HOUSE OF REPRESENTATIVES
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO ENERGY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purpose of this Act is to encourage the development and construction of biofuel production facilities in Hawaii by creating an income tax credit for investments in the construction and development of biofuel production facilities 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‑ Biofuel production facility income tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, a qualified biofuel production facility income tax credit that shall be deducted 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 credit shall be fifteen per cent of the qualified development and construction costs of a qualified biofuel production facility.
(c) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year in which the plant becomes commercially operational. For purposes of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.
(d) To qualify for this credit, the biofuel production facility shall:
(1) Be located within the State and use locally grown feedstock for at least seventy-five per cent of its production output;
(2) Meet the definition of a qualified biofuel production facility;
(3) Have a biofuel production capacity of no less than five million gallons or gallon equivalents;
(4) Have qualified development and construction costs totaling at least $10,000,000; and
(5) Be in production on or before January 1, 2017.
(e) To receive the tax credit, the taxpayer shall first prequalify a biofuel production facility for the credit by registering with the department of business, economic development, and tourism during the development or construction stage. Failure to comply with this provision may constitute a waiver of the right to claim the credit.
(f) Every taxpayer claiming a tax credit under this section for a qualified biofuel production facility, no later than ninety days following the end of the taxable year in which the biofuel plant becomes commercially operational, shall submit a written, sworn statement to the department of business, economic development, and tourism, identifying:
(1) All qualified development and construction costs as provided by subsection (n), if any, incurred; and
(2) The number of hires related to the development or construction of the qualified biofuel production facility in the taxable year.
(g) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credits over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1. All claims, including any amended claims, for tax credits 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 properly claim the credit shall constitute a waiver of the right to claim the credit.
(h) The department of business, economic development, and tourism shall:
(1) Maintain records of the names of the taxpayers and qualified biofuel production facilities claiming the tax credits under this section;
(2) Obtain and total the aggregate amounts of all qualified development and construction costs for each qualified biofuel production facility for each taxable year; and
(3) Provide a letter to the director of taxation specifying the amount of the tax credit for each qualified biofuel production facility for each taxable year that a tax credit is claimed and the cumulative amount of the tax credit for all years claimed.
Upon each determination required under this subsection, the department of business, economic development, and tourism shall issue a letter to the taxpayer specifying the qualified development and construction costs and the tax credit amount qualified for in each taxable year a tax credit is claimed. The taxpayer for each qualified biofuel production facility shall file the letter with the taxpayer's tax return for the qualified biofuel production facility to the department of taxation. Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.
(i) If a deduction is taken under section 179 of the Internal Revenue Code (with respect to election to expense depreciable business assets), no tax credit shall be allowed for those costs for which the deduction is taken.
The basis for eligible property for depreciation of accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed.
No taxpayer that claims the credit under this section shall claim any other tax credit under this chapter for the same taxable year.
(j) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable shall be for qualified production costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of the tax credit shall be determined by rule adopted by the director of taxation.
(k) Total tax credits claimed per qualified biofuel production facility shall not exceed $60,000,000.
(l) Qualified biofuel production facilities shall comply with this section.
(m) The director of taxation shall prepare forms as 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.
(n) As used in this section:
"Qualified biofuel production facility" means a facility that produces liquid or gaseous fuels from organic sources such as biomass crops, agricultural residues, and oil crops, including palm, canola, soybean, and waste cooking oils; grease; food wastes; locally produced municipal solid wastes and industrial wastes; and animal residues and wastes that can be used to generate energy.
"Qualified development and construction cost" means a capital expenditure related to the development and construction of any qualified biofuel production facility, including costs for agricultural infrastructure, design, processing equipment, waste treatment systems, pipelines, and liquid or gas storage tanks at the facility or remote locations, including expansions or modifications, interest accrued during construction if the project is not capitalized and not expensed, and utility costs incurred during construction if the utility costs are capitalized and not expensed. Capital expenditures shall be those certain direct and indirect costs determined in accordance with section 263A of the Internal Revenue Code (relating to uniform capitalization costs), but shall not include expenses for compensation paid to officers of the taxpayer, pension and other related costs, rent for land, the costs of repairing and maintaining the equipment or facilities, training of operating personnel, property taxes, costs relating to negotiation of commercial agreements not related to development or construction, or service costs that can be identified specifically with a service department or function or that directly benefit or are incurred by reason of a service department or function. For the purposes of determining a capital expenditure under this section, the provisions of section 263A of the Internal Revenue Code shall apply as it read on March 1, 2004. For purposes of this section, investment excludes land costs and includes any investment for which the taxpayer is at risk, as that term is used in section 465 of the Internal Revenue Code (with respect to deductions limited to amount at risk)."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on July 1, 2012; provided that section 2 of this Act shall:
(1) Apply to taxable years beginning after December 31, 2011;
(2) Apply to qualified development and construction costs of qualified biofuel production facilities incurred on or after July 1, 2011, and before January 1, 2017; and
(3) Be repealed on January 1, 2017; provided that any qualified development and construction costs of qualified biofuel production facilities incurred before January 1, 2017, shall be eligible for the tax credit established by this Act in the immediately following taxable year if not claimed in a prior taxable year or before the repeal of this Act.
Biofuel Production Facility; Tax Credit
Creates an income tax credit for development and construction costs for qualifying biofuel production facilities. Repeals January 1, 2017. (HB2669 HD1)
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