013		S.D. 2
STATE OF HAWAII		H.D. 3

A BILL FOR AN ACT

RELATING TO RENEWABLE ENERGY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 235-12.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-12.5  Renewable energy technologies; income tax credit.  (a)  When the requirements of subsection [(d)] (c) are met, each individual or corporate 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 in service in the State by a taxpayer during the taxable year.]  The tax credit may be claimed as follows:

     (1)  For each solar energy [system:] property that is used exclusively to heat water and is installed and first placed in service in the State by a taxpayer during the taxable year:  thirty-five per cent of the [actual cost or the cap amount determined in subsection (b), whichever is less; or] basis up to the applicable cap amount, which is determined as follows:

(A) $2,500 per property for single-family residential property;

(B) $500 per unit per property for multi-family residential property; and

(C) $250,000 per property for commercial property;

(2) For each solar energy property that is used primarily to generate electricity, is less than one megawatt in alternating current capacity, and is installed and first placed in service in the State by a taxpayer during the taxable year:

(A) 30 per cent of the basis for solar energy property first placed in service after December 31, 2012, and before January 1, 2014;

(B) 25 per cent of the basis for solar energy property first placed in service after December 31, 2013, and before January 1, 2016;

(C) 20 per cent of the basis for solar energy property first placed in service after December 31, 2015, and before January 1, 2018; and

(D) 15 per cent of the basis for solar energy property first placed in service after December 31, 2017;

provided that no energy property that receives a tax credit under this paragraph may later receive a production tax credit even if the property is one megawatt or greater;

(3) For each solar energy property that is used to generate electricity, has not already received a tax credit under paragraph (2), and is one megawatt or larger in alternating current capacity and that is first placed in service:

(A) On or before December 31, 2016, 8 cents multiplied by the number of kilowatt-hours produced by the solar energy property and sold by the taxpayer via a power purchase agreement during the taxable year or used on-site to offset the site's demand for electricity during the taxable year for the first ten years that the solar energy property is in service;

(B) After December 31, 2016, but on or before December 31, 2020, 6 cents multiplied by the number of kilowatt-hours produced by the solar energy property and sold by the taxpayer via a power purchase agreement during the taxable year or used on-site to offset the site's demand for electricity during the taxable year for the first ten years that the solar energy property is in service; and

(C) After December 31, 2020, 4 cents multiplied by the number of kilowatt-hours produced by the solar energy property and sold by the taxpayer via a power purchase agreement during the taxable year or used on-site to offset the site's demand for electricity during the taxable year for the first ten years that the solar energy property is in service; or

    [(2)] (4)  For each [wind-powered] wind energy [system:] property that is less than one megawatt in output and is not part of a larger wind energy property:  twenty per cent of the [actual cost or the cap amount determined in subsection (b),] basis or $        , whichever is less[;

provided that multiple].  Multiple owners of a single [system] property shall be entitled to a single tax credit[;], and [provided further that] the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the [system.] property.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology [system] property that is installed and placed in service in the State 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).] 704(b) of the Internal Revenue Code.

     [(b)  The amount of credit allowed for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined as follows:

(1) If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

(A) $2,250 per system for single-family residential property;

(B) $350 per unit per system for multi-family residential property; and

(C) $250,000 per system for commercial property;

(2) For all other solar energy systems, the cap amounts shall be:

(A) $5,000 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

(B) $350 per unit per system for multi-family residential property; and

(C) $500,000 per system for commercial property; and

(3) For all wind-powered energy systems, the cap amounts shall be:

(A) $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

(B) $200 per unit per system for multi-family residential property; and

(C) $500,000 per system for commercial property.

(c)] (b)  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.

"Household use" means any use to which heated water is commonly put in a residential setting, including commercial application of those uses.]

"Basis" means costs related to the solar or wind energy property under subsection (a), including accessories, energy storage, and installation, but does not include the cost of consumer incentive premiums unrelated to the operation of the energy property or offered with the sale of the energy property and costs for which another credit is claimed under this chapter.  Any cost incurred and paid for the repair, construction, or reconstruction of a structure in conjunction with the installation and placing in service of solar or wind energy property, such as the re-roofing of single-family residential property, multi-family residential property, or commercial property, shall not constitute a part of the basis for the purpose of this section; provided that costs incurred for the physical support of the solar or wind energy property, such as racking and mounting equipment and costs incurred to seal or otherwise return a roof to its pre-installation condition shall constitute part of the basis for the purposes of this section.  

The basis used under this section shall be consistent with the use of basis in section 25D or section 48 of the Internal Revenue Code; provided that, for the purposes of calculating the credit allowed under this section, the basis of the solar energy property or the wind energy property shall not be reduced by the amount of any federal tax credit or other federally subsidized energy financing received by the taxpayer.

"First placed in service" has the same meaning as in Treasury Regulation 1.167(a)-11(e)(1).

"Property" means equipment that uses solar or wind energy to generate electricity, the construction, reconstruction, or erection of which is completed by the taxpayer, or which is acquired by the taxpayer if the original use of the property commences with the taxpayer.

"Public sector agency" means any political subdivision, agency, or instrumentality of the State or of the federal government.

     "Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as solar or wind energy, into:

     (1)  A usable source of thermal or mechanical energy;

     (2)  Electricity; or

     (3)  Fuel.

     "Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts solar 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.

     [(d)] (c)  For taxable years beginning after December 31, 2005, the dollar amount of any utility rebate shall be deducted from the [cost] basis of the qualifying [system] property and its installation before applying the state tax credit.

[(e)] (d)  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 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)] (e)  If the tax credit under [this section] subsection (a)(1), (2), and (4) 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, unless otherwise elected by the taxpayer pursuant to subsection (f) or (g) [or (h)].  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)] (f)  For solar energy [systems,] properties under subsection (a)(1) and (2) or for any wind energy property under subsection (a)(4), a taxpayer may elect to reduce the eligible credit amount by thirty per cent and if this reduced amount exceeds the amount of income tax payment due from the taxpayer, the excess of the credit amount over payments due shall be refunded to the taxpayer; provided that tax credit amounts properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; and [provided further that] no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the [system] property is installed and first placed in service.  A separate election may be made for each separate [system] property that generates a credit.  An election once made is irrevocable.

     [(h)] (g)  Notwithstanding subsection [(g),] (f), for any [renewable energy technology system,] solar energy property under subsection (a)(1) and (2) or for any wind energy property under subsection (a)(4), an individual taxpayer may elect to have any excess of the credit over payments due refunded to the taxpayer[,] without discount, if:

     (1)  All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or

     (2)  The taxpayer's adjusted gross income is $20,000 or less (or $40,000 or less if filing a tax return as married filing jointly);

provided that tax credits amounts properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; and [provided further that] no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

A husband and wife who do not file a joint tax return shall only be entitled to make this election to the extent that they would have been entitled to make the election had they filed a joint tax return.

     The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the [system] property is installed and first placed in service.  A separate election may be made for each separate [system] property that generates a credit.  An election once made is irrevocable.

     [(i)] (h)  No taxpayer shall be allowed a credit under this section for the portion of the renewable energy technology system required by section 196-6.5 that is installed and first placed in service on any newly constructed single-family residential property authorized by a building permit issued on or after January 1, 2010.

     [(j)  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 for each taxable year:]

(i)  If the tax credit under subsection (a)(3) exceeds the taxpayer's income tax liability, the excess of the credit over liability shall be refunded to the taxpayer; provided that tax credit amounts properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.  No property placed in service pursuant to subsection (a)(3) shall be subject to a reduction in refund payments for any subsequent year by any legislative act or executive decision.

(j)  The tax credit provided for in this section shall be construed in accordance with Treasury Regulations and judicial interpretations of similar provisions in sections 25D, 45, and 48 of the Internal Revenue Code.

(k)  Notwithstanding the foregoing, and in lieu of the credit described above, an individual or corporate taxpayer not currently regulated by the public utilities commission that had by December 31, 2012, had entered into an agreement with a public sector agency pursuant to a public solicitation and procurement process for the sale of electrical energy from non-residential solar energy property with less than one megawatt of alternating current capacity shall be allowed to elect to receive the tax credit for energy properties placed into service prior to January 1, 2014, on the same basis as if the energy property had been placed into service prior to January 1, 2013; provided that the taxpayer shall provide a copy of the agreement to the department of taxation.

(l)  Taxpayers who have received letters from the department of taxation extending the department's letter rulings or determination letters prior to December 31, 2013, and have submitted the requested status update may qualify for the tax credit as it existed on December 31, 2012; provided that the energy property is first placed in service on or before December 31, 2013.

(m)  An association of owners under chapter 421I, 421J, 514A, or 514B may claim the credit allowed under this section in its own name for property or facilities placed in service and located on common areas.

(n)  No credit under this section shall be allowed to any federal, state, or local government or any political subdivision, agency, or instrumentality thereof.

(o)  The department of taxation, in collaboration with the department of business, economic development, and tourism, shall submit a joint report to the legislature annually no later than twenty days prior to the convening of each regular session on the following for the preceding taxable year:

     (1)  The number of renewable energy technology [systems] properties that have qualified for a tax credit during the calendar year by:

         (A)  Technology type; and

(B)  Taxpayer type (corporate and individual); [and]

(2)  The total cost of the tax credit to the State during the taxable year by:

         (A)  Technology type; [and]

(B)  Taxpayer type[.];

(C) Tax credit type (investment or production); and

(D) Refundability type (refundable or nonrefundable); and

(3) The estimated economic benefit that may be attributable to the renewable energy tax credit, including:

(A) Impact on the economy, including:

(i) Economic boost;

(ii) Net flow of money into or out of the State; and

(iii) General excise and income tax revenue generated; and

(B) Jobs, including:

(i) Number of jobs maintained;

(ii) Number of jobs created and the number of jobs lost; and

(iii) Average pay.

[(k)  This section shall apply to eligible renewable energy technology systems that are installed and placed in service on or after July 1, 2009.]

(p)  The department of business, economic development, and tourism shall commence a study no later than July 1, 2016, on the costs incurred and benefits generated by this section, as well as the extent to which the tax credit under this section has helped the State to achieve its energy goals.  In conducting this study, the department of business, economic development, and tourism shall consult with the department of taxation and industry trade groups and may consult with other stakeholders.  The department of business, economic development, and tourism shall submit a report to the legislature no later than December 31, 2017.  This report to the legislature shall include, at a minimum, the following:

(1) The elements in subsection (o);

(2) The results of its study; and

(3) Recommendations on whether the tax credit under this section should be wholly or partially continued, eliminated, or revised."

     SECTION 2.  If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2012.

Report Title:

Renewable Energy; Solar Energy Property; Tax Credit

Description:

Replaces the current renewable energy technology systems tax credit with tax credits for solar energy property and wind energy property.  Requires the Department of Taxation and Department of Business, Economic Development, and Tourism to report tax credits claimed under the renewable energy technology tax credit and make recommendations to the legislature.  Effective July 1, 2050.  (SB623 HD3)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.