SB2478 HD2

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 fuels production tax credit. (a) Each year during the credit period, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter a renewable fuels production tax credit that shall be applied to the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

For each taxpayer producing renewable fuels, the annual dollar amount of the renewable fuels production tax credit during the credit period shall be equal to 20 cents per seventy-six thousand British thermal units of renewable fuels using the lower heating value produced for distribution in the State; provided that the taxpayer's production of renewable fuels is no less than fifteen billion British thermal units of renewable fuels per year; provided further that the amount of the tax credit claimed under this section by a taxpayer shall not exceed $ per taxable year. No other tax credit shall be claimed under this chapter for the costs related to renewable fuels production that are used to properly claim a tax credit under this section for the taxable year.

(b) Within thirty calendar days after the due date of the statements required pursuant to subsection (f), the Hawaii state energy office shall:

(1) Acknowledge receipt of the statements in writing;

(2) Total all renewable fuels production that the Hawaii state energy office certifies as eligible for the tax credit for the calendar year;

(3) In the event the verified credit claims under this section exceed $ for all eligible taxpayers in any given calendar year, divide the $ between all eligible taxpayers for that year in proportion to the lower heating value of renewable fuels produced by all eligible taxpayers. Upon reaching $ in the aggregate, the Hawaii state energy office shall immediately notify the department of taxation. In no instance shall the total dollar amount of certificates issued exceed $ per year; and

(4) Issue a certificate to the taxpayer verifying the amount of renewable fuels produced and sold in the taxable year, the credit amount certified for the taxable year, the cumulative amount of the tax credit during the credit period, and that the renewable fuels have life cycle emissions substantially below that of fossil fuels. The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation.

Notwithstanding the Hawaii state energy office's certification authority under this section, the director of taxation may audit and adjust the certification to conform to the facts.

(c) If the credit under this section exceeds the taxpayer's net income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted. All claims for a credit under this section shall be properly 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 the foregoing provision shall constitute a waiver of the right to claim the credit.

(d) Prior to production of any renewable fuels for the year, the taxpayer shall provide written notice of the taxpayer's intention to begin production of renewable fuels. The information shall be provided to the department of taxation and Hawaii state energy office on forms provided by the Hawaii state energy office and shall include information on the taxpayer, facility location, facility production capacity, anticipated production start day, and taxpayer's contact information.

(e) The taxpayer shall provide written notice to the director of taxation and chief energy officer of the Hawaii state energy office within thirty days following the start of production of any renewable fuels. The notice shall include the production start date and expected renewable fuels production for the next twelve months.

(f) No later than thirty days following the close of each calendar year during the credit period, the taxpayer claiming a credit under this section shall complete and file an independent, third-party certified statement, at the taxpayer's sole expense, with the chief energy officer of the Hawaii state energy office. The statement shall be in the form prescribed by the chief energy officer of the Hawaii state energy office and shall include the following information:

(1) For each type of renewable fuel produced for which a credit is claimed:

(A) The type of fuel produced;

(B) The volume of fuel produced;

(D) The lower heating value in British thermal units of fuel produced and sold during the previous calendar year;

(E) The feedstock used;

(F) The lifecycle greenhouse gas emissions of the fuel produced and sold; and

(G) The lifecycle greenhouse gas emissions of the fossil fuel displaced by the renewable fuel;

(2) The dollar amount of renewable fuels production tax credit claimed by the taxpayer for renewable fuel produced and sold during the calendar year, not to exceed the amount per taxpayer pursuant to subsection (a);

(3) The cumulative amount of renewable fuels production tax credits received by the taxpayer during prior years during the credit period;

(4) The number of employees of the renewable fuels production facility and each employee's state of residency;

(5) The projected lower heating value in British thermal units of renewable fuels production for the succeeding year; and

(6) Whether a renewable fuels production tax credit is anticipated to be claimed in the succeeding year.

(g) In the case of a partnership, S corporation, estate, or trust, distribution and share of the renewable fuels production tax credit shall be determined pursuant to section 704(b) of the Internal Revenue Code of 1986, as amended, with respect to a partner's distributive share.

(h) Following each year in which a credit under this section has been claimed, the chief energy officer of the Hawaii state energy office shall submit a written report to the governor and legislature regarding the production and sale of renewable fuels. The report shall include:

(1) The aggregate number and aggregate number of locations of renewable fuels production facilities in the State and outside the State that have claimed a credit under this section;

(2) The total number of British thermal units of renewable fuels, itemized by type of fuel produced and sold during the previous year; and

(3) The projected number of British thermal units of renewable fuels production for the succeeding year.

(i) Notwithstanding any other provision in this section or any other law to the contrary, the information collected and compiled by the Hawaii state energy office under this section for the purposes of the renewable fuels production tax credit shall be kept confidential; provided that the Hawaii state energy office may make such information that is aggregated to prevent identification of a provider with the specific data furnished by that provider available for public inspection and dissemination subject to chapter 92F and any applicable exceptions under section 92F-13; provided further that the Hawaii state energy office shall:

(1) Be prohibited from:

(A) Using the information furnished or obtained for any purpose other than the purposes for which it was supplied; and

(B) Making any publication whereby the data furnished by any person can be identified;

(2) Ensure the security and confidentiality of the information;

(3) Protect against any anticipated threats or hazards to the security or integrity of the information; and

(4) Protect against unauthorized access to or use of the information that could result in personal or competitive harm to individuals or providers.

(j) The director of taxation:

(1) Shall prepare forms that may be necessary to claim a credit under this section;

(2) May require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section; and

(3) May adopt rules pursuant to chapter 91 necessary to effectuate the purposes of this section.

(k) Each taxpayer, together with all of its related entities, as determined under section 267(b) of the Internal Revenue Code of 1986, as amended, and all business entities under common control, as determined under sections 414(b), 414(c), and 1563(a) of the Internal Revenue Code of 1986, as amended, shall not be eligible for more than a single ten-year credit period.

(l) As used in this section:

"Credit period" means a maximum period of ten consecutive years, beginning from the first taxable year in which a taxpayer begins renewable fuels production at a level of at least fifteen billion British thermal units of renewable fuels per year.

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

"Renewable feedstocks" means:

(1) Biomass crops;

(2) Agricultural residue;

(3) Oil crops, including but not limited to algae, canola, jatropha, palm, soybean, and sunflower;

(4) Sugar and starch crops, including but not limited to sugar cane and cassava;

(5) Other agricultural crops;

(6) Grease and waste cooking oil;

(7) Food wastes;

(8) Municipal solid wastes and industrial wastes;

(9) Water; and

(10) Animal residues and wastes.

"Renewable fuels" means fuels produced from renewable feedstocks; provided that the fuel:

(1) Is sold as a fuel; and

(2) Meets the relevant ASTM International specifications for the particular fuel or other industry specification for the particular fuel or other industry specifications for liquid or gaseous fuels, including but not limited to:

(A) Methanol, ethanol, or other alcohols;

(B) Hydrogen;

(D) Biogas;

(E) Other biofuels; or

(F) Renewable jet fuel or renewable gasoline."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act shall take effect on July 1, 2100, and shall apply to taxable years beginning after December 31, 2022.

THE SENATE	S.B. NO.	2478
THIRTY-FIRST LEGISLATURE, 2022		S.D. 2
STATE OF HAWAII		H.D. 2