THE SENATE

S.B. NO.

3084

TWENTY-EIGHTH LEGISLATURE, 2016

S.D. 1

STATE OF HAWAII

H.D. 2

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO CESSPOOLS.

 

 

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

 


PART I

     SECTION 1.  Section 235-16.5, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§235-16.5[]]  Cesspool upgrade, conversion, or connection; income tax credit.  (a)  There shall be allowed to each taxpayer subject to the tax imposed under this chapter, a cesspool upgrade, conversion, or connection 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)  In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified expenses incurred by the entity for the taxable year.  The expenses upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined by rule.

     (c)  The cesspool upgrade, conversion, or connection income tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of $10,000; provided that, in the case of a qualified cesspool that is a residential large capacity cesspool, the amount of the credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of $10,000 per residential dwelling connected to the cesspool, as certified by the department of health pursuant to subsection (e).  There shall be allowed a maximum of one cesspool upgrade, conversion, or connection income tax credit per qualified cesspool[.] or per tax map key number for residential large-capacity cesspools.  The cesspool upgrade, conversion, or connection income tax credit shall be available only for the taxable year in which the taxpayer's qualified expenses are certified by the appropriate government agency.

     (d)  The total amount of tax credits allowed under this section shall not exceed $5,000,000 for all taxpayers in any taxable year; provided that any taxpayer who is not eligible to claim the credit in a taxable year due to the $5,000,000 cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year.

     (e)  The department of health shall:

     (1)  Certify all qualified cesspools for the purposes of this section; provided that, as a pilot program, the department of health, in its discretion, may certify no more than two residential large capacity cesspools as qualified cesspools;

     (2)  Collect and maintain a record of all qualified expenses certified by an appropriate government agency for the taxable year; and

     (3)  Certify to each taxpayer the amount of credit the taxpayer may claim; provided that if, in any year, the annual amount of certified credits reaches $5,000,000 in the aggregate, the department of health shall immediately discontinue certifying credits and notify the department of taxation.

The director of health may adopt rules under chapter 91 as necessary to implement the certification requirements under this section.

     (f)  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.

    (g)  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.  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.

    (h)  This section shall not apply to taxable years beginning after December 31, 2020.

    (i)  The tax credit under this section shall not be available to the following:

     (1)  A taxpayer filing a single return or a married person filing separately with a federal adjusted gross income of $200,000 or more;

     (2)  A taxpayer filing as a head of household with a federal adjusted gross income of $300,000 or more; or

     (3)  A taxpayer filing a joint return or as a surviving spouse with a federal adjusted gross income of $400,000 or more.

     [(i)] (j)  As used in this section:

     "Aerobic treatment unit system" means an individual wastewater system that consists of an aerobic treatment unit tank, aeration device, piping, and a discharge method that is in accordance with rules adopted by the department of health relating to household aerobic units.

     "Cesspool" means an individual wastewater system consisting of an excavation in the ground whose depth is greater than its widest surface dimension, which receives untreated wastewater, and retains or is designed to retain the organic matter and solids discharged into it, but permits the liquid to seep through its bottom or sides to gain access to the underground geographic formation.

     "Qualified cesspool" means a cesspool that is certified by the department of health as being:

     (1)  Located within:

         (A)  Two hundred feet of a shoreline, perennial stream, or wetland; or

         (B)  A source water assessment program area (two year time of travel from a cesspool to a public drinking water source); or

     (2)  A residential large capacity cesspool.

     "Qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading or converting a qualified cesspool into a septic system or an aerobic treatment unit system, or connecting a qualified cesspool to a sewer system, and that are certified as such by the appropriate government agency.

     "Residential large capacity cesspool" means a cesspool that is connected to more than one residential dwelling.

     "Septic system" means an individual wastewater system that typically consists of a septic tank, piping, and a drainage field where there is natural biological decontamination as wastewater discharged into the system is filtered through soil.

     "Sewer system" means a system of piping, with appurtenances, for collecting and conveying wastewater from source to discharge following treatment.

     "Wastewater" means any liquid waste, whether or not treated and whether animal, mineral, or vegetable, including agricultural, industrial, and thermal wastes."

     SECTION 2.  Chapter 342D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§342D-    Cesspool upgrade, conversion, or connection; rebate; establishment.  (a)  The department may establish a cesspool upgrade, conversion, or connection tax credit or rebate program, to offset qualified expenses incurred by low-income households.

     (b)  To qualify for the tax credit or rebate program, applicants shall comply with requirements and conditions established by the department; provided that the tax credit or rebate program shall be available only to persons whose family income is no more than       per cent of the federal poverty level.

     (c)  Rebate amounts and other program specifications for the tax credit or rebate program shall be established by the department; provided that the dollar amount of a tax credit or rebate shall not exceed $10,000 per cesspool.

     (d)  The department shall adopt rules pursuant to chapter 91 to effectuate this section.

     (e)  Notwithstanding any law to the contrary, before       , any cesspool found to be in noncompliance with chapter 321, 322, or 342E, or this chapter, or rules adopted thereunder, as a result of any inspection or other action conducted by state or county personnel pursuant to a person's applying for a rebate under this section, shall not be subject to any penalty imposed by those chapters or rules adopted thereunder.

     (f)  Persons shall not qualify for any other similar credit other than what is provided in this section.

     (g)  As used in this section:

     "Aerobic treatment unit system" means an individual wastewater system that consists of an aerobic treatment unit tank, aeration device, piping, and a discharge method that is in accordance with rules adopted by the department relating to household aerobic units.

     "Cesspool" means an individual wastewater system consisting of an excavation in the ground whose depth is greater than its widest surface dimension, which receives untreated wastewater, and retains or is designed to retain the organic matter and solids discharged into it, but permits the liquid to seep through its bottom or sides to gain access to the underground geographic formation.

     "Qualified expenses" means costs that are necessary and directly incurred by the applicant for upgrading or converting a cesspool into a septic system or an aerobic treatment unit system, or connecting a cesspool to a sewer system, and that are certified as such by the appropriate government agency.

     "Septic system" means an individual wastewater system that typically consists of a septic tank, piping, and a drainage field where there is natural biological decontamination as wastewater discharged into the system is filtered through soil.

     "Sewer system" means a system of piping, with appurtenances, for collecting and conveying wastewater from source to discharge following treatment."

     SECTION 3.  The department of health shall submit a report to the legislature, including findings, recommendations, and implementing draft legislation no later than twenty days prior to the convening of the regular session of 2017 on the following:

(1)  Recommendations on how to incentivize or compel high-income homeowners to convert; and

(2)  Recommendations on how to incentivize middle- and low-income homeowners to convert.

PART II

     SECTION 4.  Section 235-16.5, Hawaii Revised Statutes, is amended by amending the definition of "qualified cesspool" in subsection (i) to read as follows:

     ""Qualified cesspool" means a cesspool that is [certified]:

     (1)  Certified by the department of health as being:

    [(1)] (A)  Located within:

         [(A)] (i) Two hundred feet of a shoreline, perennial stream, or wetland; or

         [(B)] (ii) A source water assessment program area (two year time of travel from a cesspool to a public drinking water source); or

    [(2)] (B)  A residential large capacity cesspool[.]; or

     (2)  Certified by the county as being located within two hundred feet of an existing sewer system."

     SECTION 5.  Section 235-16.5, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  The cesspool upgrade, conversion, or connection income tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of [$10,000;] $        ; provided that, in the case of a qualified cesspool that is a residential large capacity cesspool, the amount of the credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of [$10,000] $         per residential dwelling connected to the cesspool, as certified by the department of health pursuant to subsection (e).  There shall be allowed a maximum of one cesspool upgrade, conversion, or connection income tax credit per qualified cesspool[.] or per tax map key, in the case of a large capacity cesspool.  The cesspool upgrade, conversion, or connection income tax credit shall be available only for the taxable year in which the taxpayer's qualified expenses are certified by the appropriate government agency."

PART III

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act shall take effect on January 1, 2050; provided that sections 1, 2, 3, and 5 shall apply to taxable years beginning after December 31, 2015.



Report Title:

Income Tax Credit; Rebate; Cesspool Upgrade, Conversion, or Connection

 

Description:

Amends the cesspool upgrade, conversion, or connection income tax credit by making high-income taxpayers ineligible to claim it, making it available for cesspools located near sewer systems, and amending the maximum credit amount.  Authorizes DOH to establish a cesspool tax credit or rebate program to facilitate cesspool conversions or improvements by low-income residents.  (SB3084 HD2)

 

 

 

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