| 47 | | - | SECTION 1. The legislature finds that Hawaii has nearly 88,000 cesspools that release more than 50,000,000 gallons of raw sewage into the State's groundwater and surface waters every day. Cesspools are an antiquated technology for disposal of untreated sewage that have the potential to pollute groundwater and harm streams and coastal resources, including coral reefs. The legislature also finds that Act 125, Session Laws of Hawaii 2017 (Act 125), established a requirement for the conversion of all cesspools in the State to department of health approved wastewater management systems by 2050. However, in order to achieve this goal by 2050, the State must begin to take action now. The legislature further finds that one mechanism commonly used by other states that have faced similar challenges is to require that existing cesspools are converted at the point of sale or when a property is sold in a real estate transaction. This requirement would systematically reduce the number of cesspools in Hawaii, protect homebuyers by ensuring that the wastewater management system on the property they are buying will not be illegal in 2050, and open up financing options for the cost of the conversion. Massachusetts, New Jersey, New York, and Rhode Island are examples of states that have enacted point-of-sale cesspool conversion requirements. The legislature additionally finds that the cost of cesspool conversion can be a challenge for low- and middle-income residents and that offering an income tax credit to offset the cost of cesspool conversion would help to mitigate the financial burden on these individuals, just as Act 125 offered a temporary income tax credit for the cost of upgrading, converting, or connecting a cesspool. Therefore, the purpose of this Act is to: (1) Provide a tax credit for the upgrade or conversion of a cesspool to a director-approved wastewater system or connection of a cesspool to a sewerage system; (2) Require cesspool upgrades, conversions, or connections at the point of sale of real property or within twelve months of the date of sale recordation, with certain exemptions; and (3) Appropriate funds for additional positions for the department of health to assist with monitoring and enforcing cesspool upgrades, conversions, and connections. SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows: "§235- 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 amount of the tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of: (1) $15,000 per residential dwelling connected to the cesspool, for a taxpayer with a federal adjusted gross income of less than $ ; (2) $10,000 per residential dwelling connected to the cesspool, for a taxpayer with a federal adjusted gross income of at least $ but less than $ ; (3) $7,500 per residential dwelling connected to the cesspool, for a taxpayer with a federal adjusted gross income of at least $ but less than $ ; and (4) $0 per residential dwelling connected to the cesspool, for a taxpayer with a federal adjusted gross income greater than $ . (d) A maximum of one tax credit may be issued per cesspool. The tax credit shall be available only for the taxable year in which the taxpayer's qualified expenses are certified by the appropriate government agency. (e) The total amount of tax credits allowed under this section shall not exceed $ 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 cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year. (f) The department of health shall: (1) Collect and maintain a record of all qualified expenses certified by an appropriate government agency for the taxable year; and (2) 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 $ in the aggregate, the appropriate government agency shall immediately discontinue certifying credits and notify the department of taxation. The director of health shall adopt rules under chapter 91 as necessary to implement the certification requirements under this section. (g) 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) Shall adopt rules under chapter 91 as necessary to implement this section. (h) 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. (i) This section shall apply to taxable years beginning after December 31, 2022, and ending before January 1, 2036. (j) As used in this section: "Cesspool" has the same meaning as in section 342D-72. "Qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading or converting a cesspool to a director of health-approved wastewater system or connecting a cesspool to a sewerage system and that are certified as such by the appropriate government agency. "Sewerage system" has the same meaning as in section 342D‑1. "Wastewater" means any liquid waste, whether or not treated, and whether animal, mineral, or vegetable, including agricultural, industrial, and thermal wastes." SECTION 3. Chapter 342D, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows: "§342D- Cesspool upgrade, conversion, or connection; point of sale. (a) Any cesspool on real property that is sold or whose ownership is transferred on or after January 1, 2024, shall be: (1) Upgraded or converted to a director-approved wastewater system; or (2) Connected to a sewerage system, at the time of sale or transfer of ownership of the real property or within twelve months of the date of sale recordation; provided that the requirements of this section shall apply to cesspools that are located on properties within one thousand feet of a shoreline, perennial stream, wetland, drinking water well, or sensitive body of water. (b) The department of health shall adopt rules pursuant to chapter 91 to implement this section, including rules for enforcing this section and any exemptions from this section that the department deems necessary; provided that the rules shall include at least the following exemptions: (1) Cesspools on real property transferred between joint tenants or tenants in common; (2) Cesspools on real property transferred to a spouse, child, or parent; and (3) Cesspools on real property transferred between spouses resulting from a decree of dissolution of marriage, a decree of legal separation, or a property settlement agreement that is incidental to the decree. (c) As used in this section, "cesspool" has the same meaning as in section 342D-72." SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2022-2023 for four full-time equivalent (4.0 FTE) positions for the department of health's wastewater branch to assist with monitoring and enforcing the cesspool upgrades, conversions, and connections pursuant to this Act. The sum appropriated shall be expended by the department of health for the purposes of this Act. SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. SECTION 6. New statutory material is underscored. SECTION 7. This Act shall take effect on July 1, 2100; provided that section 2 shall: (1) Apply to taxable years beginning after December 31, 2022; and (2) Be repealed on December 31, 2035. |
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| 47 | + | SECTION 1. The legislature finds that Hawaii has nearly 88,000 cesspools that release more than 50,000,000 gallons of raw sewage into the State's groundwater and surface waters every day. Cesspools are an antiquated technology for disposal of untreated sewage that have the potential to pollute groundwater and harm streams and coastal resources, including coral reefs. The legislature further finds that Act 125, Session Laws of Hawaii 2017 (Act 125), established a requirement for the conversion of all cesspools in the State to department of health approved wastewater management systems by 2050. However, in order to achieve this goal by 2050, the State must begin to take action now. The legislature further finds that one mechanism commonly used by other states that have faced similar challenges is to require that existing cesspool are converted at the point of sale, or when a property is sold in a real estate transaction. This requirement would systematically reduce the number of cesspools in Hawaii, protect homebuyers by ensuring that the wastewater management system on the property they are buying will not be illegal in 2050, and open up financing options for the cost of the conversion. Rhode Island, New York, Massachusetts, and New Jersey are examples of states that have enacted point-of-sale cesspool conversion requirements. The legislature also finds that the cost of cesspool conversion can be a challenge for low- and middle-income residents and that offering an income tax credit to offset the cost of cesspool conversion would help to mitigate the financial burden on these individuals. Act 125 offered a temporary income tax credit for the cost of upgrading, converting, or connecting a cesspool. Therefore, the purpose of this Act is to: (1) Require cesspool upgrades, conversions, or connections at the point of sale of real property, with certain exemptions; and (2) Provide a tax credit for the upgrade or conversion of a cesspool to a department-approved wastewater system or connection of a cesspool to a sewerage system. SECTION 2. Chapter 342D, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows: "§342D- Cesspool upgrade, conversion, or connection; point of sale. (a) Any cesspool on real property that is sold or whose ownership is transferred on or after January 1, 2024, shall be: (1) Upgraded or converted to a department-approved wastewater system; or (2) Connected to a sewerage system, at the time of sale or transfer of ownership of the real property. (b) The department of health shall adopt rules pursuant to chapter 91 to implement this section, including any exemptions from this section that the department deems necessary; provided that the rules shall include at least the following exemptions: (1) Cesspools on real property transferred between joint tenants or tenants in common; (2) Cesspools on real property transferred to a spouse, child, or parent; and (3) Cesspools on real property transferred between spouses resulting from a decree of dissolution of marriage, a decree of legal separation, or a property settlement agreement that is incidental to the decree. (c) As used in this section, "cesspool" has the same meaning as in section 342D-72." SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows: "§235- 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 amount of the tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of: (1) $15,000 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income of less than $ ; (2) $10,000 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income of at least $ but less than $ ; (3) $7,500 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income of at least $ but less than $ ; and (4) $0 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income greater than $ . (d) A maximum of one tax credit may be issued per cesspool. The tax credit shall be available only for the taxable year in which the taxpayer's qualified expenses are certified by the appropriate government agency. (e) The total amount of tax credits allowed under this section shall not exceed $ 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 cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year. (f) The department of health shall: (1) Collect and maintain a record of all qualified expenses certified by an appropriate government agency for the taxable year; and (2) 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 $ in the aggregate, the appropriate government agency shall immediately discontinue certifying credits and notify the department of taxation. The director of health shall adopt rules under chapter 91 as necessary to implement the certification requirements under this section. (g) 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) Shall adopt rules under chapter 91 as necessary to implement this section. (h) 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. (i) This section shall apply to taxable years beginning after December 31, 2021, and ending before January 1, 2036. (j) As used in this section: "Cesspool" has the same meaning as in section 342D-72. "Qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading or converting a cesspool to a department-approved wastewater system or connecting a cesspool to a sewerage system, and that are certified as such by the appropriate government agency. "Sewerage system" has the same meaning as in section 342D-1. "Wastewater" means any liquid waste, whether or not treated and whether animal, mineral, or vegetable, including agricultural, industrial, and thermal wastes." SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. SECTION 5. New statutory material is underscored. SECTION 6. This Act shall take effect upon its approval; provided that section 3 shall apply to taxable years beginning after December 31, 2023, and shall be repealed on December 31, 2035. INTRODUCED BY: _____________________________ |
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