THE SENATE	S.B. NO.	2100
TWENTY-NINTH LEGISLATURE, 2018
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. Section 196-6.5, Hawaii Revised Statutes, is amended to read as follows:

"§196-6.5 Solar water heater system required for new single-family residential construction. (a) On or after January 1, 2010, no building permit shall be issued for a new single-family dwelling that does not include a solar water heater system that meets the standards established pursuant to section 269-44, unless the coordinator approves a variance. A variance application shall only be accepted if submitted by an architect or mechanical engineer licensed under chapter 464, who attests that:

(1) Installation is impracticable due to poor solar resource;

(2) Installation is cost-prohibitive based upon a life cycle cost-benefit analysis that incorporates the average residential utility bill and the cost of the new solar water heater system with a life cycle that does not exceed fifteen years;

(3) A renewable energy technology system[, as defined in section 235-12.5,] is substituted for use as the primary energy source for heating water; or

(4) A demand water heater device approved by Underwriters Laboratories, Inc., is installed; provided that at least one other gas appliance is installed in the dwelling. For the purposes of this paragraph, "demand water heater" means a gas-tankless instantaneous water heater that provides hot water only as it is needed.

(b) A request for a variance shall be submitted to the coordinator on an application prescribed by the coordinator and shall include a description of the location of the property and justification for the approval of a variance using the criteria established in subsection (a). A variance shall be deemed approved if not denied within thirty working days after receipt of the variance application. The coordinator shall publicize:

(1) All applications for a variance within seven days after receipt of the variance application; and

(2) The disposition of all applications for a variance within seven days of the determination of the variance application.

(c) The director of business, economic development, and tourism may adopt rules pursuant to chapter 91 to impose and collect fees to cover the costs of administering variances under this section. The fees, if any, shall be deposited into the energy security special fund established under section 201-12.8.

(d) Nothing in this section shall preclude any county from establishing procedures and standards required to implement this section.

(e) Nothing in this section shall preclude participation in any utility demand-side management program or public benefits fee program under part VII of chapter 269.

(f) As used in this section, "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."

SECTION 2. Section 235-12.5, Hawaii Revised Statutes, is amended to read as follows:

"§235-12.5 [Renewable energy technologies;] Solar energy, energy storage, wind energy properties; 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) $2,250 per solar energy property for single-family residential property;

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

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

(2) For each solar energy property that is used primarily to generate electricity and is installed and first placed in service in the State by a taxpayer during the taxable year:

(A) Twenty-five per cent of the basis for solar energy property first placed in service after December 31, 2018, and before January 1, 2022, up to the applicable cap amount, which is determined as follows:

(i) $5,000 per solar energy property for single-family residential property; provided that if all or a portion of the solar energy property 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-five per cent of the basis or $2,250, whichever is less;

(ii) $350 per unit per solar energy property for multi-family residential property; and

(iii) $500,000 per solar energy property for commercial property;

(B) Twenty per cent of the basis for solar energy property first placed in service after December 31, 2021, and before January 1, 2025, up to the applicable cap amount, which is determined as follows:

(i) $5,000 per solar energy property for single-family residential property; provided that if all or a portion of the solar energy property 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 basis or $2,250, whichever is less;

(ii) $350 per unit per solar energy property for multi-family residential property; and

(iii) $500,000 per solar energy property for commercial property; and

(C) Fifteen per cent of the basis for solar energy property first placed in service after December 31, 2024, up to the applicable cap amount, which is determined as follows:

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

(ii) $350 per unit per solar energy property for multi-family residential property; and

(iii) $500,000 per solar energy property for commercial property;

(3) For each solar energy property that is used primarily to generate electricity and is installed and first placed in service in the State by a taxpayer during the taxable year; provided that the solar energy property is grid-connected and incorporates an energy storage property:

(A) Twenty-five per cent of the basis for solar energy property first placed in service after December 31, 2018, and before January 1, 2022, up to the applicable cap amount, which is determined as follows:

(i) $10,000 per solar energy property for single-family residential property; provided that if all or a portion of the solar energy property 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-five per cent of the basis or $2,250, whichever is less;

(ii) $700 per unit per solar energy property for multi-family residential property; and

(iii) $500,000 per solar energy property for commercial property;

(B) Twenty per cent of the basis for solar energy property first placed in service after December 31, 2021, and before January 1, 2025, up to the applicable cap amount, which is determined as follows:

(i) $10,000 per solar energy property for single-family residential property; provided that if all or a portion of the solar energy property 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 basis or $2,250, whichever is less;

(ii) $700 per unit per solar energy property for multi-family residential property; and

(iii) $500,000 per solar energy property for commercial property; and

(C) Fifteen per cent of the basis for solar energy property first placed in service after December 31, 2024, up to the applicable cap amount, which is determined as follows:

(i) $10,000 per solar energy property for single-family residential property; provided that if all or a portion of the solar energy property is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by fifteen per cent of the basis or $2,250, whichever is less;

(ii) $700 per unit per solar energy property for multi-family residential property; and

(iii) $500,000 per solar energy property for commercial property;

(4) For each energy storage property that is installed and first placed in service in the State by a taxpayer during the taxable year, if the cost of the energy storage property is not also included in the basis of a solar or wind energy property under this subsection:

(A) Twenty-five per cent of the basis for energy storage property first placed in service after December 31, 2018, and before January 1, 2022, up to the applicable cap amount, which is determined as follows:

(i) $5,000 per energy storage property for single-family residential property;

(ii) $350 per unit per energy storage property for multi-family residential property; and

(iii) $500,000 per energy storage property for commercial property;

(B) Twenty per cent of the basis for energy storage property first placed in service after December 31, 2021, and before January 1, 2025, up to the applicable cap amount, which is determined as follows:

(i) $5,000 per energy storage property for single-family residential property;

(ii) $350 per unit per energy storage property for multi-family residential property; and

(iii) $500,000 per energy storage property for commercial property; and

(C) Fifteen per cent of the basis for energy storage property first placed in service after December 31, 2024, up to the applicable cap amount, which is determined as follows:

(i) $5,000 per energy storage property for single-family residential property;

(ii) $350 per unit per energy storage property for multi-family residential property; and

(iii) $500,000 per energy storage property for commercial property;

(5) For each combined energy storage and solar energy system that is installed and first placed in service in the State by a taxpayer during the taxable year, the applicable credit available for an energy storage system under paragraph (4) of this subsection plus one half of the available applicable credit for a solar energy system under paragraph (2) or (3) of this section; and

[(2)] (6) For each [wind-powered] wind energy [system:] property, twenty per cent of the [actual cost or the cap amount determined in subsection (b), whichever is less;] basis, up to the applicable cap amount, which is determined as follows:

(A) $1,500 per wind energy property 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 basis or $1,500, whichever is less;

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

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

[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] solar or wind energy 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.

"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.]

"Basis" means costs related to the solar energy, wind energy, or energy storage 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 reroofing 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.

"Energy storage property" means any identifiable facility, equipment, or apparatus, including battery, grid-interactive water heater, ice storage air conditioner, or the like, that is permanently fixed to a site and electrically connected to a site distribution panel by means of an installed wiring, and that receives electricity generated from various sources, stores that electricity as electrical, chemical, thermal, or mechanical energy, and delivers the energy back to an electric utility or the user of the electric system at a later time.

"First placed in service" has the same meaning as in 26 Code of Federal Regulations 1.167(a)-11(e)(1).

"Grid-connected" means that the individual or corporate taxpayer has obtained an approved interconnection agreement from an electric utility for the solar energy property or whose facility does not have an existing tie to the electric grid.

"Solar or wind energy [system"] property" 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[.]; provided that:

(1) The construction, reconstruction, or erection of the solar or wind energy property is completed by the taxpayer; or

(2) The solar or wind energy property is acquired by the taxpayer if the original use of the solar or wind energy property commences with the taxpayer.

[(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 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 or wind energy [systems,] properties, 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 or wind energy property is installed and first placed in service. A separate election may be made for each separate [system] solar or wind energy property that generates a credit. An election once made is irrevocable.

[(h)] (g) Notwithstanding subsection [(g),] (f), for any [renewable energy technology system,] solar or wind energy property, 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 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] solar or wind energy property is installed and first placed in service. A separate election may be made for each separate [system] solar or wind energy 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.

(i) The tax credit under this section shall be construed in accordance with federal regulations and judicial interpretations of similar provisions in sections 25D, 45, and 48 of the Internal Revenue Code.

(j) A planned community association, condominium association of owners, or cooperative housing corporation may claim the tax credit under this section in its own name for property or facilities placed in service and located on common areas.

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

(l) No credit under this section shall be authorized for taxable years ending after December 31, 2036.

[(j)] (m) 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:

(1) The number of [renewable energy technology systems] solar or wind energy 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.

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

PART II

SECTION 3. (a) There is established within the department of transportation a building energy efficiency demonstration project for building energy efficiency designs that assist the State in reaching net zero emissions.

(b) The department of transportation shall identify one state land site and construct a new state building or remodel an existing state facility to create a facility or building with net zero emissions. The department of transportation shall follow the United States Department of Energy's description of a Zero Energy Ready Home, which is a home with a renewable energy system that can offset all or most of its annual energy consumption. The department of transportation shall work with the department of business, economic development, and tourism to identify a site.

(c) In developing, constructing, and maintaining the new state building following the guidelines established under subsection (b), the department of transportation with the department of business, economic development, and tourism shall conduct an analysis of the cost and benefits of adopting the building energy efficiency designs incorporated into the building or facility, including the fiscal consequences to the State and the related cost savings from energy efficiency. The department shall include payback periods of investment, taking into account the cost savings of the program. Building energy efficiency designs shall include, but not be limited to, the following when applicable:

(1) Lighter colored roofing material;

(2) Windows that use dynamic or electro chromatic glazing with the ability to change performance properties;

(3) Sensor-based lighting control systems;

(4) High efficiency ventilation or air conditioning units;

(5) Incorporation of natural light;

(6) Renewable energy systems; and

(7) Waste to energy conversion systems.

(d) The department of transportation shall submit a report to the legislature of the analysis conducted pursuant to subsection (c) no later than twenty days prior to the convening of the regular session of 2021.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2018-2019 to implement the building energy efficiency demonstration project.

The sum appropriated shall be expended by the department of transportation for the purposes of this Act.

PART III

SECTION 5. 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 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2018; provided that section 2 shall apply to taxable years beginning after December 31, 2018.

INTRODUCED BY:

_____________________________

Report Title:

Renewable Energy; Solar and Wind Energy Property; Tax Credit; State Building Design; Energy Efficiency; Appropriation

Description:

Replaces the current renewable energy technology systems tax credit with tax credits for solar or wind energy property and energy storage property and is applicable to taxable years beginning after 12/31/2018. Establishes a demonstration project for building energy efficiency designs within the Department of Transportation.

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