HOUSE OF REPRESENTATIVES

H.B. NO.

1689

TWENTY-EIGHTH LEGISLATURE, 2016

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to taxation.

 

 

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

 


SECTION 1. Section 235-110.3, Hawaii Revised Statutes, is amended as follows:

1. By amending the section heading and subsections (a) through (c) to read:

"235-110.3 [Ethanol] Renewable fuels facility tax credit. (a) Each year during the credit period, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, [an ethanol] a renewable fuels facility tax credit that shall be applied to the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

For each [qualified ethanol] qualifying renewable fuels production facility, the annual dollar amount of the [ethanol] renewable fuels facility tax credit during the eight-year period shall be equal to thirty per cent of its annual nameplate capacity if the facility's nameplate capacity is greater than five hundred thousand but less than fifteen million gallons. A taxpayer may claim this credit for each qualifying [ethanol] renewable fuels facility; provided that:

(1) The claim for this credit by any taxpayer of a qualifying [ethanol] renewable fuels production facility shall not exceed one hundred per cent of the total of all investments made by the taxpayer in the qualifying [ethanol] renewable fuels production facility during the credit period;

(2) The qualifying [ethanol] renewable fuels production facility operated at a level of production of at least seventy-five per cent of its nameplate capacity on an annualized basis;

(3) The qualifying [ethanol] renewable fuels production facility is in production on or before January 1, 2017; and

(4) No taxpayer that claims the credit under this section shall use the investment upon which the claim under this section is made to claim any other tax credit under this chapter for the same taxable year.

(b) As used in this section:

"Credit period" means a maximum period of eight years beginning from the first taxable year in which the qualifying [ethanol] renewable fuels production facility begins production even if actual production is not at seventy-five per cent of nameplate capacity.

"Investment" means a nonrefundable capital expenditure related to the development and construction of any qualifying [ethanol] renewable fuels production facility, including processing equipment, boilers, turbines, generators, waste treatment systems, pipelines, and liquid storage tanks at the facility or remote locations, including expansions or modifications. Capital expenditures shall be those direct and certain 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, utility costs during construction, 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).

"Nameplate capacity" means the qualifying [ethanol] renewable fuels production facility's net production design capacity, in gallons of [motor] fuel grade [ethanol] renewable fuels per year.

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

"Qualifying [ethanol] renewable fuels production" means [ethanol] fuel produced or generated from renewable[, organic] feedstocks[, or waste materials, including municipal solid waste]. All qualifying production shall be fermented, distilled, transesterified, gasified, pyrolized, combusted, or produced by physical, chemical, biochemical, or thermochemical conversion methods [such as reformation and catalytic conversion and dehydrated] at the facility.

"Qualifying [ethanol] renewable fuels production facility" or "facility" means a facility located in Hawaii [which] that produces [motor] or generates, directly from renewable feedstocks, fuel grade [ethanol] renewable fuels meeting the [minimum specifications by the American Society of Testing and Materials standard D-4806, as amended.] relevant ASTM International specifications for the particular fuel or other industry specifications for liquid or gaseous fuels, including but not limited to:

(1) Methanol, ethanol, or other alcohols;

(2) Hydrogen;

(3) Biodiesel or renewable diesel;

(4) Biogas;

(5) Other biofuels; or

(6) Renewable jet fuel or renewable gasoline.

"Renewable feedstocks" means:

(1) Biomass crops;

(2) Agricultural residues;

(3) Oil crops, including but not limited to algae, canola, jatropha, palm, soybean, and sunflower;

(4) Sugar and starch crops, including but not limited to sugar cane and cassava;

(5) Other agricultural crops;

(6) Grease and waste cooking oil;

(7) Food wastes;

(8) Municipal solid wastes and industrial wastes;

(9) Water; and

(10) Animal residues and wastes,

that can be used to generate energy.

(c) In the case of a taxable year in which the cumulative claims for the credit by the taxpayer of a qualifying [ethanol] renewable fuels production facility [exceeds] exceed the cumulative investment made in the qualifying [ethanol] renewable fuels production facility by the taxpayer, only that portion that does not exceed the cumulative investment shall be claimed and allowed."

2. By amending subsections (f) through (m) to read:

"(f) If a qualifying [ethanol] renewable fuels production facility or an interest therein is acquired by a taxpayer prior to the expiration of the credit period, the credit allowable under subsection (a) for any period after [such] the acquisition shall be equal to the credit that would have been allowable under subsection (a) to the prior taxpayer had the taxpayer not disposed of the interest. If an interest is disposed of during any year for which the credit is allowable under subsection (a), the credit shall be allowable between the parties on the basis of the number of days during the year the interest was held by each taxpayer. In no case shall the credit allowed under subsection (a) be allowed after the expiration of the credit period.

(g) Once the total nameplate capacities of qualifying [ethanol] renewable fuels production facilities built within the State reaches or exceeds a level of forty million gallons per year, credits under this section shall not be allowed for new [ethanol] renewable fuels production facilities. If a new facility's production capacity would cause the statewide [ethanol] renewable fuels production capacity to exceed forty million gallons per year, only the [ethanol] renewable fuels production capacity that does not exceed the statewide forty million gallon per year level shall be eligible for the credit.

(h) Prior to construction of any new qualifying [ethanol] renewable fuels production facility, the taxpayer shall provide written notice of the taxpayer's intention to begin construction of a qualifying [ethanol] renewable fuels production facility. The information shall be provided to the department of taxation and the department of business, economic development, and tourism on forms provided by the department of business, economic development, and tourism, and shall include information on the taxpayer, facility location, facility production capacity, anticipated production start date, and the taxpayer's contact information. Notwithstanding any other law to the contrary, this information shall be available for public inspection and dissemination under chapter 92F.

(i) The taxpayer shall provide written notice to the director of taxation and the director of business, economic development, and tourism within thirty days following the start of production. The notice shall include the production start date and expected [ethanol fuel] renewable fuels production for the next twenty-four months. Notwithstanding any other law to the contrary, this information shall be available for public inspection and dissemination under chapter 92F.

(j) If a qualifying [ethanol] renewable fuels production facility fails to achieve an average annual production of at least seventy-five per cent of its nameplate capacity for two consecutive years, the stated capacity of that facility may be revised by the director of business, economic development, and tourism to reflect actual production for the purposes of determining statewide production capacity under subsection (g) and allowable credits for that facility under subsection (a). Notwithstanding any other law to the contrary, this information shall be available for public inspection and dissemination under chapter 92F.

(k) Each calendar year during the credit period, the taxpayer shall provide information to the director of business, economic development, and tourism on the number of gallons and type of [ethanol] renewable fuels produced and sold during the previous calendar year, how much was sold in Hawaii versus overseas, feedstocks used for [ethanol] renewable fuels production, the number of employees of the facility, and the projected number of gallons of [ethanol] renewable fuels production for the succeeding year.

(l) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every qualifying [ethanol] renewable fuels production facility. The cost upon which 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).

(m) Following each year in which a credit under this section has been claimed, the director of business, economic development, and tourism shall submit a written report to the governor and legislature regarding the production and sale of [ethanol.] renewable fuels. The report shall include:

(1) The number, location, and nameplate capacities of qualifying [ethanol] renewable fuels production facilities in the State;

(2) The total number of gallons of [ethanol] renewable fuels produced and sold during the previous year; and

(3) The projected number of gallons of [ethanol production] renewable fuels expected to be produced for the succeeding year."

SECTION 2. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2015.

 

INTRODUCED BY:

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Report Title:

Renewable Fuels Facility Tax Credit

 

Description:

Amends the existing ethanol facility income tax credit to include other renewable fuels.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.