HB 1265: RELATING TO TAX CREDITS.

A BILL FOR AN ACT

relating to tax credits.

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

     SECTION 1.  The legislature finds that promoting the use of recycled materials and waste inputs in business operations reduces environmental impacts, conserves natural resources, and supports the circular economy.  Providing tax incentives to businesses that incorporate recycled or waste materials into their products or services would encourage sustainable practices and help mitigate the environmental challenges facing the State.

     Therefore, the purpose of this Act is to establish a tax credit for businesses that use recycled or waste inputs as part of their operations.

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

     "§235-     Recycled or waste inputs tax credit.  (a)  There shall be allowed to each taxpayer subject to the tax imposed by this chapter, a tax credit for using recycled or waste inputs in the taxpayer's business operations, which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

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

     (1)  Ten per cent of the cost of recycled or waste inputs used by the taxpayer in the taxable year, up to a maximum of $500,000 per taxpayer per taxable year; or

     (2)  Fifteen per cent of the cost of recycled or waste inputs used by the taxpayer in the taxable year if the taxpayer's principal place of business is located in a rural area, up to a maximum of $750,000 per taxpayer per taxable year.

     (c)  To qualify for the tax credit, the recycled or waste inputs used by the taxpayer shall meet the following requirements:

     (1)  The inputs shall consist of materials that have been diverted from the waste stream, including post-consumer or post-industrial materials;

     (2)  The inputs shall be used as raw materials in the production of goods or services; and

     (3)  The inputs shall be sourced from certified recycling or waste recovery facilities.

     (d)  If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.  All claims for a tax credit under this section, including any 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.

     (e)  Every claim, including any amended claims, for a tax credit under this section shall include:

     (1)  Documentation that verifies the recycled or waste inputs used, including invoices, receipts, or other relevant records;

     (2)  Certification from the supplier of the recycled or waste inputs confirming compliance with the requirements of this section; and

     (3)  Any other information required by the department of taxation to determine the taxpayer's eligibility for the tax credit.

     (f)  The director of taxation:

     (1)  Shall prepare any forms necessary for a taxpayer to claim a 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 to implement this section.

     (g)  As used in this section:

     "Recycled or waste inputs" means materials that have been diverted from the waste stream and used as raw materials in the production of goods or services.  "Recycled or waste inputs" includes post-consumer materials, post-industrial materials, and other recovered materials certified by the department of taxation.

     "Rural area" means any area outside of a standard metropolitan statistical area as defined by the United States Census Bureau or any area designated as rural by the department of business, economic development, and tourism."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2025.

Report Title:

Recycled or Waste Inputs Tax Credit

Description:

Establishes a Recycled or Waste Inputs Tax Credit.  Applies to taxable years beginning after 12/31/25.

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