| 47 | | - | SECTION 1. The legislature finds that Hawaii is at a critical crossroad in the States ongoing quest to reduce greenhouse gas emissions. In 2021, Hawaii became the first state in the nation to declare a climate emergency and is now poised to lead by example in mitigating the impacts of climate change through adaptive and preemptive actions to transition toward a multi-sector decarbonized economy. This is aligned with the ambitious Hawaii Clean Energy Initiative, which seeks to achieve the nation's first-ever one hundred per cent renewable portfolio standards by the year 2045. The legislature further acknowledged the necessity to analyze pathways and develop recommendations to achieve economy-wide decarbonization goals by adopting Act 238, Sessions Laws of Hawaii 2022. The legislature additionally finds that the State has made progress in reducing greenhouse gas pathways by adopting alternatives to fossil fuel for electrical power generation and introducing alternatives for ground transportation, including the use of electric vehicles. Additionally, sustainable aviation fuel for air transportation is another pathway that deserves more robust exploration. Hawaii now has the opportunity to accelerate its progress toward achieving net-zero or net-negative targets as quickly as practicable, but no later than 2045. As an island state heavily reliant on air transportation, it is important for the legislature to provide incentives within the airline industry to encourage practices that lower carbon footprints. The legislature acknowledges that total jet fuel consumption in Hawaii is eighteen million barrels (767,000,000 gallons) per year between civilian and military consumption. To provide greater energy security for the State, the legislature finds that Hawaii is preparing to produce its own sustainable aviation fuel (SAF) as well as other renewable fuels. Instead of investing in imported crude oil or refined petroleum products and perpetuating the State's dependence on fossil fuels, local sustainable fuel production will allow investment in the local economy and support job creation. The legislature further acknowledges that while SAF offers multiple benefits, the cost of SAF production is several times that of conventional fuels. Thus, creating a regulatory framework to support local SAF production is critical. As with other states, Hawaii must look at policies that will work in tandem with federal policies to make SAF production sustainable within the State. Accordingly, the purpose of this Act is to advance Hawaii's commitment to reducing greenhouse gas emissions by: (1) Establishing a temporary tax credit for the import of renewable fuel; and (2) Updating the renewable fuels production tax credit. SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§235- Renewable fuels import tax credit; sustainable aviation fuel. (a) Any law to the contrary notwithstanding, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, a renewable fuels import tax credit that shall be deducted 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. The amount of the credit shall be: (1) cents per gallon of renewable fuel costs incurred by a taxpayer; provided that the lifecycle greenhouse gas emissions are at least per cent below that of fossil fuels and the renewable fuel is consumed in the State; or (2) In the case of sustainable aviation fuel, one hundred cents per gallon for fuel consumed by flights originating from and within the State. (b) In the case of a partnership, S corporation, estate, or trust, distribution and share of the renewable fuels import tax credit shall be determined pursuant to section 704(b) (with respect to a partner's distributive share) of the Internal Revenue Code of 1986, as amended. For a fiscal year taxpayer, the taxpayer shall report the credit in the taxable year in which the calendar year end is included. (c) No later than sixty days following the close of the calendar year, every taxpayer claiming a credit under this section shall complete and file an independent, third-party certified statement, at the taxpayer's sole expense, with and in the form prescribed by the Hawaii state energy office, providing the following information: (1) The type, quantity, and British thermal unit value, using the lower heating value, of each qualified fuel, broken down by the type of fuel, imported and sold during the previous calendar year; (2) The feedstock used to produce the imported renewable fuel; (3) The proposed total amount of credit to which the taxpayer is entitled for each calendar year and the cumulative amount of the tax credit the taxpayer received the previous calendar year; (4) The number of full-time employees and number of part-time employees of the facility and those employees' states of residency, totaled per state; (5) The number and location of all renewable fuel facilities within and outside of the State; (6) The lifecycle greenhouse gas emissions in kilograms of carbon dioxide equivalent per million British thermal units for each type of qualified fuel imported; and (7) The lifecycle greenhouse gas emissions reported to the United States Department of the Treasury, if different than the emissions reported under paragraph (6). (d) Within sixty calendar days after the due date of the statement required under subsection (c), the Hawaii state energy office shall: (1) Acknowledge, in writing, receipt of the statement; and (2) Issue a certificate to the taxpayer reporting the amount of renewable fuels imported and sold, the amount of credit that the taxpayer is entitled to claim under for the previous calendar year, and the cumulative amount of the tax credit during the previous calendar year. (e) The taxpayer shall file the certificate issued under subsection (d) with the taxpayer's tax return with the department of taxation. The director of taxation may audit and adjust the certification to conform to the facts. (f) The total amount of tax credits allowed under this section shall not exceed $50,000,000 for all eligible taxpayers in any calendar year. In the event that the credits claimed under this section exceed $50,000,000 for all eligible taxpayers in any given calendar year, the $50,000,000 shall be allocated proportionally to each eligible taxpayer in proportion to the amount of the taxpayer's credits under this section for the calendar year. To the extent that the application of the $50,000,000 maximum reduces the amount of a taxpayer's credit, the amount of the reduction shall be available to the taxpayer to be used as a credit in the next subsequent calendar year; provided that the credit shall not be carried over for any calendar year thereafter; provided further that the carryover credit shall be subject to the $50,000,000 annual maximum and subject to proportional allocation, if required to meet the annual maximum. (g) Notwithstanding any other law to the contrary, the information collected and compiled by the Hawaii state energy office under subsections (c) and (d) for the purposes of the renewable fuels import tax credit shall be available for public inspection and dissemination, subject to chapter 92F. (h) If the credit under this section exceeds the taxpayer's net 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, unless otherwise elected by the taxpayer pursuant to subsections (i) or (j). All claims for a tax credit under this section, including amended claims, shall be properly 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 or to provide the certified statement required under subsection (c) shall constitute a waiver of the right to claim the credit. (i) A taxpayer may elect to reduce the eligible tax credit amount by thirty per cent. If the reduced amount 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. (j) Notwithstanding subsection (i), an individual taxpayer may elect to have any excess of the tax credit over payments due refunded to the taxpayer if: (1) All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or (2) The taxpayer's adjusted gross income is $20,000 or less (or $40,000 or less if filing a tax return as married filing jointly); provided that tax credits properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. A married couple who does not file a joint tax return shall only be entitled to make this election to the extent that they would have been entitled to make the election had they filed a joint tax return. The election required by this subsection shall be made in a manner prescribed by the director of taxation on the taxpayer's return for the taxable year in which the credit is claimed. An election once made shall be irrevocable. Not more than one taxpayer shall be allowed to claim a tax credit for the same purchase of eligible renewable fuel. (k) Before the import of any renewable fuels for the calendar year, the taxpayer shall provide written notice of the taxpayer's intention to begin import of renewable fuels. The written notice shall be provided to the department of taxation and the Hawaii state energy office and shall include information on the taxpayer, facility location, facility capacity, anticipated import start date, and the taxpayer's contact information. Notwithstanding any other law to the contrary, the written notice described in this subsection, including taxpayer and facility information, shall be available for public inspection and dissemination, subject to chapter 92F. (l) The taxpayer shall provide written notice to the director of taxation and the chief energy officer of the Hawaii state energy office within thirty days following the start of importation. The notice shall include the import start date and expected renewable fuels importation for the next twelve months. Notwithstanding any other law to the contrary, the written notice described in this subsection shall be available for public inspection and dissemination, subject to chapter 92F. (m) Following each calendar year in which a credit under this section has been claimed, the chief energy officer of the Hawaii state energy office shall submit a written report to the governor and legislature regarding the importation and sale of renewable fuels. The report shall include: (1) The number and location of renewable fuels facilities in the State and outside the State that have claimed a credit under this section; (2) The total number of British thermal units of renewable fuels, itemized by type of fuel imported and sold during the previous calendar year; and (3) The projected number of British thermal units of renewable fuels imported for the succeeding year. (n) 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 pursuant to chapter 91 necessary to effectuate the purposes of this section. (o) This section shall not apply to taxable years beginning after December 31, 2035. (p) As used in this section: "Lifecycle greenhouse gas emissions" shall have the same meaning as defined in section 235-110.32. "Renewable fuels" shall have the same meaning as defined in section 235-110.32. "Sustainable aviation fuel" shall have the same meaning as defined in section 235-110.32." SECTION 3. Section 235-110.32, Hawaii Revised Statutes, is amended to read as follows: "[[]§235-110.32[]] Renewable fuels production tax credit. (a) Each year during the credit period, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter a renewable fuels production 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 taxpayer producing renewable fuels, the annual dollar amount of the renewable fuels production tax credit during the ten-year credit period shall be equal to [20] 35 cents per seventy-six thousand British thermal units of renewable fuels using the lower heating value produced and sold for distribution in the State; provided that the taxpayer's production of renewable fuels is not less than two billion five hundred million British thermal units of renewable fuels per calendar year; provided further that [the amount of the tax credit claimed under this section by a taxpayer shall not exceed $3,500,000 per taxable year; provided further that the tax credit shall only be claimed for fuels with lifecycle emissions below that of fossil fuels. No other tax credit may be claimed under this chapter for the costs incurred to produce the renewable fuels that are used to properly claim a tax credit under this section for the taxable year.] the tax credit shall only be claimed for fuels with lifecycle greenhouse gas emissions at least per cent below that of fossil fuels. (b) Each taxpayer, together with all of its related entities as determined under section 267(b) of the Internal Revenue Code and all business entities under common control, as determined under sections 414(b), 414(c), and 1563(a) of the Internal Revenue Code, shall not be eligible for more than a single [ten-year] credit period[.]; provided that taxpayers who previously claimed credits under this chapter shall be eligible for tax years beginning after December 31, 2024. [(b)] (c) In the case of a partnership, S corporation, estate, or trust, distribution and share of the renewable fuels production tax credit shall be determined pursuant to section 704(b) (with respect to a partner's distributive share) of the Internal Revenue Code of 1986, as amended. For a fiscal year taxpayer, the taxpayer shall report the credit in the taxable year in which the calendar year end is included. [(c)] (d) No later than [thirty] sixty days following the close of the calendar year, every taxpayer claiming a credit under this section shall complete and file an independent, third-party certified statement, at the taxpayer's sole expense, with and in the form prescribed by the Hawaii state energy office, providing the following information: (1) The type, quantity, and British thermal unit value, using the lower heating value, of each qualified fuel, broken down by the type of fuel, produced and sold during the previous calendar year; (2) The feedstock used for each type of qualified fuel; (3) The proposed total amount of credit to which the taxpayer is entitled for each calendar year and the cumulative amount of the tax credit the taxpayer received during the credit period; (4) The number of full-time employees and number of part-time employees of the facility and those employees' states of residency, totaled per state; (5) The number and location of all renewable fuel production facilities within and outside of the State; [and] (6) The lifecycle greenhouse gas emissions [per] in kilograms of carbon dioxide equivalent per million British thermal units for each type of qualified fuel produced[.]; and (7) The lifecycle greenhouse gas emissions reported to the United States Department of the Treasury, if different than the emissions reported pursuant to paragraph (6). [(d)] (e) Within [thirty] sixty calendar days after the due date of the statement required under subsection [(c),] (d), the Hawaii state energy office shall: (1) Acknowledge, in writing, receipt of the statement; and (2) Issue a certificate to the taxpayer reporting the amount of renewable fuels produced and sold, the amount of credit that the taxpayer is entitled to claim for the previous calendar year, and the cumulative amount of the tax credit during the credit period[; and (3) Provide the taxpayer with a determination of whether the lifecycle greenhouse gas emissions for each type of qualified fuel produced is lower than that of fossil fuels]. [(e)] (f) The taxpayer shall file the certificate issued under subsection [(d)] (e) with the taxpayer's tax return with the department of taxation. The director of taxation may audit and adjust the certification to conform to the facts. [(f)] (g) The total amount of tax credits allowed under this section shall not exceed [$20,000,000] $100,000,000 for all eligible taxpayers in any calendar year. In the event that the credit claims under this section exceed [$20,000,000] $100,000,000 for all eligible taxpayers in any given calendar year, the [$20,000,000] $100,000,000 shall be [divided between all] allocated proportionally to each eligible [taxpayers for that year] taxpayer in proportion to the total amount of renewable fuels [produced by all eligible taxpayers. Upon reaching $20,000,000 in the aggregate, the Hawaii state energy office shall immediately discontinue issuing certificates and notify the department of taxation. In no instance shall the total dollar amount of certificates issued exceed $20,000,000 per calendar year.] production tax credits under this section for the calendar year. To the extent that the application of the $100,000,000 maximum reduces the amount of a taxpayer's credit, the amount of the reduction shall be available to the taxpayer to be used as a credit in the subsequent calendar year; provided that the credit shall not be carried over for any calendar year thereafter; provided further that the carryover credit shall be subject to the $100,000,000 annual maximum and subject to proportional allocation, if required to meet the annual maximum. [(g)] (h) Notwithstanding any other law to the contrary, the information collected and compiled by the Hawaii state energy office under subsections [(c)] (d) and [(d)] (e) for the purposes of the renewable fuels production tax credit shall be available for public inspection and dissemination, subject to chapter 92F. [(h)] (i) If the credit under this section exceeds the taxpayer's net income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted, unless otherwise elected by the taxpayer pursuant to subsections [(i)] (j) or [(j).] (k). All claims for a credit under this section shall be properly 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 or to provide the certified statement required under subsection [(c)] (d) shall constitute a waiver of the right to claim the credit. [(i)] (j) A taxpayer may elect to reduce the eligible credit amount by thirty per cent and if this reduced amount exceeds the amount of income tax payment due from the taxpayer, the excess of the credit amount over payments due shall be refunded to the taxpayer; provided that tax credit amounts properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the credit is claimed. An election once made is irrevocable. [(j)] (k) Notwithstanding subsection [(i),] (j), an individual taxpayer may elect to have any excess of the credit over payments due refunded to the taxpayer, if: (1) All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or (2) The taxpayer's adjusted gross income is $20,000 or less (or $40,000 or less if filing a tax return as married filing jointly); provided that tax credits properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. A married couple who does not file a joint tax return shall only be entitled to make this election to the extent that they would have been entitled to make the election had they filed a joint tax return. The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the credit is claimed. An election once made is irrevocable. [(k)] (l) Before the production of any renewable fuels for the calendar year, the taxpayer shall provide written notice of the taxpayer's intention to begin production of renewable fuels. The written notice shall be provided to the department of taxation and the Hawaii state energy office 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, the written notice described in this subsection, including taxpayer and facility information, shall be available for public inspection and dissemination, subject to chapter 92F. [(l)] (m) The taxpayer shall provide written notice to the director of taxation and the chief energy officer of the Hawaii state energy office within thirty days following the start of production. The notice shall include the production start date and expected renewable fuels production for the next twelve months. Notwithstanding any other law to the contrary, the written notice described in this subsection shall be available for public inspection and dissemination, subject to chapter 92F. [(m)] (n) Following each calendar year in which a credit under this section has been claimed, the chief energy officer of the Hawaii state energy office shall submit a written report to the governor and legislature regarding the production and sale of renewable fuels. The report shall include: (1) The number and location of renewable fuels production facilities in the State and outside the State that have claimed a credit under this section; (2) The total number of British thermal units of renewable fuels, itemized by type of fuel produced and sold during the previous calendar year; and (3) The projected number of British thermal units of renewable fuels production for the succeeding year. [(n)] (o) 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 pursuant to chapter 91 necessary to effectuate the purposes of this section. [(o)] (p) As used in this section: "Credit period" means a maximum period of ten consecutive years, beginning from the first taxable year in which a taxpayer begins renewable fuels production at a level of at least two billion five-hundred million British thermal units of renewable fuels per calendar year. "Lifecycle greenhouse gas emissions" means the aggregate attributional core lifecycle greenhouse gas emissions values utilizing the most recent version of Argonne National Laboratory's Greenhouse Gasses, Regulated Emissions, and Energy Use in Technologies Model, inclusive of agricultural practices and carbon capture and sequestration. "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter. "Renewable feedstocks" means: (1) Biomass crops and other renewable organic material, including but not limited to logs, wood chips, wood pellets, and wood bark; (2) Agricultural residue; (3) Oil crops, including but not limited to algae, camelina, canola, carinata, jatropha, palm, soybean, and sunflower; (4) Sugar and starch crops, including but not limited to corn, sugar cane, and cassava; (5) Other agricultural crops; (6) Grease, fats, tallows, and waste cooking oil; (7) Food wastes; (8) Municipal solid wastes [and], industrial wastes[;], and construction and demolition wastes; (9) Water, including wastewater; [and] (10) Bio-intermediate ethanol produced from renewable feedstocks; and [(10)] (11) Animal residues and wastes, that can be used to generate energy. "Renewable fuels" means fuels produced from renewable feedstocks; provided that the fuel: (1) Is sold as a fuel in the State; and (2) Meets the relevant ASTM International specifications or other industry specifications for the particular fuel, including but not limited to: (A) Methanol, ethanol, or other alcohols; (B) Hydrogen; (C) Biodiesel or renewable diesel; (D) Biogas; (E) Other biofuels; (F) Renewable [jet fuel or renewable] gasoline[;] or renewable naptha; (G) Renewable propane or renewable liquid petroleum gases; (H) Sustainable aviation fuel; or [(G)] (I) Logs, wood chips, wood pellets, or wood bark. "Sustainable aviation fuel" means ASTM International D7566-compliant renewable aviation turbine fuel blendstock that achieves at least per cent reduction in aggregate attributional core lifecycle greenhouse gas emissions." 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, 2024, and shall apply to taxable years beginning after December 31, 2024; provided that section 2 shall repeal on January 1, 2036. |
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| 47 | + | SECTION 1. The legislature finds that Hawaii is at a critical crossroad in the States ongoing quest to reduce greenhouse gas emissions. In 2021, Hawaii became the first state in the nation to declare a climate emergency and is now poised to lead by example in mitigating the impacts of climate change through adaptive and preemptive actions to transition toward a multi-sector decarbonized economy. This is aligned with the ambitious Hawaii Clean Energy Initiative, which seeks to achieve the nation's first-ever one hundred per cent renewable portfolio standards by the year 2045. The legislature further acknowledged the necessity to analyze pathways and develop recommendations to achieve economy-wide decarbonization goals by adopting Act 238, Sessions Laws of Hawaii 2022. The legislature additionally finds that the State has made progress in reducing greenhouse gas pathways by adopting alternatives to fossil fuel for electrical power generation and introducing alternatives for ground transportation, including the use of electric vehicles. Additionally, sustainable aviation fuel for air transportation is another pathway that deserves more robust exploration. Hawaii now has the opportunity to accelerate its progress toward achieving net-zero or net-negative targets as quickly as practicable, but no later than 2045. As an island state heavily reliant on air transportation, it is important for the legislature to provide incentives within the airline industry to encourage practices that lower carbon footprints. The legislature acknowledges that total jet fuel consumption in Hawaii is eighteen million barrels (767,000,000 gallons) per year between civilian and military consumption. To provide greater energy security for the State, the legislature finds that Hawaii is preparing to produce its own sustainable aviation fuel (SAF) as well as other renewable fuels. Instead of investing in imported crude oil or refined petroleum products and perpetuating the State's dependence on fossil fuels, local sustainable fuel production will allow investment in the local economy and support job creation. The legislature further acknowledges that while SAF offers multiple benefits, the cost of SAF production is several times that of conventional fuels. Thus, creating a regulatory framework to support local SAF production is critical. As with other states, Hawaii must look at policies that will work in tandem with federal policies to make SAF production sustainable within the State. Accordingly, the purpose of this Act is to advance Hawaii's commitment to reducing greenhouse gas emissions by: (1) Establishing a tax credit for the import of renewable fuel; and (2) Updating the renewable fuels production tax credit. SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§235- Renewable fuels import tax credit; sustainable aviation fuel. (a) Any law to the contrary notwithstanding, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, a renewable fuels import tax credit that shall be deducted 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. The amount of the credit shall be: (1) cents per gallon of renewable fuel costs incurred by a taxpayer; provided that the lifecycle greenhouse gas emissions are at least per cent below that of fossil fuels and the renewable fuel is consumed in the State; or (2) In the case of sustainable aviation fuel, one hundred cents per gallon for fuel consumed by flights originating from and within the State. (b) In the case of a partnership, S corporation, estate, or trust, distribution and share of the renewable fuels import tax credit shall be determined pursuant to section 704(b) (with respect to a partner's distributive share) of the Internal Revenue Code of 1986, as amended. For a fiscal year taxpayer, the taxpayer shall report the credit in the taxable year in which the calendar year end is included. (c) No later than sixty days following the close of the calendar year, every taxpayer claiming a credit under this section shall complete and file an independent, third-party certified statement, at the taxpayer's sole expense, with and in the form prescribed by the Hawaii state energy office, providing the following information: (1) The type, quantity, and British thermal unit value, using the lower heating value, of each qualified fuel, broken down by the type of fuel, imported and sold during the previous calendar year; (2) The feedstock used to produce the imported renewable fuel; (3) The proposed total amount of credit to which the taxpayer is entitled for each calendar year and the cumulative amount of the tax credit the taxpayer received the previous calendar year; (4) The number of full-time employees and number of part-time employees of the facility and those employees' states of residency, totaled per state; (5) The number and location of all renewable fuel facilities within and outside of the State; (6) The lifecycle greenhouse gas emissions in kilograms of carbon dioxide equivalent per million British thermal units for each type of qualified fuel imported; and (7) The lifecycle greenhouse gas emissions reported to the United States Department of the Treasury, if different than the emissions reported under paragraph (6). (d) Within sixty calendar days after the due date of the statement required under subsection (c), the Hawaii state energy office shall: (1) Acknowledge, in writing, receipt of the statement; and (2) Issue a certificate to the taxpayer reporting the amount of renewable fuels imported and sold, the amount of credit that the taxpayer is entitled to claim under for the previous calendar year, and the cumulative amount of the tax credit during the previous calendar year. (e) The taxpayer shall file the certificate issued under subsection (d) with the taxpayer's tax return with the department of taxation. The director of taxation may audit and adjust the certification to conform to the facts. (f) The total amount of tax credits allowed under this section shall not exceed $50,000,000 for all eligible taxpayers in any calendar year. In the event that the credits claimed under this section exceed $50,000,000 for all eligible taxpayers in any given calendar year, the $50,000,000 shall be allocated proportionally to each eligible taxpayer in proportion to the amount of the taxpayer's credits under this section for the calendar year. To the extent that the application of the $50,000,000 maximum reduces the amount of a taxpayer's credit, the amount of the reduction shall be available to the taxpayer to be used as a credit in the next subsequent calendar year; provided that the credit shall not be carried over for any calendar year thereafter; provided further that the carryover credit shall be subject to the $50,000,000 annual maximum and subject to proportional allocation, if required to meet the annual maximum. (g) Notwithstanding any other law to the contrary, the information collected and compiled by the Hawaii state energy office under subsections (c) and (d) for the purposes of the renewable fuels import tax credit shall be available for public inspection and dissemination, subject to chapter 92F. (h) If the credit under this section exceeds the taxpayer's net 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, unless otherwise elected by the taxpayer pursuant to subsections (i) or (j). All claims for a tax credit under this section, including amended claims, shall be properly 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 or to provide the certified statement required under subsection (c) shall constitute a waiver of the right to claim the credit. (i) A taxpayer may elect to reduce the eligible tax credit amount by thirty per cent. If the reduced amount 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. (j) Notwithstanding subsection (i), an individual taxpayer may elect to have any excess of the tax credit over payments due refunded to the taxpayer if: (1) All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or (2) The taxpayer's adjusted gross income is $20,000 or less (or $40,000 or less if filing a tax return as married filing jointly); provided that tax credits properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. A married couple who does not file a joint tax return shall only be entitled to make this election to the extent that they would have been entitled to make the election had they filed a joint tax return. The election required by this subsection shall be made in a manner prescribed by the director of taxation on the taxpayer's return for the taxable year in which the credit is claimed. An election once made shall be irrevocable. Not more than one taxpayer shall be allowed to claim a tax credit for the same purchase of eligible renewable fuel. (k) Before the import of any renewable fuels for the calendar year, the taxpayer shall provide written notice of the taxpayer's intention to begin import of renewable fuels. The written notice shall be provided to the department of taxation and the Hawaii state energy office and shall include information on the taxpayer, facility location, facility capacity, anticipated import start date, and the taxpayer's contact information. Notwithstanding any other law to the contrary, the written notice described in this subsection, including taxpayer and facility information, shall be available for public inspection and dissemination, subject to chapter 92F. (l) The taxpayer shall provide written notice to the director of taxation and the chief energy officer of the Hawaii state energy office within thirty days following the start of importation. The notice shall include the import start date and expected renewable fuels importation for the next twelve months. Notwithstanding any other law to the contrary, the written notice described in this subsection shall be available for public inspection and dissemination, subject to chapter 92F. (m) Following each calendar year in which a credit under this section has been claimed, the chief energy officer of the Hawaii state energy office shall submit a written report to the governor and legislature regarding the importation and sale of renewable fuels. The report shall include: (1) The number and location of renewable fuels facilities in the State and outside the State that have claimed a credit under this section; (2) The total number of British thermal units of renewable fuels, itemized by type of fuel imported and sold during the previous calendar year; and (3) The projected number of British thermal units of renewable fuels imported for the succeeding year. (n) 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 pursuant to chapter 91 necessary to effectuate the purposes of this section. (o) This section shall not apply to taxable years beginning after December 31, 2035. (p) As used in this section: "Lifecycle greenhouse gas emissions" shall have the same meaning as defined in section 235-110.32. "Renewable fuels" shall have the same meaning as defined in section 235-110.32. "Sustainable aviation fuel" shall have the same meaning as defined in section 235-110.32." SECTION 3. Section 235-110.32, Hawaii Revised Statutes, is amended to read as follows: "[[]§235-110.32[]] Renewable fuels production tax credit. (a) Each year during the credit period, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter a renewable fuels production 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. (1) For each taxpayer producing renewable fuels, the annual dollar amount of the renewable fuels production tax credit during the ten-year credit period shall be equal to [20] 35 cents per seventy-six thousand British thermal units of renewable fuels using the lower heating value produced and sold for distribution in the State; provided that the taxpayer's production of renewable fuels is not less than two billion five hundred million British thermal units of renewable fuels per calendar year; provided further that [the amount of the tax credit claimed under this section by a taxpayer shall not exceed $3,500,000 per taxable year; provided further that the tax credit shall only be claimed for fuels with lifecycle emissions below that of fossil fuels. No other tax credit may be claimed under this chapter for the costs incurred to produce the renewable fuels that are used to properly claim a tax credit under this section for the taxable year.] the tax credit shall only be claimed for fuels with lifecycle greenhouse gas emissions at least per cent below that of fossil fuels; provided further that there shall be an additional credit value of $1 per gallon for renewable fuels produced from locally-sourced renewable feedstock; and (2) For each taxpayer producing sustainable aviation fuel within the State and produced and sold for consumption by flights originating from and within the State, there shall be an additional credit value equal to $1 per gallon. (b) Each taxpayer, together with all of its related entities as determined under section 267(b) of the Internal Revenue Code and all business entities under common control, as determined under sections 414(b), 414(c), and 1563(a) of the Internal Revenue Code, shall not be eligible for more than a single [ten-year] credit period[.]; provided that taxpayers who previously claimed credits under this chapter shall be eligible for tax years beginning after December 31, 2024. [(b)] (c) In the case of a partnership, S corporation, estate, or trust, distribution and share of the renewable fuels production tax credit shall be determined pursuant to section 704(b) (with respect to a partner's distributive share) of the Internal Revenue Code of 1986, as amended. For a fiscal year taxpayer, the taxpayer shall report the credit in the taxable year in which the calendar year end is included. [(c)] (d) No later than [thirty] sixty days following the close of the calendar year, every taxpayer claiming a credit under this section shall complete and file an independent, third-party certified statement, at the taxpayer's sole expense, with and in the form prescribed by the Hawaii state energy office, providing the following information: (1) The type, quantity, and British thermal unit value, using the lower heating value, of each qualified fuel, broken down by the type of fuel, produced and sold during the previous calendar year; (2) The feedstock used for each type of qualified fuel; (3) The proposed total amount of credit to which the taxpayer is entitled for each calendar year and the cumulative amount of the tax credit the taxpayer received during the credit period; (4) The number of full-time employees and number of part-time employees of the facility and those employees' states of residency, totaled per state; (5) The number and location of all renewable fuel production facilities within and outside of the State; [and] (6) The lifecycle greenhouse gas emissions [per] in kilograms of carbon dioxide equivalent per million British thermal units for each type of qualified fuel produced[.]; and (7) The lifecycle greenhouse gas emissions reported to the United States Department of the Treasury, if different than the emissions reported pursuant to paragraph (6). [(d)] (e) Within [thirty] sixty calendar days after the due date of the statement required under subsection [(c),] (d), the Hawaii state energy office shall: (1) Acknowledge, in writing, receipt of the statement; and (2) Issue a certificate to the taxpayer reporting the amount of renewable fuels produced and sold, the amount of credit that the taxpayer is entitled to claim for the previous calendar year, and the cumulative amount of the tax credit during the credit period[; and (3) Provide the taxpayer with a determination of whether the lifecycle greenhouse gas emissions for each type of qualified fuel produced is lower than that of fossil fuels]. [(e)] (f) The taxpayer shall file the certificate issued under subsection [(d)] (e) with the taxpayer's tax return with the department of taxation. The director of taxation may audit and adjust the certification to conform to the facts. [(f)] (g) The total amount of tax credits allowed under this section shall not exceed [$20,000,000] $100,000,000 for all eligible taxpayers in any calendar year. In the event that the credit claims under this section exceed [$20,000,000] $100,000,000 for all eligible taxpayers in any given calendar year, the [$20,000,000] $100,000,000 shall be [divided between all] allocated proportionally to each eligible [taxpayers for that year] taxpayer in proportion to the total amount of renewable fuels [produced by all eligible taxpayers. Upon reaching $20,000,000 in the aggregate, the Hawaii state energy office shall immediately discontinue issuing certificates and notify the department of taxation. In no instance shall the total dollar amount of certificates issued exceed $20,000,000 per calendar year.] production tax credits under this section for the calendar year. To the extent that the application of the $100,000,000 maximum reduces the amount of a taxpayer's credit, the amount of the reduction shall be available to the taxpayer to be used as a credit in the subsequent calendar year; provided that the credit shall not be carried over for any calendar year thereafter; provided further that the carryover credit shall be subject to the $100,000,000 annual maximum and subject to proportional allocation, if required to meet the annual maximum. [(g)] (h) Notwithstanding any other law to the contrary, the information collected and compiled by the Hawaii state energy office under subsections [(c)] (d) and [(d)] (e) for the purposes of the renewable fuels production tax credit shall be available for public inspection and dissemination, subject to chapter 92F. [(h)] (i) If the credit under this section exceeds the taxpayer's net income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted, unless otherwise elected by the taxpayer pursuant to subsections [(i)] (j) or [(j).] (k). All claims for a credit under this section shall be properly 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 or to provide the certified statement required under subsection [(c)] (d) shall constitute a waiver of the right to claim the credit. [(i)] (j) A taxpayer may elect to reduce the eligible credit amount by thirty per cent and if this reduced amount exceeds the amount of income tax payment due from the taxpayer, the excess of the credit amount over payments due shall be refunded to the taxpayer; provided that tax credit amounts properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the credit is claimed. An election once made is irrevocable. [(j)] (k) Notwithstanding subsection [(i),] (j), an individual taxpayer may elect to have any excess of the credit over payments due refunded to the taxpayer, if: (1) All of the taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or (2) The taxpayer's adjusted gross income is $20,000 or less (or $40,000 or less if filing a tax return as married filing jointly); provided that tax credits properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. A married couple who does not file a joint tax return shall only be entitled to make this election to the extent that they would have been entitled to make the election had they filed a joint tax return. The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the credit is claimed. An election once made is irrevocable. [(k)] (l) Before the production of any renewable fuels for the calendar year, the taxpayer shall provide written notice of the taxpayer's intention to begin production of renewable fuels. The written notice shall be provided to the department of taxation and the Hawaii state energy office 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, the written notice described in this subsection, including taxpayer and facility information, shall be available for public inspection and dissemination, subject to chapter 92F. [(l)] (m) The taxpayer shall provide written notice to the director of taxation and the chief energy officer of the Hawaii state energy office within thirty days following the start of production. The notice shall include the production start date and expected renewable fuels production for the next twelve months. Notwithstanding any other law to the contrary, the written notice described in this subsection shall be available for public inspection and dissemination, subject to chapter 92F. [(m)] (n) Following each calendar year in which a credit under this section has been claimed, the chief energy officer of the Hawaii state energy office shall submit a written report to the governor and legislature regarding the production and sale of renewable fuels. The report shall include: (1) The number and location of renewable fuels production facilities in the State and outside the State that have claimed a credit under this section; (2) The total number of British thermal units of renewable fuels, itemized by type of fuel produced and sold during the previous calendar year; and (3) The projected number of British thermal units of renewable fuels production for the succeeding year. [(n)] (o) 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 pursuant to chapter 91 necessary to effectuate the purposes of this section. [(o)] (p) As used in this section: "Credit period" means a maximum period of ten consecutive years, beginning from the first taxable year in which a taxpayer begins renewable fuels production at a level of at least two billion five-hundred million British thermal units of renewable fuels per calendar year. "Lifecycle greenhouse gas emissions" means the aggregate attributional core lifecycle greenhouse gas emissions values utilizing the most recent version of Argonne National Laboratory's Greenhouse Gasses, Regulated Emissions, and Energy Use in Technologies Model, inclusive of agricultural practices and carbon capture and sequestration. "Locally-sourced renewable feedstock" means renewable feedstock that is grown, produced, or processed within five hundred miles of the delivery of fuel into the vehicle, vessel, or fuel storage tank of the end user. "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter. "Renewable feedstocks" means: (1) Biomass crops and other renewable organic material, including but not limited to logs, wood chips, wood pellets, and wood bark; (2) Agricultural residue; (3) Oil crops, including but not limited to algae, camelina, canola, carinata, jatropha, palm, soybean, and sunflower; (4) Sugar and starch crops, including but not limited to corn, sugar cane, and cassava; (5) Other agricultural crops; (6) Grease, fats, tallows, and waste cooking oil; (7) Food wastes; (8) Municipal solid wastes [and], industrial wastes[;], and construction and demolition wastes; (9) Water, including wastewater; [and] (10) Bio-intermediate ethanol produced from renewable feedstocks; and [(10)] (11) Animal residues and wastes, that can be used to generate energy. "Renewable fuels" means fuels produced from renewable feedstocks; provided that the fuel: (1) Is sold as a fuel in the State; and (2) Meets the relevant ASTM International specifications or other industry specifications for the particular fuel, including but not limited to: (A) Methanol, ethanol, or other alcohols; (B) Hydrogen; (C) Biodiesel or renewable diesel; (D) Biogas; (E) Other biofuels; (F) Renewable [jet fuel or renewable] gasoline[;] or renewable naptha; (G) Renewable propane or renewable liquid petroleum gases; (H) Sustainable aviation fuel; or [(G)] (I) Logs, wood chips, wood pellets, or wood bark. "Sustainable aviation fuel" means ASTM International D7566-compliant renewable aviation turbine fuel blendstock that achieves at least per cent reduction in aggregate attributional core lifecycle greenhouse gas emissions." 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, 2024 and shall apply to taxable years beginning after December 31, 2024; provided that section 2 shall repeal on January 1, 2036. INTRODUCED BY: _____________________________ |
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