SB1163

SECTION 1. 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 system; 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[:] 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 system for single-family residential property;

(B) $350 per unit per solar energy system for multi-family residential property; provided that if the multi-family residential property is classified as low-income, affordable housing, or senior housing, the single-family residential cap pursuant to subparagraph (A) shall apply per unit; and

(2) For each solar energy system 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 systems first placed in service after December 31, 2019, and before January 1, 2025, up to the applicable cap amount, which is determined as follows:

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

(ii) $350 per unit per solar energy system for multi-family residential property; provided that if the multi-family residential property is classified as low-income, affordable housing, or senior housing, the single-family residential cap pursuant to clause (i) shall apply per unit; and

(iii) $500,000 per solar energy system for commercial property; provided that a solar energy system that has an executed customer service contract dated prior to June 30, 2018, and is installed and first placed in service before December 31, 2019, shall receive thirty-five per cent of the basis for the solar energy system, up to the applicable cap amount as described in this clause, or a power purchase agreement dated prior to December 31, 2019, and first placed into service before December 31, 2024, shall receive thirty-five per cent of the basis for the solar energy system, up to the applicable cap amount as described in this clause;

(B) Twenty per cent of the basis for solar energy systems first placed in service after December 31, 2024, and before January 1, 2026, up to the applicable cap amount, which is determined as follows:

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

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

(C) Fifteen per cent of the basis for solar energy systems first placed in service after December 31, 2025, up to the applicable cap amount, which is determined as follows:

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

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

(3) For each energy storage system 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 system is not also included in the basis of a solar or wind energy system under paragraphs (2) and (4):

(A) Twenty-five per cent of the basis for energy storage systems first placed in service after December 31, 2019, and before January 1, 2025, up to the applicable cap amount, which is determined as follows:

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

(ii) $350 per unit per energy storage system for multi-family residential property; provided that if the multi-family residential property is classified as low-income, affordable housing, or senior housing, the single-family residential cap pursuant to clause (i) shall apply per unit; and

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

(B) Twenty per cent of the basis for energy storage systems first placed in service after December 31, 2024, and before January 1, 2026, up to the applicable cap amount, which is determined as follows:

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

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

(C) Fifteen per cent of the basis for energy storage systems first placed in service after December 31, 2025, up to the applicable cap amount, which is determined as follows:

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

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

[~~(2)~~] (4) For each [~~wind-powered~~] wind energy system[:], 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 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 basis or $1,500, whichever is less;

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

(C) $500,000 per wind energy system for commercial property; provided that a wind energy system that has an executed customer service contract dated prior to June 30, 2018, and is installed and first placed in service before December 31, 2019, shall receive thirty per cent of the basis for the wind energy system, up to the applicable cap amount as described in this subparagraph, or a power purchase agreement dated prior to December 31, 2019, and first placed into service before December 31, 2024, shall receive thirty per cent of the basis for the wind energy system, up the applicable cap amount as described in this subparagraph;

[~~provided that multiple~~] Multiple owners of a single system 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.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible [~~renewable energy technology~~] solar energy, energy storage, or wind energy system 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 system 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 system or offered with the sale of the energy system 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 a solar or wind energy system, 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 system, 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 term "basis" used under this section shall be consistent with the use of the term "basis" in section 25D or section 48 of the Internal Revenue Code.

"Commercial energy storage system" means any one system that has a total output capacity of at least one thousand kilowatts.

"Energy storage system" means any identifiable facility, equipment, apparatus, or the like, including a battery, grid-interactive water heater, or ice storage air conditioner, that is permanently fixed to a site and electrically connected to a site distribution panel by means of 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 title 26 Code of Federal Regulations section 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 system or whose facility does not have an existing tie to the electric grid.

"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[.]; provided that:

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

(2) The solar or wind energy system is acquired by the taxpayer if the original use of the solar or wind energy system 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 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 storage systems, 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 solar or wind energy storage system is installed and first placed in service. A separate election may be made for each separate solar or wind energy storage system that generates a credit. An election once made is irrevocable.

[~~(h)~~] (g) Notwithstanding subsection [~~(g),~~] (f), for any [~~renewable energy technology~~] solar or wind energy storage system, 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~~] married couple 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.

[~~(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 Treasury 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 apartment owners, or cooperative housing corporation may claim the tax credit under this section in its own name for systems 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, 2037.

[~~(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~~] solar or wind energy storage systems 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.~~]"

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

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2019; provided that section 1 shall apply to taxable years beginning after December 31, 2019.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1163
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII