Report Title:

Ethanol; Sales Incentives; Pump Conversion Tax Credit

 

Description:

Provides additional incentives for ethanol production:  requires the State to enter into twenty-year contracts to purchase and resell ethanol; establishes a tax credit for gasoline-to-ethanol pump conversions.

 


THE SENATE

S.B. NO.

1002

TWENTY-FOURTH LEGISLATURE, 2007

 

STATE OF HAWAII

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO ETHANOL.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  The legislature finds that Brazil was the first country to become energy independent, in large part by taking actions necessary for ethanol market development to occur.  Brazil thus provides Hawaii with examples of government actions necessary to create an interim level of demand sufficient to jump-start the State's ethanol industry, which would in turn assist the ethanol industry in providing an indispensable transitional fuel pending the development of a hydrogen-fuel economy.  Increased state action would also fulfill existing legislative mandates to:

     (1)  Facilitate the long-term dedication of important agricultural lands through the use of incentives; and

     (2)  Contribute to the State's economic base by producing agricultural commodities for export or local consumption.

     The legislature further finds that energy independence is a national security issue and that Hawaii cannot become energy independent without the development of an instate market for ethanol.

     The purpose of this Act is to create a demand for ethanol in Hawaii.

     SECTION 2.  Chapter 196, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§196-    Ethanol production; sales incentives.  (a)  The State shall negotiate and enter into twenty-year contracts to:

     (1)  Purchase ethanol from a qualifying ethanol production facility willing to sell ethanol to the State for not more than $2 per gallon; and

     (2)  Re-sell the ethanol to a distributor, which may buy the ethanol at up to the $2 per gallon cost; provided that the distributor shall resell a portion of the ethanol to the:

         (A)  State at not more than $2.10 per gallon for use in state vehicles; and

         (B)  Public at not more than a ten per cent mark-up, or $2.20 per gallon, whichever is less.

     (b)  The contract shall require that ethanol be sold to the State without the State taking possession (i.e., delivered to the State F.O.B. at a designated barge location, where a distributor would take possession).

     (c)  The contract shall specify that the prices in subsection (a) shall be subject to cost of living adjustments as determined by the public utilities commission; provided that a contract may be amended by agreement of the parties."

     SECTION 3.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Gasoline-to-ethanol pump conversion tax credit.  (a)  There shall be allowed to each taxpayer who is the owner, developer, or lessee of any retail station, subject to the taxes imposed by this chapter, a gasoline-to-ethanol pump conversion 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; provided that the credit shall be limited to one pump per retail station; and provided further that the total number of pumps shall be agreed to by the State in a manner that will ensure an appropriate geographical distribution in the State.  The amount of the tax credit claimed under this section by the taxpayer in all years for which the credit is available shall be limited to      per cent of the gasoline-to-ethanol pump conversion costs incurred during the taxable year for which the credit is claimed; provided that the costs shall not exceed $           in the aggregate for each retail station; and that the costs are incurred before December 31,     .

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for gasoline-to-ethanol pump conversion incurred by the entity for the taxable year.  The cost upon which the tax credit is computed shall be determined at the entity level.

     If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the gasoline-to-ethanol pump conversion for which the deduction is taken.

     The basis of eligible property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed.  In the alternative, the taxpayer shall treat the amount of the credit allowable and claimed as a taxable income item for the taxable year in which it is properly recognized under the method of accounting used to compute taxable income.

     (b)  The credit allowed under this section shall be claimed against the net income tax liability, if any, imposed by this chapter for the taxable year in which the tax credit is properly claimed.

     (c)  If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.  All claims, including amended claims, for a tax credit under this section 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. (d)  The director of taxation shall prepare any forms that may be necessary to claim a credit under this section.  The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

     (e)  The tax credit allowed under this section shall be available for taxable years beginning after December 31,     , and shall not be available for taxable years beginning after December 31,     .

     (f)  As used in this section:

     "Gasoline-to-ethanol pump conversion cost" means any costs incurred after December 31,     , for plans, design, construction, and equipment that is permanently affixed to the facility in the State related to new construction, alterations, or modifications to a retail station, and shall not include any costs for which another credit was claimed under this chapter.

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

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act, upon its approval, shall apply to taxable years beginning after December 31,     .

 

INTRODUCED BY:

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