Hawaii 2023 Regular Session

Hawaii Senate Bill SB427 Compare Versions

Only one version of the bill is available at this time.

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1	1	THE SENATE S.B. NO. 427 THIRTY-SECOND LEGISLATURE, 2023 STATE OF HAWAII A BILL FOR AN ACT Relating to Cesspools. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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3	3	THE SENATE S.B. NO. 427
4	4	THIRTY-SECOND LEGISLATURE, 2023
5	5	STATE OF HAWAII
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7	7	THE SENATE
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9	9	S.B. NO.
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11	11	427
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13	13	THIRTY-SECOND LEGISLATURE, 2023
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17	17	STATE OF HAWAII
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31	31	A BILL FOR AN ACT
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37	37	Relating to Cesspools.
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43	43	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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47	47	SECTION 1. The legislature finds that Hawaii has nearly eighty-three thousand cesspools that release more than fifty million 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, establishes 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 the cost of cesspool conversion can be a challenge for low- and middle-income residents. Offering an income tax credit to offset the cost of cesspool conversion would help to mitigate the financial burden on these individuals. Act 125 also established a temporary income tax credit for the cost of upgrading, converting, or connecting a cesspool. The legislature further finds that requiring conversion of existing cesspools at the point of sale or time a property is sold in a real estate transaction is a common mechanism used by other states. Massachusetts, New Jersey, New York, and Rhode Island have all enacted point-of-sale cesspool conversion requirements. This requirement would systematically reduce the number of cesspools in Hawaii, protect homebuyers by ensuring that the purchased property's wastewater management system will comply with 2050 conversion requirements, and open up financing options for conversion costs. Accordingly, the purpose of this Act is to protect public health and the environment by: (1) Providing a tax credit for the upgrade or conversion of a cesspool to a director of health-approved wastewater system or connection of a cesspool to a sewerage system; (2) Requiring certain cesspool upgrades, conversions, or connections at the point of sale or transfer of ownership of real property; and (3) Requiring cesspools be upgraded by 2030, 2035, or 2050 depending on the cesspool's priority level, as determined by the University of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool. 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 shall be 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 department of health. (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 the department of health 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 department of health shall immediately discontinue certifying credits and notify the department of taxation. (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, 2023, and ending before January 1, 2030. (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 relating to household aerobic units. "Approved wastewater system" includes aerobic treatment unit systems, septic systems, and other types of onsite wastewater systems that have been approved by the department of health. "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 into an approved wastewater system, or connecting a cesspool to a sewerage system, and that are certified by the department of health. "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. "Sewerage system" has the same meaning as in section 342D‑1. "Wastewater" has the same meaning as in section 342D-1." 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; upon sale. (a) Any cesspool located within five hundred feet of a shoreline, perennial stream, wetland, source water protection area, or sensitive body of water, as defined by department rule, on real property that is sold or the ownership of which is transferred on or after January 1, 2025, shall be: (1) Upgraded or converted to an 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 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 a minimum, 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; (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; and (4) Cesspools on real property transferred as a result of a short sale, pre-foreclosure, or foreclosure. (c) 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. "Approved wastewater system" includes aerobic treatment unit systems, septic systems, and other types of onsite wastewater systems that have been approved by the director of health. "Cesspool" has the same meaning as in section 342D-72. "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." SECTION 4. Section 342D-72, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: "(a) Before January 1, 2050, every cesspool in the State, excluding cesspools granted exemptions by the director of health pursuant to subsection (b), shall be: (1) Upgraded or converted to a director-approved wastewater system; or (2) Connected to a sewerage system[.]; provided that cesspools categorized as priority level one, as determined by the University of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool, shall conform to paragraph (1) or (2) by January 1, 2030; provided further that cesspools categorized as priority level two, as determined by the University of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool, shall conform to paragraph (1) or (2) by January 1, 2035." SECTION 5. 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 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for the purposes of this Act. The sums appropriated shall be expended by the department of health for the purposes of this Act. SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 8. This Act shall take effect on July 1, 2023; provided that section 2 shall apply to taxable years beginning after December 31, 2023 and shall be repealed on December 31, 2029. INTRODUCED BY: _____________________________
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49	49	SECTION 1. The legislature finds that Hawaii has nearly eighty-three thousand cesspools that release more than fifty million 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.
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51	51	The legislature further finds that Act 125, Session Laws of Hawaii 2017, establishes 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.
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53	53	The legislature further finds that the cost of cesspool conversion can be a challenge for low- and middle-income residents. Offering an income tax credit to offset the cost of cesspool conversion would help to mitigate the financial burden on these individuals. Act 125 also established a temporary income tax credit for the cost of upgrading, converting, or connecting a cesspool.
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55	55	The legislature further finds that requiring conversion of existing cesspools at the point of sale or time a property is sold in a real estate transaction is a common mechanism used by other states. Massachusetts, New Jersey, New York, and Rhode Island have all enacted point-of-sale cesspool conversion requirements. This requirement would systematically reduce the number of cesspools in Hawaii, protect homebuyers by ensuring that the purchased property's wastewater management system will comply with 2050 conversion requirements, and open up financing options for conversion costs.
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57	57	Accordingly, the purpose of this Act is to protect public health and the environment by:
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59	59	(1) Providing a tax credit for the upgrade or conversion of a cesspool to a director of health-approved wastewater system or connection of a cesspool to a sewerage system;
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61	61	(2) Requiring certain cesspool upgrades, conversions, or connections at the point of sale or transfer of ownership of real property; and
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63	63	(3) Requiring cesspools be upgraded by 2030, 2035, or 2050 depending on the cesspool's priority level, as determined by the University of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool.
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65	65	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:
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67	67	"§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.
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69	69	(b) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable shall be 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.
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71	71	(c) The amount of the tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of:
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73	73	(1) $15,000 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income of less than $ ;
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75	75	(2) $10,000 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income of at least $ but less than $ ;
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77	77	(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
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79	79	(4) $0 per residential dwelling connected to the cesspool, for a taxpayer with an adjusted gross income greater than $ .
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81	81	(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 department of health.
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83	83	(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.
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85	85	(f) The department of health shall:
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87	87	(1) Collect and maintain a record of all qualified expenses certified by the department of health for the taxable year; and
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89	89	(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 department of health shall immediately discontinue certifying credits and notify the department of taxation.
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91	91	(g) The director of taxation:
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93	93	(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;
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95	95	(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
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97	97	(3) Shall adopt rules under chapter 91 as necessary to implement this section.
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99	99	(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.
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101	101	(i) This section shall apply to taxable years beginning after December 31, 2023, and ending before January 1, 2030.
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103	103	(j) As used in this section:
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105	105	"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.
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107	107	"Approved wastewater system" includes aerobic treatment unit systems, septic systems, and other types of onsite wastewater systems that have been approved by the department of health.
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109	109	"Cesspool" has the same meaning as in section 342D-72.
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111	111	"Qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading or converting a cesspool into an approved wastewater system, or connecting a cesspool to a sewerage system, and that are certified by the department of health.
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113	113	"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.
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115	115	"Sewerage system" has the same meaning as in section 342D‑1.
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117	117	"Wastewater" has the same meaning as in section 342D-1."
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119	119	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:
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121	121	"§342D- Cesspool upgrade, conversion or connection; upon sale. (a) Any cesspool located within five hundred feet of a shoreline, perennial stream, wetland, source water protection area, or sensitive body of water, as defined by department rule, on real property that is sold or the ownership of which is transferred on or after January 1, 2025, shall be:
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123	123	(1) Upgraded or converted to an approved wastewater system; or
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125	125	(2) Connected to a sewerage system,
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127	127	at the time of sale or transfer of ownership of the real property.
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129	129	(b) The department 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 a minimum, the following exemptions:
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131	131	(1) Cesspools on real property transferred between joint tenants or tenants in common;
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133	133	(2) Cesspools on real property transferred to a spouse, child, or parent;
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135	135	(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; and
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137	137	(4) Cesspools on real property transferred as a result of a short sale, pre-foreclosure, or foreclosure.
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139	139	(c) As used in this section:
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141	141	"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.
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143	143	"Approved wastewater system" includes aerobic treatment unit systems, septic systems, and other types of onsite wastewater systems that have been approved by the director of health.
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145	145	"Cesspool" has the same meaning as in section 342D-72.
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147	147	"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."
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149	149	SECTION 4. Section 342D-72, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
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151	151	"(a) Before January 1, 2050, every cesspool in the State, excluding cesspools granted exemptions by the director of health pursuant to subsection (b), shall be:
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153	153	(1) Upgraded or converted to a director-approved wastewater system; or
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155	155	(2) Connected to a sewerage system[.];
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157	157	provided that cesspools categorized as priority level one, as determined by the University of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool, shall conform to paragraph (1) or (2) by January 1, 2030; provided further that cesspools categorized as priority level two, as determined by the University of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool, shall conform to paragraph (1) or (2) by January 1, 2035."
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159	159	SECTION 5. 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 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for the purposes of this Act.
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161	161	The sums appropriated shall be expended by the department of health for the purposes of this Act.
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163	163	SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
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165	165	SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
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167	167	SECTION 8. This Act shall take effect on July 1, 2023; provided that section 2 shall apply to taxable years beginning after December 31, 2023 and shall be repealed on December 31, 2029.
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171	171	INTRODUCED BY: _____________________________
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213	213	Report Title: Cesspools; Wastewater Systems; Upgrades; Conversions; Connections; Income Tax Credits; Point of Sale; Prioritization; Appropriation Description: Establishes an income tax credit for certain cesspool upgrades. Requires upgrades to certain cesspools at the point of sale. Requires cesspools be upgraded by 2030, 2035, or 2050 depending on the cesspool's priority level. Appropriates funds. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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219	219	Report Title:
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221	221	Cesspools; Wastewater Systems; Upgrades; Conversions; Connections; Income Tax Credits; Point of Sale; Prioritization; Appropriation
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225	225	Description:
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227	227	Establishes an income tax credit for certain cesspool upgrades. Requires upgrades to certain cesspools at the point of sale. Requires cesspools be upgraded by 2030, 2035, or 2050 depending on the cesspool's priority level. Appropriates funds.
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235	235	The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.