SB547

SECTION 1. The legislature finds that Hawaii faces ongoing challenges related to water scarcity due to chronic drought conditions and increasing demands on its water resources. Promoting water conservation technologies, such as gray water recycling systems and atmospheric water generators, is essential for ensuring a sustainable and secure water future for the State.

Accordingly, the purpose of this Act is to encourage the installation and use of gray water recycling systems and atmospheric water generators in the State.

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

"§235- Water conservation income tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed by this chapter, a water conservation 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 amount of the tax credit shall be equal to:

(1) For residential properties: $10,000, or twenty-five per cent of the cost of installing an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less; and

(2) For commercial properties: $50,000, or twenty per cent of the cost of installing an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

(c) Notwithstanding subsection (b), low-income homeowners may qualify for a tax credit of $12,500, or thirty-five per cent of the cost of installing an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

(d) Beginning July 1, 2028, only atmospheric water generators that are fully NSF P343-certified shall be eligible for tax credits under this section.

(e) If the tax 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 income tax liability in subsequent years until exhausted.

(f) The director of taxation shall:

(1) Prepare any forms necessary to claim a credit under this section;

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

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

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

(h) For the purposes of this section:

"Atmospheric water generator" means a device that extracts water from ambient air humidity.

"Gray water" shall have the same meaning as defined in section 342D-1.

"Low-income homeowner" means a homeowner that earns eighty per cent or less of the area median income.

"NSF/ANSI 350-certified" means certified to meet the National Sanitation Foundation International Standard/American National Standard 350 for onsite residential and commercial water reuse treatment systems.

"NSF P343" means the National Sanitation Foundation Protocol P343 - health and sanitation requirements for atmospheric water generators.

"NSF P343-certified" means certified to meet NSF P343 for atmospheric water generators."

SECTION 3. (a) The department of business, economic development, and tourism shall establish a rebate program to incentivize the installation of gray water recycling systems and atmospheric water generators.

(b) Rebates shall be awarded as follows:

(1) For residential properties: $7,500, or thirty per cent of the cost of installing an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less; and

(2) For commercial properties: $35,000, or twenty-five per cent of the cost of installing an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

(c) Low-income homeowners may qualify for a rebate of $10,000, or forty per cent of the cost of installing an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

(d) Beginning July 1, 2028, only atmospheric water generators that are fully NSF P343-certified shall be eligible for rebates under this section.

(e) The department of business, economic development, and tourism shall adopt rules pursuant to chapter 91 necessary to implement this section.

(f) For the purposes of this section, the definitions established in section 235- , Hawaii Revised Statutes, shall apply.

SECTION 4. (a) The state building code council shall adopt the International Association of Plumbing and Mechanical Officials' 2023 water efficiency and sanitation standard, incorporating provisions regulating the design, installation, and maintenance of gray water recycling systems and atmospheric water generators in the State.

(b) The state building code council shall adopt rules pursuant to chapter 91 necessary to implement this section.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2025; provided that section 2 shall apply to taxable years beginning after December 31, 2025.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	547
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII