STAND. COM. REP. NO. 170-04

Honolulu, Hawaii

, 2004

RE: H.B. No. 2961

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Energy and Environmental Protection, to which was referred H.B. No. 2961 entitled:

"A BILL FOR AN ACT RELATING TO ETHANOL,"

begs leave to report as follows:

The purpose of this bill is to:

(1) Change the existing ethanol investment tax credit to a facility tax credit that provides an incentive based on the production capacity of a facility;

(2) Provide a credit of 30 cents per gallon of nameplate capacity between 10,000 but not over 15,000,000 gallons; and

(3) Reduce from 40 million gallons, to 35 million gallons per year, the cap on the total nameplate capacity of ethanol production facilities built in Hawaii over which no new credits will be allowed to be claimed by ethanol production facilities, or for ethanol investments.

Maui Ethanol LLC testified in support requesting amendments. The Department of Taxation (DoTax) and Department of Business, Economic Development, and Tourism (DBEDT) testified in support of the intent of this bill. Tesoro commented and expressed concerns.

Your Committee heard testimony from DoTax stating that DoTax prefers a more comprehensive approach that encourages large capacity ethanol production.

In addition, concerns were raised that the tax credit could be interpreted as offering a 240 percent refundable tax credit for the amount of the investment in an ethanol production facility.

Your Committee has amended this bill accordingly, by among other things:

(1) Providing that the tax credit is based on a minimum production capacity of 500,000 gallons;

(2) Clarifying that the tax credit shall not exceed the amount invested in the facility;

(3) Providing a definition of the term "investment" based on section 263A of the Internal Revenue Code, excluding certain specified expenses;

(4) Requiring DBEDT to maintain records of investments of qualifying ethanol production facilities and certify the amount of the tax credit;

(5) Capping the total amount of all credits certified by DBEDT at $12,000,000 per year; and

(6) Prohibiting a taxpayer from claiming or receiving both this credit and the high technology business investment tax credit under section 235-110.9.

As affirmed by the record of votes of the members of your Committee on Energy and Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2961, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2961, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Energy and Environmental Protection,

 

____________________________

HERMINA M. MORITA, Chair