HOUSE OF REPRESENTATIVES	H.B. NO.	1408
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

Relating to renewable energy.

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

PART I

     SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-  Renewable energy technologies; certification of certain credits; aggregate cap. (a) Taxpayers claiming a credit for commercial non-utility scale solar energy property under section 235-12.5(a)(3) or for wind energy property producing electricity for use in the taxpayer's primary residence under section 235-12.5(a)(6), shall apply for certification of the property from the department of business, economic development, and tourism.  This certification must be approved by the department of business, economic development, and tourism prior to the taxpayer claiming a credit under section 235-12.5; provided that no property shall be certified after December 31, 2018.

(b)  To qualify for certification:

(1) A taxpayer under a feed-in tariff shall provide the department of business, economic development, and tourism with a dated copy of utility interconnection costs and a requirements estimate from the applicable electric utility company; and

(2) A taxpayer under a power purchase agreement shall provide the department of business, economic development, and tourism with documentation from the public utilities commission demonstrating the commission's approval of the power purchase agreement.

Upon the determination that the energy property owned by the taxpayer is suitable for certification, the department of business, economic development, and tourism shall grant qualified status and issue a certificate to the taxpayer.  Qualified taxpayers claiming a credit under section 235-12.5 shall include this certificate with the taxpayer's tax return for the taxable year in which the credit is claimed.

(c)  For qualified taxpayers, the department of business, economic development, and tourism shall obtain the following information:

(1) The amount of credit claimed; and

(2) The date the taxpayer received qualified status.

(d)  In January of each year, the department of business, economic development, and tourism shall determine the order in which credits shall be claimed by contacting qualified taxpayers in the order of the date the taxpayer received qualified status.  A taxpayer that elects to claim a credit under section 235-12.5(a)(3) or (a)(6) shall provide the department of business, economic development, and tourism with reports from the electric utility company demonstrating the number of kilowatt hours produced and sold by the taxpayer during the calendar year.  A taxpayer shall not cease to be qualified under this section solely for electing not to claim a credit under section 235-12.5(a)(3) or (a)(6). 

(e)  If in any year, the annual aggregate amount of certified credits for solar energy properties under section 235-12.5(a)(3) reaches the applicable aggregate cap amount, the department of business, economic development, and tourism shall notify the department of taxation and shall carry forward all certified tax credits in excess of the applicable aggregate cap amount to the following year.  The aggregate cap amount for solar energy property shall be determined as follows:

Calendar Year Aggregate Cap Amount

2013 $6,000,000

2014 $9,000,000

2015 $12,000,000

2016 and beyond $13,500,000

In no instance shall the total amount of certified credits claimed for solar energy property exceed the applicable aggregate cap amount.  Notwithstanding any other law to the contrary, information regarding the credits certified, claimed, and carried forward each year shall be available for public inspection and dissemination under chapter 92F.

(f)  If in any year, the annual aggregate amount of certified credits for wind energy properties under section 235-12.5(a)(6) reaches the applicable aggregate cap amount, the department of business, economic development, and tourism shall notify the department of taxation and shall carry forward all certified tax credits in excess of the applicable aggregate cap amount to the following year.  The aggregate cap amount for wind energy property shall be determined as follows:

Calendar Year Aggregate Cap Amount

2013 $2,000,000

2014 $4,000,000

2015 $6,000,000

2016 and beyond $10,000,000

In no instance shall the total amount of certified credits claimed for wind energy property exceed the applicable aggregate cap amount.  Notwithstanding any other law to the contrary, information regarding the credits certified, claimed, and carried forward each year shall be available for public inspection and dissemination under chapter 92F.

(g)  Notwithstanding the department of business, economic development, and tourism's certification authority under this section, the director of taxation may audit and adjust the certification status of taxpayers claiming a credit under section 235-12.5.

(h)  Pursuant to chapter 91, the department of business, economic development, and tourism and the department of taxation may take all steps necessary and appropriate to administer this section including by adopting rules for guidelines and requirements to:

(1) Determine eligibility of qualified taxpayers; and

(2) Further clarify and streamline the determination process under which taxpayers may claim tax credits in accordance with the aggregate caps provided in subsections (e) and (f)."

     SECTION 2.  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] property 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:  thirty-five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less; or

(2) For each wind-powered energy system:  twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;]

(1) For each solar energy property that produces electricity for residential usage, not including the heating of water, up to an amount not to exceed $12,500 calculated as follows:

(A) Thirty per cent of the basis of solar energy property installed and placed in service after December 31, 2012, but prior to January 1, 2014;

(B) Twenty-five per cent of the basis of solar energy property installed and placed in service after December 31, 2013, but prior to January 1, 2015; or

(C) Twenty per cent of the basis of solar energy property installed and placed in service on or after January 1, 2015;

(2) For solar energy property that produces water heating for residential use:  thirty-five per cent of the basis of the solar energy property, not to exceed $2,500;

(3) Subject to the requirements of section 235-   , for commercial non-utility scale solar energy property, an amount not to exceed $500,000 calculated as follows:

(A) Thirty per cent of the basis of commercial non-utility scale solar energy property installed and placed in service after December 31, 2012, but prior to January 1, 2014;

(B) Twenty-five per cent of the basis of commercial non-utility scale solar energy property installed and placed in service after December 31, 2013, but prior to January 1, 2015; or

(C) Twenty per cent of the basis of commercial non-utility scale solar energy property installed and placed in service on or after January 1, 2015;

(4) For commercial non-utility scale solar energy property that heats water:  thirty-five per cent of the basis of the commercial non-utility scale solar energy property, up to an amount not to exceed $250,000;

(5) For utility scale solar energy property installed and placed into service after December 31, 2012:  eight cents per kilowatt hour produced during the utility scale solar energy property's first one hundred twenty months of operation;

(6) Subject to the requirements of section 235-   , for non-utility scale wind energy property that produces electricity for use in the primary residence of the taxpayer claiming the credit: twenty per cent of the basis of the wind energy property;

(7) For other non-utility scale wind energy property that produces electricity:  twenty per cent of the basis of the wind energy property; or

(8) For utility scale wind energy property installed and placed into service after December 31, 2012:  fifteen cents per kilowatt hour produced and sold to a public utility during the utility scale wind energy property's first one hundred twenty months of operation;

provided that multiple owners of [a single system] an energy 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.] basis of the energy 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] basis 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).

     [(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.]

"Basis" means the cost of installing and placing an energy property in service, including the cost of any accessories.  The following are not included in the definition of basis:

(1) Premiums unrelated to the operation of energy property;

(2) Premiums offered with the sale of energy property; and

(3) Costs incurred for the repair, construction, or reconstruction of buildings or structures associated with the installation or placing in service of energy property.

"Commercial non-utility scale" means energy produced for a business that does not include leased or rented residences where the producing entity is not connected to a utility grid at sub-transmission or transmission voltage.

     "Energy property" means new tangible property that captures and converts a renewable source of energy into:

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

(2) Electricity; or

(3) Fuel

Energy property includes solar energy and wind energy property, including 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.

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

"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.]

"Residential use" means energy produced for real property used as a dwelling, including leased property, primary residences, and rental units.

"Sub-transmission or transmission voltage" means the applicable primary, transmission, or sub-transmission voltage level filed by the appropriate electric utility and deemed as nominal by the public utilities commission, allowing, however, for acceptable variations in voltage levels as defined by the public utilities commission.

     ["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.]

"Utility scale" means solar or wind energy property that is:

(1) Designed, installed, and placed into service to produce electricity;

(2) Interconnected to a utility grid at sub-transmission or transmission voltage; and

(3) Subject to a feed-in tariff or power purchase agreement approved by the public utilities commission.

    [(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] energy 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 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 [(g) or (h)] (f), (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] property used for residential or commercial purposes, but not including utility scale solar energy property, 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] solar energy property is installed and placed in service.  [A separate election may be made for each separate system that generates a credit.]  An election once made is irrevocable.

    [(h)] (g)  Notwithstanding subsection [(g),] (f), for any [renewable] energy [technology system,] property, an individual taxpayer may elect to have any excess of the credit over payments due refunded to the taxpayer, 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 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] energy property is installed and placed in service.  [A separate election may be made for each separate system that generates a credit.]  An election once made is irrevocable.

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

(j)  The basis of eligible energy property for the purpose of depreciation and disposition of the energy property shall be reduced by fifty per cent of the amount of credit allowable and claimed under this section.

    [(j)] (k)  [To the extent feasible, using existing resources to] To assist the energy-efficiency policy review and evaluation, the department shall assist with data collection on the following for each 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.

(l)  In addition to the information in subsection (j), the department of business, economic development, and tourism shall also take the following steps as to taxpayer data:

(1) Verify the number of kilowatt hours produced and sold by each taxpayer during each calendar year;

(2) Total all tax credits that the department of business, economic development, and tourism certifies pursuant to this section; and

(3) Compile the total amounts of tax credits taken under this section for each taxable year and the cumulative amount of the tax credit taken during the credit period.

(m)  The director of business, economic development, and tourism may adopt rules subject to chapter 91 as may be necessary or appropriate to carry out the purposes of this section.

    [(k)] (n)  This section shall apply to eligible [renewable] energy [technology systems] properties that are installed and placed in service [on or] after [July 1, 2009.] December 31, 2012, and before January 1, 2019."

PART II

     SECTION 3.  Independent power producers not currently regulated by the public utilities commission that have submitted an agreement with an electric utility company for approval by the public utilities commission by March 31, 2013, shall be allowed tax credits as authorized in the 2012 calendar year for energy properties placed into service after December 31, 2012, as part of the agreement.

PART III

     SECTION 4.  (a)  The department of business, economic development, and tourism shall conduct a study in the 2017 calendar year to determine:

     (1)  The extent to which renewable energy technologies income tax credits have benefitted the State by advancing the State's renewable energy goals, reducing energy costs for homeowners and business owners, and generating economic growth;

     (2)  The net cost to the State of the renewable energy technologies income tax credits;

     (3)  The extent to which the State will be able to achieve its renewable energy goals without further modification to the existing renewable energy technologies income tax credit; and

     (4)  Whether the renewable energy technologies income tax credit should be extended, eliminated, or otherwise revised for tax years beginning January 1, 2020.

     (b)  The department of business, economic development, and tourism shall submit a report of findings and recommendations to the legislature no later than twenty days prior to the convening of the regular session of 2018.

PART IV

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect upon its approval; provided that sections 1 and 2 shall apply to taxable years beginning after December 31, 2012.

INTRODUCED BY:

_____________________________

Report Title:

Renewable Energy Technologies Tax Credit Rates

Description:

Provides tax credit rates and certification requirements for various renewable energy technologies.  Requires an annual report from Department of Taxation and a 2017 study from the Department of Business, Economic Development and Tourism.

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