SB2752 HD2

SECTION 1. The legislature finds that wells in a state of disuse or disrepair can become conduits for contaminants to be introduced into ground water. Abandoned wells can also become receptacles for the disposal of waste, potentially resulting in additional contamination and associated risk to public health and the environment.

The legislature further finds that the commission on water resource management has developed minimum standards relating to water wells, including their sealing and abandonment, in order to protect the quality and quantity of the State's ground water resources.

The purpose of this Act is to:

(1) Establish an income tax credit for taxpayers who are required to seal abandoned wells on their real property;

(2) Require an owner of an abandoned well to repair or seal the well at the owner's expense; and

(3) Appropriate funds for the following positions in the commission on water resource management:

(A) Either:

(i) Two full-time equivalent engineering technician positions; or

(ii) Two full-time equivalent environmental health specialist positions; and

(B) One full-time equivalent clerical position.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§235- Well abandonment compliance income tax credit. (a) There shall be allowed to each taxpayer a well abandonment compliance income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The cost upon which the tax credit is computed shall be determined at the entity level. In the case of a partnership, S corporation, estate, trust, or other pass through entity, distribution and share of the credit shall be determined by rule.

(c) The well abandonment compliance income tax credit shall be equal to per cent of the qualified compliance costs incurred by the taxpayer, up to a maximum of $ .

(d) 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. 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 the foregoing provision shall constitute a waiver of the right to claim the credit.

(e) The director of taxation:

(1) Shall prepare any 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) Shall adopt rules pursuant to chapter 91 to effectuate this section.

(f) The commission on water resource management shall:

(1) Maintain records of the total amount of qualified compliance costs for each taxpayer claiming a credit;

(2) Verify the amount of the qualified compliance costs claimed;

(3) Total all qualified compliance costs claimed; and

(4) Certify the total amount of the tax credit for each taxable year.

Upon each determination, the commission on water resource management shall issue a certificate to the taxpayer verifying the qualified compliance costs and the credit amount certified for each taxable year. For a taxable year, the commission on water resource management may certify a credit for a taxpayer who could have claimed the credit in a previous taxable year, but chose not to because the maximum annual credit amount under subsection (g) was reached in that taxable year.

The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation. Notwithstanding the commission on water resource management's certification authority under this section, the director of taxation may audit and adjust the certification to conform to the facts.

Notwithstanding any other law to the contrary, the information required by this subsection shall be available for public inspection and dissemination under chapter 92F.

(g) If in any taxable year the annual amount of certified credits reaches $ in the aggregate, the commission on water resource management shall immediately discontinue certifying credits and notify the department of taxation. In no instance shall the commission on water resource management certify a total amount of credits exceeding $ per taxable year. To comply with this restriction, the commission on water resource management shall certify credits on a first come, first served basis.

The department of taxation shall not allow the aggregate amount of credits claimed to exceed that amount per taxable year.

(h) As used in this section:

"Abandoned well" shall have the same meaning as defined in section 174C-81.

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

"Qualified compliance costs" means construction costs that are necessary and directly incurred by the taxpayer to seal an abandoned well in compliance with section 174C-87.

"Well" shall have the same meaning as defined in section 174C-3."

SECTION 3. Section 174C-81, Hawaii Revised Statutes, is amended by amending the definition of "abandoned well" to read as follows:

""Abandoned well" means any well [~~that~~]:

(1) The purpose or use of which has been permanently discontinued[~~. Any well shall be deemed abandoned which is~~];

(2) That has served its purpose;

(3) That is not properly maintained;

(4) The physical condition of which is causing a waste of ground water or is impairing or threatens to impair the quality of the ground water resources; or

(5) That is in such a state of disrepair that its continued use [~~for the purpose of obtaining ground water~~] is impractical[.] or poses a hazard to public health or safety."

SECTION 4. Section 174C-87, Hawaii Revised Statutes, is amended to read as follows:

"§174C-87 [~~Abandonment~~] Sealing of abandoned wells. (a) When a well is abandoned, the owner shall [~~fill and~~] seal the abandoned well in a manner approved by the commission. Before [~~abandonment,~~] sealing, the owner shall file with the commission [a report showing the owner's name and address; the water use permit number, if any; the name and address of the well driller who will be employed to perform the work required for abandonment; the reason for abandonment; a description of the work to be performed to effect the abandonment;] an application for a well sealing permit signed by a driller licensed to do the work and [~~such~~] other information [as] required by the commission [~~may require~~].

(b) The owner of an abandoned well shall repair or seal the well at the owner's expense, as provided by the well construction and pump installation standards.

(c) Notwithstanding any other law to the contrary, if the owner of real property that includes an abandoned well transfers ownership of the real property, the owner shall notify the commission on water resource management of that transfer upon opening of escrow; provided that the presence or existence of the abandoned well is:

(1) Within the knowledge of the owner; or

(2) Visible from an accessible area."

SECTION 5. 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 2022-2023 for the following positions in the commission on water resource management:

(1) Either:

(A) Two full-time equivalent (2.0 FTE) engineering technician positions; or

(B) Two full-time equivalent (2.0 FTE) environmental health specialist positions; and

(2) One full-time equivalent (1.0 FTE) clerical position.

The sum appropriated shall be expended by the department of land and natural resources for the purposes of this Act.

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, 2050; provided that section 2 of this Act shall apply to taxable years beginning after December 31, 2021.

THE SENATE	S.B. NO.	2752
THIRTY-FIRST LEGISLATURE, 2022		S.D. 2
STATE OF HAWAII		H.D. 2