Geothermal-to-Hydrogen Tax Credit
Provides for a tax credit of 20 percent of the total cost of the geothermal-to-hydrogen system erected or placed in service after December 31, 2003, and before January 1, 2012, that have an unspecified nameplate capacity.
HOUSE OF REPRESENTATIVES
TWENTY-SECOND LEGISLATURE, 2003
STATE OF HAWAII
A BILL FOR AN ACT
relating to a geothermal-to-hydrogen tax credit.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that scientists have recognized hydrogen as a potential source of fuel for many years. Currently, hydrogen is used in industrial processes, rocket fuel, and spacecraft propulsion.
The United States Department of Energy and the private sector have funded hydrogen research and development for several years. With further research, development, and demonstration, the expanded use of hydrogen could one day competitively serve as an alternative source of energy for fueling vehicles and generating electricity.
The legislature recognizes the potential for hydrogen use in the islands and that Hawaii represents an excellent site to attract government and industry investments to develop the hydrogen infrastructure. The availability of indigenous renewable resources (e.g., geothermal energy), excellent research capabilities at the University of Hawaii, and high transportation fuel costs are incentives for the development of hydrogen for fuel infrastructure.
During the 2000 regular session, the legislature requested a study to identify, evaluate, and recommend candidate actions to establish hydrogen as a future ingredient in the State's energy economy. The Hawaii natural energy institute of the University of Hawaii conducted this study and concluded that large-scale hydrogen use for transportation could be competitive this decade. The conclusion assumes technological advancement using hydrogen as a fuel source. Act 283, Session Laws of Hawaii 2001, allocated funds to address some of the candidate action plans that would initiate hydrogen development in the State.
Major companies are investing in the development of fossil fuel-based fuel cells for both stationary and mobile power. Automakers are projecting the commercial availability of fossil fuel-based fuel cell powered vehicles that could be fueled by hydrogen within this decade. Significant investments are being made to develop fossil fuel-based fuel cell technology that will benefit the development of geothermal-to-hydrogen technology.
With its traditional high fuel costs and abundance of renewable energy resources, Hawaii could attract advanced technology development companies for research, development, and demonstration. In addition, the University of Hawaii is recognized as a "center for excellence in hydrogen research" by the United States Department of Energy. These factors can lead to the development of a hydrogen-based economy where Hawaii produces more of its own environmentally clean fuels, thus reducing its dependence on fossil fuels and resulting in job growth, reduced pollution, and a more robust state economy.
Geothermal development has been limited to the island of Hawaii. Puna Geothermal Ventures has a contract to supply thirty megawatts of power to Hawaii Electric Light Company, with the utility in turn providing the geothermal-generated electricity to its customers. Expansion of this firm's renewable resource is in part limited by the low electrical demand during the late evening and early mornings.
Producing hydrogen during periods of low electrical demand during the late evening and early morning could increase geothermal development and produce an indigenous hydrogen fuel in the islands. The collocation of hydrogen production with geothermal energy would ensure that the production of hydrogen reduces the amount of fossil fuel used in the State.
The legislature believes that the State should do more to support efforts to enhance hydrogen production and use in Hawaii. Accordingly, the purpose of this Act is to establish a tax credit for the production of hydrogen using collocated geothermal resources.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Geothermal-to-hydrogen investment tax credit. (a) Each individual or corporate resident taxpayer who 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 is equal to twenty per cent of the total cost of the geothermal-to-hydrogen system. The tax credit shall apply only to the actual cost of the geothermal-to-hydrogen system, its accessories, and installation.
(b) The tax credit shall apply only with respect to geothermal-to-hydrogen systems that are erected and placed in service after December 31, 2003, but before January 1, 2012, and that have a nameplate capacity of at least kilograms for hydrogen in a liquid state and at least standard cubic feet for hydrogen in a gaseous state. The geothermal-to-hydrogen system shall be collocated on the same or immediately adjacent parcel of land.
(c) The tax credit shall be claimed against the net income tax liability for the year in which the geothermal-to-hydrogen system was purchased and placed in use in Hawaii.
(d) Tax credits that exceed the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years without restriction until exhausted.
(e) The director of taxation shall prepare such forms as may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.
(f) As used in this section:
"Geothermal energy system" means any existing or new identifiable facility, equipment, or apparatus that makes use of geothermal energy to produce electricity.
"Geothermal-to-hydrogen system" means a hydrogen production system using any new identifiable facility, equipment, or apparatus that makes use of geothermal energy to produce hydrogen in either a gaseous or liquid state. This includes a geothermal energy system only if it is a new geothermal energy system with at least fifty per cent of its net energy output dedicated to producing hydrogen gas.
"Nameplate capacity" means the qualifying geothermal-to-hydrogen systems production design capacity, in kilograms per year for hydrogen in a liquid state and standard cubic feet per year for hydrogen in a gaseous state, based on an assumed operating year of three hundred fifty days.
"Standard cubic foot" means 0.00251 kilograms at atmospheric pressure and 20 degrees centigrade."
SECTION 3. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2003.