THE SENATE

S.B. NO.

3150

THIRTIETH LEGISLATURE, 2020

S.D. 2

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


SECTION 1. The legislature finds that climate change is the most critical issue confronting the State of Hawaii. The overwhelming consensus of climate scientists who have studied the issue is that climate change is occurring primarily as a result of the combustion of fossil fuels. The legislature concurs with this conclusion.

The Hawaii climate change mitigation and adaptation commission has stated that the most effective single means of reducing greenhouse gas emissions is to "put a price on carbon". The concept of "carbon pricing" is supported by various local and state entities and, as of the end of 2018, fifty-one carbon pricing initiatives have been implemented or scheduled for implementation worldwide. Numerous respected economists have emphasized the importance of assuring that the social costs of the adverse impacts of carbon dioxide emissions will be included in future market pricing involving fossil fuels.

The legislature further finds that the best means of carbon pricing for the State is a use-based tax on all carbon dioxide-emitting fuels, such as oil, gas, and coal. The department of taxation already implements various fuel-based taxes, including the environmental response, energy, and food security tax, which imposes a tax on barrels of petroleum products. A separate tax is also imposed on fossil fuels other than petroleum, applied to each million British thermal units (BTUs) of heat value of a fuel. The legislature concludes that the environmental response, energy, and food security tax provisions could be amended to implement a state carbon emissions tax. However, the current tax rates per barrel and per million BTUs of fossil fuels should be replaced with a tax table that reflects the quantity of carbon dioxide emissions produced per barrel or per million BTUs of various fuels.

A carbon emissions tax is typically calculated as a value per metric ton of carbon dioxide equivalent emissions. Many climate change experts have concluded that, to be effective in achieving reductions in combustion of fossil fuels to the extent needed to meet the goals set under the Paris Agreement, the price of carbon emissions should be set in the range of $40 per metric ton of carbon dioxide emissions in 2020, and increase to a price of $80 by 2030. The legislature finds that the need to establish effective carbon prices is compelling.

Accordingly, the purpose of this Act is to:

(1) Amend the environmental response, energy, and food security tax to address carbon emissions;

(2) Increase the tax rate to effectively set a price of $          per metric ton of carbon dioxide emissions in      ;

(3) Incrementally increase the tax rate over time so that, in 2030, the tax rate shall be equivalent to a carbon price of $ per metric ton of carbon emissions; and

(4) Establish a refundable tax credit for lower-income individuals to mitigate the effect of the tax on carbon emissions.

The legislature notes that, since the initial increase in tax rates is not scheduled to take effect until , the legislature will have the opportunity to consider any revisions to the tax rates set by this Act that may be warranted by the results of the carbon pricing study currently underway pursuant to Act 122, Session Laws of Hawaii 2019. In amending the environmental response, energy, and food security tax, the legislature has taken into account the license taxes currently imposed on gasoline and diesel fuel. The legislature believes that the combined impact of the amendments made by this Act and the existing license taxes will achieve the carbon price targets.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"235-   Tax credit to mitigate the effect of a carbon emissions tax on lower income taxpayers. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, an income 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.

(b) The amount of the tax credit shall be determined as follows:

(1) For a taxpayer filing a single return or a married person filing separately, the applicable tax credit is determined by which bracket in the following table the taxpayer's gross annual household income falls within:

 

Gross Annual Household Income Credit Amount

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less $ .

 

(2) For a taxpayer filing as a head of household, the applicable tax credit is determined by which bracket in the following table the taxpayer's gross annual household income falls within:

 

Gross Annual Household Income Credit Amount

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less $ .

 

(3) For a taxpayer filing a joint return or as a surviving spouse, the applicable tax credit is determined by which bracket in the following table the taxpayer's gross annual household income falls within:

 

Gross Annual Household Income Credit Amount

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less but

more than $ $    

 

$ or less $ .

(c) If the tax credit claimed by the taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that the tax credit properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.

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 the foregoing provision shall constitute a waiver of the right to claim the credit.

(d) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;

(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the tax credit made under this section; and

(3) May adopt rules under chapter 91 necessary to effectuate the purposes of this section.

(e) All of the provisions relating to assessments and refunds under this chapter and under section 231-23(c)(1) shall apply to the tax credit under this section.

(f) As used in this section, "qualified taxpayer" means a resident taxpayer who meets the following criteria:

(1) The taxpayer files an individual income tax return, whether as a single taxpayer, a head of household, a married individual filing a separate return, a married couple filing a joint return, or a surviving spouse; and

(2) The taxpayer has a gross annual household income within the ranges listed in subsection (b)(1), (2), or (3), as applicable."

SECTION 3. Section 243-3.5, Hawaii Revised Statutes, is amended to read as follows:

"243-3.5 Environmental response, energy, carbon emissions, and food security tax; uses. (a) In addition to any other taxes provided by law, subject to the exemptions set forth in section 243-7, there is hereby imposed a state environmental response, energy, carbon emissions, and food security tax on each barrel or fractional part of a barrel of petroleum product sold by a distributor to any retail dealer or end user of petroleum product, other than a refiner. The tax [shall be $1.05] on each barrel or fractional part of a barrel of petroleum product [that is not aviation fuel; provided that of the tax] shall be in the amounts provided in the following table:

Product 2021 2024 2027 2030

Propane; Butane $ $ $ $    

Gasoline $ $ $ $    

Diesel $ $ $ $    

Kerosene $ $ $ $    

Aviation gas $ $ $ $    

Jet fuel $ $ $ $    

No.6 Fuel oil $ $ $ $    

Other $ $ $ $    

The tax for each year referenced above shall take effect on July 1 of that year and continue to be applicable until the effective date of the next increment.

The tax imposed by this subsection shall be paid by the distributor of the petroleum product.

(b) Tax revenues collected pursuant to [this] subsection[:] (a) shall be distributed in the following priority, with the excess revenues to be deposited into the general fund:

(1) [5 cents of the tax on each barrel] $ shall be deposited into the environmental response revolving fund established under section 128D-2;

(2) [5 cents of the tax on each barrel] $ shall be deposited into the energy security special fund established under section 201-12.8;

(3) [10 cents of the tax on each barrel] $ shall be deposited into the energy systems development special fund established under section 304A-2169.1; [and]

(4) [15 cents of the tax on each barrel] $ shall be deposited into the agricultural development and food security special fund established under section 141-10[.];

(5) All taxes paid on gasoline or other aviation fuel sold for use in or used for airplanes shall be deposited in the airport revenue fund created by section 248-8; and

(6) All taxes paid on gasoline, diesel, or other fuel sold for use in or used for small boats shall be deposited in the boating special fund created by section 248-8.

[The tax imposed by this subsection shall be paid by the distributor of the petroleum product.

(b)] (c) In addition to subsection (a), the environmental response, energy, carbon emissions, and food security tax shall also be imposed on each one million British thermal units of fossil fuel sold by a distributor to any retail dealer or end user, other than a refiner, of fossil fuel. The tax [shall be 19 cents] on each one million British thermal units of fossil fuel[; provided that of the tax] is set forth in the following table:

Fuel 2021 2024 2027 2030

Coal (all

forms) $ $ $ $    

Natural gas

(including

liquefied

natural gas) $ $ $ $    

The tax for each year referenced above shall take effect on July 1 of that year and continue to be applicable until the effective date of the next increment.

The tax imposed by this subsection shall be paid by the distributor of the fossil fuel.

(d) Tax revenues collected pursuant to [this] subsection[:] (c) shall be distributed in the following priority each fiscal year, with the excess revenues to be deposited into the general fund:

(1) 4.8 per cent of the tax on each one million British thermal units shall be deposited into the environmental response revolving fund established under section 128D-2;

(2) 14.3 per cent of the tax on each one million British thermal units shall be deposited into the energy security special fund established under section 201‑12.8;

(3) 9.5 per cent of the tax on each one million British thermal units shall be deposited into the energy systems development special fund established under section 304A-2169.1; and

(4) 14.3 per cent of the tax on each one million British thermal units shall be deposited into the agricultural development and food security special fund established under section 141-10.

[The tax imposed by this subsection shall be paid by the distributor of the fossil fuel.

(c)] (e) The tax imposed under subsection [(b)] (c) shall not apply to coal used to fulfill [a signed] an existing power purchase agreement between an independent power producer and an electric utility that is in effect as of June 30, 2015[.]; provided that this exemption from taxation shall not apply to any extension of an existing power purchase agreement or to any subsequent power purchase agreement. An independent power producer shall be permitted to pass the tax imposed under subsection [(b)] (c) on to an electric utility. In [which] any case[,] in which the tax is passed on, the electric utility may recover the cost of the tax through an appropriate surcharge to the end user that is approved by the public utilities commission.

[(d)] (f) A gas utility shall be allowed to recover the cost of the tax imposed under subsection [(b)] (c) as part of its fuel cost in its fuel adjustment charge without further approval by the public utilities commission.

[(e)] (g) Each distributor subject to the tax imposed by subsection (a) or [(b),] (c), on or before the last day of each calendar month, shall file with the director, on forms prescribed, prepared, and furnished by the director, a return statement of the tax under this section for which the distributor is liable for the preceding month. The form and payment of the tax shall be transmitted to the department of taxation in the appropriate district.

[(f)] (h) Notwithstanding section 248-8 to the contrary, the environmental response, energy, carbon emissions, and food security tax collected under this section shall be paid over to the director of finance for deposit as provided in subsection [(a) or (b),] (b) or (d), as the case may be.

[(g)] (i) Every distributor shall keep in the State and preserve for five years a record in a form as the department of taxation shall prescribe showing the total number of barrels, and the fractional part of barrels, of petroleum product or the total number of one million British thermal units of fossil fuel, as the case may be, sold by the distributor during any calendar month. The record shall show any other data and figures relevant to the enforcement and administration of this chapter as the department may require.

[(h)] (j) For the purposes of this section:

"Barrel" may be converted to million British thermal units, using the United States Department of Energy, Energy Information Administration annual energy review or annual energy outlook.

"Fossil fuel" means a [hydrocarbon deposit,] fuel, such as coal, natural gas, or liquefied natural gas, derived from a hydrocarbon deposit resulting from the accumulated remains of ancient plants or animals [and used for fuel]; provided that the term specifically does not include petroleum product."

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

SECTION 5. This Act shall take effect on July 1, 2050; provided that section 2 shall apply to taxable years beginning after December 31, 2021.


 


 

Report Title:

Environmental Response, Energy, and Food Security Tax; Carbon Emissions; Tax Credit

 

Description:

Amends the environmental response, energy, and food security tax to address carbon emissions. Increases the tax rate to effectively set a price of an unspecified amount per metric ton of carbon dioxide emissions in 2021. Incrementally increases the tax rate over time so that, in 2030, the tax rate shall be equivalent to a carbon price of an unspecified amount per metric ton of carbon emissions. Establishes a refundable tax credit for lower-income individuals. Effective 7/1/2050. Tax credit applies to taxable years beginning after 12/31/2021. (SD2)

 

 

 

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