HOUSE OF REPRESENTATIVES

H.B. NO.

756

TWENTY-SEVENTH LEGISLATURE, 2013

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to renewable energy.

 

 

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

 


SECTION 1.  The legislature finds that the renewable energy technologies income tax credit remains in the public interest because it helps to promote effective energy policy in line with Hawaii's energy goals.  The legislature further finds that the renewable energy technologies income tax credit has resulted in job creation; the department of business, economic development, and tourism reports that solar energy projects constituted fifteen per cent of all construction activity in the State in 2012.  In addition to job creation, the tax credit has also helped to bring private and federal capital into the State, as well as aiding in the reduction of Hawaii's vulnerability to economic downturns caused by spikes in the price of oil.  The widely-claimed renewable energy technologies income tax credit has also proven popular with the general public.  This has led to increased awareness and support of other State energy initiatives and policy measures.

The legislature further finds that despite its many benefits, the renewable energy technologies income tax credit has become difficult to administer.  Specifically, recent economic studies and forecasts have shown that the credit has cost the state general fund significant amounts in lost tax revenues.  Additionally, as technology has advanced, the cost for the development and installation of renewable energy systems has decreased.  This has led to a discrepancy in the current levels of State provided renewable energy tax incentives when compared to recently lowered costs of renewable energy technology systems.

To remedy some of the problems caused by the renewable energy technologies income tax credit, the legislature finds that it is necessary and appropriate to substantially revise the credit in order to streamline its administration and reduce its outlay of taxable funds.  In order to ensure that resident businesses and homeowners continue to invest in renewable energy systems, this Act proposes a steady, predictable, and gradual reduction of the available credit amounts.  In addition, to reduce the credit's fiscal and administrative burden on the department of taxation and to enhance the credit's transparency to the general public, this measure also proposes various simplifications to the overall structure of the credit.  The intent of this Act is, to the extent possible, to follow the policy and structure devised by the federal government in the design and administration of solar technology credits introduced under the Energy Policy Act of 2005.

     SECTION 2.  Section 235-12.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-12.5  Renewable energy technologies; income tax credit.  (a)  [When the requirements of subsection (d) are met, each individual or corporate taxpayer that 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 may be claimed for every eligible renewable energy technology system that is installed and placed in service in the State by a taxpayer during the taxable year.  The tax credit may be claimed as follows:] There shall be allowed to each taxpayer subject to the tax imposed under this chapter, an income tax credit which 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.  The amount of the credit shall be:

     (1)  For [each] solar energy [system: thirty five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;] property that is placed in service in the State by a taxpayer during the taxable year and that is not part of a utility scale solar energy facility and for which no credit has been claimed under subsection (a)(4):  the percentage set forth in subsection (b)(1) and calculated using the applicable tax basis for solar energy property defined in subsection (d); or

     (2)  For [each wind-powered energy system:  twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;] wind energy property that is placed in service in the State by a taxpayer during the taxable year and that is not part of a utility scale solar energy facility: the percentage set forth in subsection (b)(2) and calculated using the applicable tax basis for wind energy defined in subsection (d);

     (3)  For utility scale solar energy facilities placed in service in the State: the relevant rate set out under subsection (b)(3) multiplied by the number of kilowatt hours produced by the facility for sale primarily to a public utility company for resale to the public during the taxable year.  This rate shall be available for the ten-year period beginning on the date the facility was originally placed in service subject to the credit allowed under subsection (b)(3); or

     (4)  For solar energy property that is placed in service in the State and that is not part of a utility scale solar energy facility and for which no credit has been claimed under subsection (a)(1): the relevant rate set out under subsection (b)(4) multiplied by the number of kilowatt hours produced by the property during the taxable year.  This rate shall be available for the ten-year period beginning on the date the facility was originally placed in service subject to the credit allowed under subsection (b)(4);

provided that multiple owners of a single [system] solar energy property, wind energy property, or utility scale solar energy facility shall be entitled to a single tax credit[; and provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.] for that property or facility.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for [every] all eligible [renewable energy technology system] solar and wind energy properties [that is] installed and placed in service in the State by the entity[.] and all energy produced by solar energy property or produced and sold by a utility scale solar energy facility during the applicable taxable year.  The [cost upon which] amount of the tax credit [is computed] shall be determined at the entity level.  Distribution and share of credit shall be determined [pursuant to section 235-110.7(a)] by the entity.

     (b)  The amount of credit allowed [for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined] under this section shall be as follows:

    [(1)  If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

         (A)  $2,250 per system for single-family residential property;

         (B)  $350 per unit per system for multi-family residential property; and

         (C)  $250,000 per system for commercial property;

     (2)  For all other solar energy systems, the cap amounts shall be:

         (A)  $5,000 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

         (B)  $350 per unit per system for multi-family residential property; and

         (C)  $500,000 per system for commercial property; and

     (3)  For all wind-powered energy systems, the cap amounts shall be:

         (A)  $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

         (B)  $200 per unit per system for multi-family residential property; and

         (C)  $500,000 per system for commercial property.]

     (1)  For solar energy property:

         (A)  Thirty per cent of the basis of solar energy property placed in service on or after July 1, 2013 and on or before December 31, 2014;

          (B)  Twenty-five per cent of the basis of solar energy property placed in service on or after January 1, 2015 and on or before December 31, 2015;

          (C)  Twenty per cent of the basis of solar energy property placed in service on or after January 1, 2016 and on or before December 31, 2016;

          (D)  Fifteen per cent of the basis of solar energy property placed in service on or after January 1, 2017 and on or before December 31, 2017; and

          (E)  Ten per cent of the basis of solar energy property placed in service on or after January 1, 2018;

     (2)  For wind energy property: twenty per cent of the basis of wind energy property placed in service on or after July 1, 2013;

     (3)  For a utility scale solar energy facility:

          (A)  Eleven and one-half cents per kilowatt hour for ordinary utility scale solar energy facilities placed in service on or after July 1, 2013 and on or before December 31, 2019; and

          (B)  Five and three-quarter cents per kilowatt hour for competitively-bid utility scale solar energy facilities placed in service on or after July 1, 2013 and on or before December 31, 2019; and

     (4)  For solar energy property for which no credit is claimed under subsection (a)(1): eleven and one-half cents per kilowatt hour for energy property placed in service on or after July 1, 2013 and on or before December 31, 2019.

     (c)  For the purposes of this section:

     ["Actual cost" means costs related to the renewable energy technology systems under subsection (a), including accessories and installation, but not including the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system and costs for which another credit is claimed under this chapter.

     "Household use" means any use to which heated water is commonly put in a residential setting, including commercial application of those uses.

     "Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as solar or wind energy, into:

     (1)  A usable source of thermal or mechanical energy;

     (2)  Electricity; or

     (3)  Fuel.]

     "Competitively-bid utility scale solar energy facility" means a utility scale solar energy facility that is installed and placed in service through the use of a competitive bidding process required by statute or administrative rule and conducted by or on behalf of the public utilities commission or a public utilities commission regulated entity.

     "Ordinary utility scale solar energy facility" means a utility scale solar energy facility that is not installed and placed in service through the use of a competitive bidding process required by statute or administrative rule and conducted by or on behalf of the public utilities commission or a public utilities commission regulated entity.

     "Placed in service" shall have the same meaning as in United States Treasury Regulation 1.167(a)-11(e)(1).

     ["Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts solar or wind energy to useful thermal or electrical energy for heating, cooling, or reducing the use of other types of energy that are dependent upon fossil fuel for their generation.]

     "Solar energy property" means:

     (1)  Any equipment constructed, reconstructed, or erected by a credit-claiming taxpayer for the purpose of generating solar electricity or solar-powered heating or cooling; or

     (2)  Any equipment acquired by a credit-claiming taxpayer, provided that the use of the property to generate solar electricity or solar-powered heating or cooling commences with the taxpayer's acquisition of the property.

     "Sub-transmission or transmission voltage" means the applicable primary, transmission, or sub-transmission voltage level filed by the appropriate electric utility and deemed as nominal by the public utilities commission, allowing for acceptable variations in voltage levels as defined by the public utilities commission.

     "Utility scale solar energy facility" means solar energy property that is:

     (1)  Designed, installed, and placed into service to produce electricity; and

     (2)  Interconnected to a utility grid at a sub-transmission or transmission voltage.

     "Wind energy property" means any equipment that is not interconnected to a utility grid at a sub-transmission or transmission voltage and that is:

     (1)  Constructed, reconstructed, or erected by a credit-claiming taxpayer to generate electricity using wind energy; or

     (2)  Acquired by a credit-claiming taxpayer, provided that the use of the property to generate electricity using wind energy commences with the taxpayer's acquisition of the property.

     (d)  [For taxable years beginning after December 31, 2005, the dollar amount of any utility rebate shall be deducted from the cost of the qualifying system and its installation before applying the state tax credit.] For the purposes of calculating the credit allowed under this chapter:

(1)    The basis of the solar or wind energy property shall include all costs related to the solar or wind energy property, including accessories and installation, but shall not include the cost of consumer incentive premiums unrelated to the operation of the property or offered with the sale of the property.  The basis used for claiming the credit allowed under this chapter shall be consistent with the basis used by the taxpayer for claiming the federal energy investment tax credit described in section 48 of the Internal Revenue Code or the qualified solar electric property expenditure used by the taxpayer in claiming the federal residential energy efficient property credit described in section 25D of the Internal Revenue Code; provided that for the purposes of calculating the credit allowed under this chapter, the basis of the solar or wind energy property shall not be reduced by the amount of any federal tax credits or other subsidized energy financing received by the taxpayer; and

(2)    The number of kilowatt hours produced by solar energy property shall be determined by a meter or metering system installed on the property which allows the taxpayer to determine the amount of solar energy production accurate to within two per cent of actual system output.  The installed meter or meters shall be a separate interval data recording meter or a complete system capable of recording data no less frequently than every fifteen minutes or its functional equivalent.  The type of meter installed on the solar energy property shall be listed with the California energy commission.

     (e)  The director of taxation shall prepare any forms that may be necessary to claim a tax credit under this section, including forms identifying the technology type of each tax credit claimed under this section[, whether for solar or wind].  The director may also require the taxpayer to furnish reasonable 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.

     (f)  If the tax credit under this section exceeds the taxpayer's 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, unless otherwise elected by the taxpayer pursuant to subsection (g) [or (h)].  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 subsection shall constitute a waiver of the right to claim the credit.

     (g)  For solar energy [systems,] property and for utility scale solar energy facilities, a taxpayer may elect to reduce the eligible credit amount by thirty per cent and if this reduced amount exceeds the amount of income tax payment due from the taxpayer, the excess of the credit amount over payments due shall be refunded to the taxpayer; provided that tax credit amounts properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; and provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the system is installed and placed in service.  A separate election may be made for each separate [system] solar energy property and utility scale solar energy facility that generates a credit.  An election once made is irrevocable.

     [(h)  Notwithstanding subsection (g), for any renewable energy technology system, an individual taxpayer may elect to have any excess of the credit over payments due refunded to the taxpayer, if:

     (1)  All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or

     (2)  The taxpayer's adjusted gross income is $20,000 or less (or $40,000 or less if filing a tax return as married filing jointly);

provided that tax credits properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; and provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     A husband and wife who do not file a joint tax return shall only be entitled to make this election to the extent that they would have been entitled to make the election had they filed a joint tax return.

     The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the system is installed and placed in service.  A separate election may be made for each separate system that generates a credit.  An election once made is irrevocable.

     (i)  No taxpayer shall be allowed a credit under this section for the portion of the renewable energy technology system required by section 196-6.5 that is installed and placed in service on any newly constructed single-family residential property authorized by a building permit issued on or after January 1, 2010.

     (j)  To the extent feasible, using existing resources to assist the energy-efficiency policy review and evaluation, the department shall assist with data collection on the following for each taxable year:

     (1)  The number of renewable energy technology systems that have qualified for a tax credit during the calendar year by:

         (A)  Technology type; and

         (B)  Taxpayer type (corporate and individual); and

     (2)  The total cost of the tax credit to the State during the taxable year by:

         (A)  Technology type; and

         (B)  Taxpayer type.

     (k)  This section shall apply to eligible renewable energy technology systems that are installed and placed in service on or after July 1, 2009.]

     (h)  The credit allowed under this section is subject to the following:

     (1)  Solar energy property shall not include any renewable energy technology property installed to comply with the requirements of section 196-6.5;

     (2)  The basis of solar or wind energy property shall not include any amount for which another credit is claimed under this chapter;

     (3)  A utility scale solar energy facility shall not include any facility for which another credit is claimed under this chapter;

     (4)  The credit under this section shall not be allowed to:

(A)  Any federal, state, or local government or any political subdivision, agency, or instrumentality thereof;

(B)  Any organization described in section 501(c) of the Internal Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code;

(C)  Any entity referred to in section 54(j)(4) of the Internal Revenue Code; or

(D)  Any partnership or other pass-through entity or any partner or other holder of an equity or profits interest of which is described in paragraph (A), (B), or (C); and

     (5)  An association of owners under chapter 514A, 514B, 421I, or 421J may claim the credit allowed under this section in its own name for property or facilities placed in service and located on common areas.

                (i)      The department shall collect data regarding tax credits claimed under this section and shall report to the legislature no later than December 31 of each year the credit allowed under this section remains available.  The information contained in this report shall include credit information received by the department as of August 31 of the applicable year and any credit information available for the preceding year. The annual report submitted for each year shall also include an update of the figures reported in the previous year's annual report.  The information to be included in the annual report shall be as follows:

(1)    The dollar amount of tax credits claimed for solar

energy property under subsection (a)(1) of this section;

(2)    The dollar amount of tax credits claimed for solar energy property under subsection (a)(4) of this section;

(3)    The dollar amount of tax credits claimed for competitively-bid utility scale solar energy facilities;

(4)    The dollar amount of tax credits claimed for ordinary utility scale solar energy facilities;

(5)    The dollar amount of tax credits claimed for wind energy property;

(6)    The total dollar amount of tax credits claimed under this section; and

(7)    The dollar amount of tax credits taken as refundable tax credits for each of the reporting categories above.

(j)  The tax credits provided for in this section shall be construed in accordance with United States treasury regulations and judicial interpretations of similar provisions in sections 25D, 45, and 48 of the Internal Revenue Code."

     SECTION 3.  (a)  The department of business, economic development, and tourism shall conduct a study in the 2017 calendar year to determine:

     (1)  The extent to which renewable energy technologies income tax credits have benefitted the State by advancing the State's renewable energy goals, reducing energy costs for homeowners and business owners, and generating economic growth;

     (2)  The net cost to the State of the renewable energy technologies income tax credits;

     (3)  The extent to which the State will be able to achieve its renewable energy goals without further modification to the existing renewable energy technologies income tax credit; and

     (4)  Whether the renewable energy technologies income tax credit should be extended, eliminated, or otherwise revised for tax years beginning January 1, 2020.

     (b)  To the extent possible, in conducting this study, the department of business, economic development, and tourism shall consult with, at minimum, representatives of the following:

     (1)  The department of taxation;

     (2)  The Blue Planet Foundation;

     (3)  The Ulupono Initiative;

     (4)  The Sierra Club;

     (5)  The Hawaii Solar Energy Association;

     (6)  The Hawaii Renewable Energy Association; and

     (7)  The Hawaii PV Coalition.

     (c)  The department of business, economic development, and tourism shall submit a report of findings and recommendations to the legislature no later than twenty days prior to the convening of the regular session of 2018.

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act, upon its approval, shall take effect on July 1, 2013 and shall apply to taxable years beginning after December 31, 2012; provided that:

     (1)  Taxpayers who have installed and placed in service renewable energy technology systems prior to July 1, 2013, may instead elect to claim tax credits under section 235-12.5, Hawaii Revised Statutes, in the form in which it read on June 30, 2013; and

     (2)  Taxpayers not currently regulated by the public utilities commission that have entered into agreements on or before December 31, 2012 for the sale of electrical energy from a non-residential non-utility scale solar energy property through a public solicitation and procurement process, shall be allowed to elect to receive tax credits under section 235-12.5, Hawaii Revised Statutes for energy properties placed into service prior to January 1, 2014 on the same basis as if the energy property had been placed into service prior to July 1, 2013.

 

INTRODUCED BY:

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Report Title:

Renewable Energy Technologies Tax Credit Rates

 

Description:

Provides a graduated reduction of rates for the renewable energy technologies tax credit for various types of renewable energy properties.  Requires an annual report from Department of Taxation and a 2017 study from the Department of Business, Economic Development and Tourism.  Applies to taxable years after December 31, 2012. 

 

 

 

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