HB 2241: Renewable Energy Technologies; Income Tax Credit; Income Restriction; Solar Energy Systems; Third-party Financed Systems

A BILL FOR AN ACT

RELATING TO RENEWABLE ENERGY.

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

     SECTION 1.  The legislature finds that the State's environmental commitments and goals necessitate the swift adoption of renewable energy.  Renewable energy systems that capture solar and wind energy and convert it to thermal or mechanical energy, electricity, and fuel will be key in the State's transition away from fossil fuels.  The legislature further finds that the renewable energy technologies income tax credit could be adjusted to better support low- and moderate- income families by limiting the credit to taxpayers in those income brackets.  The legislature additionally finds that these changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, helping to protect hundreds of jobs in the State's energy industry.

     Accordingly, the purpose of this Act is to amend the renewable energy technologies income tax credit by:

     (1)  Limiting claims for certain solar energy systems installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $175,000 or less if filing as an individual, $262,500 or less if filing as a head of household, or $350,000 or less if filing jointly;

     (2)  Removing certain cap amounts for solar energy systems that are not third-party financed systems;

     (3)  Increasing the adjusted gross income requirements for an individual taxpayer to elect to have any excess credits refunded and limiting refundability to systems that are not third-party financed systems; and

     (4)  Prohibiting a taxpayer from claiming a credit for a renewable energy technology system installed and placed in service on a residential property where the taxpayer has claimed a credit in prior taxable years.

     SECTION 2.  Section 235-12.5, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsections (a) through (c) to read:

     "(a)  Each individual or corporate taxpayer that files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax.  The tax credit may be claimed for every eligible renewable energy technology system that is installed and placed in service in the State by a taxpayer during the taxable year.  No taxpayer may claim a tax credit under this section for a solar energy system with the primary purpose other than using energy from the sun to heat water for household use that is installed and placed in service on a single-family residential property unless the taxpayer's adjusted gross income is $175,000 or less if filing as an individual, $262,500 or less if filing as a head of household, or $350,000 or less if filing jointly; provided that this income restriction shall only apply to systems that are not third-party financed systems.  The tax credit may be claimed as follows:

     (1)  For each solar energy system:  thirty-five per cent of the actual cost or the cap amount determined in subsection (b); provided that:

          (A)  For taxable years beginning after December 31, 2019, and except as provided in subparagraphs (B) and (C), no tax credit may be claimed for a solar energy system that is five megawatts in total output capacity or larger and requires a power purchase agreement approved by the public utilities commission;

          (B)  A solar energy system that is five megawatts in total output capacity or larger, installed and placed in service pursuant to a power purchase agreement approved or pending approval by a decision and order by the public utilities commission prior to December 31, 2019, shall continue to receive a tax credit equal to thirty‑five per cent of the actual cost, or $500,000 per solar energy system that has a total output capacity of at least one thousand kilowatts per system of direct current, whichever is less; and

          (C)  For each solar energy system integrated with a pumped hydroelectric energy storage system, the tax credit may be claimed for thirty-five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less; provided that applicable project approval filings have been made to the public utilities commission by December 31, 2021; or

     (2)  For each wind-powered energy system:  twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;

provided further that multiple owners of a single system shall be entitled to a single tax credit; [and] provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service in the State by the entity.  The cost upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined pursuant to administrative rule.

     (b)  The amount of credit allowed for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined as follows:

     (1)  If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

          (A)  $2,250 per system for single-family residential property;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $250,000 per system for commercial property;

     (2)  For all other solar energy systems, the cap amounts shall be:

          (A)  [$5,000 per system for] For single-family residential property[;]:

               (i)  $5,000 per third-party financed system; or

              (ii)  $5,000 for a system that is not a third‑party financed system;

               provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property; and

     (3)  For all wind-powered energy systems, the cap amounts shall be:

          (A)  $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

          (B)  $200 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property.

     (c)  For the purposes of this section:

     "Actual cost" means costs related to the renewable energy technology systems under subsection (a), including accessories and installation, but not including the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system and costs for which another credit is claimed under this chapter.

     "Household use" means any use to which heated water is commonly put in a residential setting, including commercial application of those uses.

     "Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as solar or wind energy, into:

     (1)  A usable source of thermal or mechanical energy;

     (2)  Electricity; or

     (3)  Fuel.

     "Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts solar or wind energy to useful thermal or electrical energy for heating, cooling, or reducing the use of other types of energy that are dependent upon fossil fuel for their generation.

     "Third-party financed system" means a renewable energy technology system for which a tax credit under this section is claimed by a taxpayer who is not the owner of the property on which the system is installed and placed into service."

     2.  By amending subsections (h) and (i) to read:

     "(h)  Notwithstanding subsection (g), for any renewable energy technology system, 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 system is not a third-party financed system and the taxpayer's adjusted gross income is [$20,000] $40,000 or less (or [$40,000] $60,000 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; [and] provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     [A husband and wife] Spouses who do 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 system is installed and placed in service.  A separate election may be made for each separate system that generates a credit.  An election once made is irrevocable.

     (i)  No taxpayer shall be allowed a credit under this section for [the]:

     (1)  The portion of the renewable energy technology system required by section 196-6.5 that is installed and placed in service on any newly constructed single‑family residential property authorized by a building permit issued on or after January 1, 2010[.]; or

     (2)  Any renewable energy technology system that is installed and placed in service on a single-family residential property or multi-family residential property where the taxpayer has claimed a credit under this section in prior taxable years."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval; provided that:

     (1)  Section 2 shall apply to taxable years beginning after December 31, 2026; and

     (2)  On January 1, 2029, this Act shall be repealed, and section 235-12.5, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act.

Report Title:

Renewable Energy Technologies; Income Tax Credit; Income Restriction; Solar Energy Systems; Third-party Financed Systems

Description:

Amends the Renewable Energy Technologies Income Tax Credit by:  Limiting claims for certain solar energy systems that are not third-party financed systems and installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $175,000 or less if filing as an individual, $262,500 or less if filing as a head of household, or $350,000 or less if filing jointly; increasing the maximum adjusted gross income an individual taxpayer must be below in order to be eligible to have any excess credits refunded and limiting credit refundability to systems that are not third-party financed systems; and prohibiting a taxpayer from claiming a credit for a renewable energy technology system installed and placed in service on a residential property where the taxpayer has claimed a credit in prior taxable years.  Applies to taxable years beginning after 12/31/2026.  Sunsets 1/1/2029.  (SD2)

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

A BILL FOR AN ACT

RELATING TO RENEWABLE ENERGY.

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

     SECTION 1.  The legislature finds that the State's environmental commitments and goals necessitate the swift adoption of renewable energy.  Renewable energy systems that capture solar and wind energy and convert it to thermal or mechanical energy, electricity, and fuel will be key in the State's transition away from fossil fuels.  The legislature further finds that the renewable energy technologies income tax credit could be adjusted to better support low- and moderate- income families by limiting the credit to taxpayers in those income brackets.  The legislature additionally finds that these changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, helping to protect hundreds of jobs in the State's energy industry.

     Accordingly, the purpose of this Act is to amend the renewable energy technologies income tax credit by:

     (1)  Limiting claims for certain solar energy systems installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $250,000 or less if filing as an individual or $350,000 or less if filing jointly;

     (2)  Removing certain cap amounts for solar energy systems that are not third-party financed systems; and

     (3)  Increasing the adjusted gross income requirements for an individual taxpayer to elect to have any excess credits refunded and limiting refundability to systems that are not third-party financed systems.

     SECTION 2.  Section 235-12.5, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsections (a) through (c) to read:

     "(a)  Each individual or corporate taxpayer that files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax.  The tax credit may be claimed for every eligible renewable energy technology system that is installed and placed in service in the State by a taxpayer during the taxable year.  No taxpayer may claim a tax credit under this section for a solar energy system with the primary purpose other than using energy from the sun to heat water for household use that is installed and placed in service on a single-family residential property unless the taxpayer's adjusted gross income is $250,000 or less if filing as an individual or $350,000 or less if filing jointly; provided that this income restriction shall only apply to systems that are not third-party financed systems.  The tax credit may be claimed as follows:

     (1)  For each solar energy system:  thirty-five per cent of the actual cost or the cap amount determined in subsection (b); provided that:

          (A)  For taxable years beginning after December 31, 2019, and except as provided in subparagraphs (B) and (C), no tax credit may be claimed for a solar energy system that is five megawatts in total output capacity or larger and requires a power purchase agreement approved by the public utilities commission;

          (B)  A solar energy system that is five megawatts in total output capacity or larger, installed and placed in service pursuant to a power purchase agreement approved or pending approval by a decision and order by the public utilities commission prior to December 31, 2019, shall continue to receive a tax credit equal to thirty-five per cent of the actual cost, or $500,000 per solar energy system that has a total output capacity of at least one thousand kilowatts per system of direct current, whichever is less; and

          (C)  For each solar energy system integrated with a pumped hydroelectric energy storage system, the tax credit may be claimed for thirty-five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less; provided that applicable project approval filings have been made to the public utilities commission by December 31, 2021; or

     (2)  For each wind-powered energy system:  twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;

provided further that multiple owners of a single system shall be entitled to a single tax credit; [and] provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service in the State by the entity.  The cost upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined pursuant to administrative rule.

     (b)  The amount of credit allowed for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined as follows:

     (1)  If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

          (A)  $2,250 per system for single-family residential property;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $250,000 per system for commercial property;

     (2)  For all other solar energy systems, the cap amounts shall be:

          (A)  [$5,000 per system for] For single-family residential property[;]:

               (i)  $5,000 per third-party financed system; or

              (ii)  No cap for a system that is not a third-party financed system;

               provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property; and

     (3)  For all wind-powered energy systems, the cap amounts shall be:

          (A)  $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

          (B)  $200 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property.

     (c)  For the purposes of this section:

     "Actual cost" means costs related to the renewable energy technology systems under subsection (a), including accessories and installation, but not including the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system and costs for which another credit is claimed under this chapter.

     "Household use" means any use to which heated water is commonly put in a residential setting, including commercial application of those uses.

     "Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as solar or wind energy, into:

     (1)  A usable source of thermal or mechanical energy;

     (2)  Electricity; or

     (3)  Fuel.

     "Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts solar or wind energy to useful thermal or electrical energy for heating, cooling, or reducing the use of other types of energy that are dependent upon fossil fuel for their generation.

     "Third-party financed system" means a renewable energy technology system for which a tax credit under this section is claimed by a taxpayer who is not the owner of the property on which the system is installed and placed into service."

     2.  By amending subsection (h) to read:

     "(h)  Notwithstanding subsection (g), for any renewable energy technology system, 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 system is not a third-party financed system and the taxpayer's adjusted gross income is [$20,000] $40,000 or less (or [$40,000] $60,000 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; [and] provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     [A husband and wife] Spouses who do 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 system is installed and placed in service.  A separate election may be made for each separate system that generates a credit.  An election once made is irrevocable."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000, and shall apply to taxable years beginning after December 31, 2026.

Report Title:

Renewable Energy Technologies; Income Tax Credit; Income Restriction; Solar Energy Systems; Third-party Financed Systems

Description:

Amends the Renewable Energy Technologies Income Tax Credit by:  beginning 12/31/26, limiting claims for certain solar energy systems that are not third-party financed systems and installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $250,000 or less if filing as an individual or $350,000 or less if filing jointly; removing certain cap amounts for solar energy systems that are not third-party financed systems; and increasing the maximum adjusted gross income an individual taxpayer must be below in order to be eligible to have any excess credits refunded and limiting credit refundability to systems that are not third-party financed systems.  Effective 7/1/3000.  (SD1)

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

A BILL FOR AN ACT

RELATING TO RENEWABLE ENERGY.

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

     SECTION 1.  The legislature finds that the State's environmental commitments and goals necessitate the swift adoption of renewable energy.  Renewable energy systems that capture solar and wind energy and convert it to thermal or mechanical energy, electricity, and fuel will be key in the State's transition away from fossil fuels.  The legislature further finds that the renewable energy technologies income tax credit could be adjusted to better support low- and moderate- income families by limiting the credit to taxpayers in those income brackets.  The legislature additionally finds that such changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, helping to protect hundreds of jobs in the State's energy industry.

     Accordingly, the purpose of this Act is to amend the renewable energy technologies income tax credit by:

     (1)  Limiting claims for certain solar energy systems installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $250,000 or less if filing as an individual or $350,000 or less if filing jointly;

     (2)  Removing certain cap amounts for solar energy systems that are not third-party financed systems; and

     (3)  Increasing the adjusted gross income requirements for an individual taxpayer to elect to have any excess credits refunded and limiting refundability to systems that are not third-party financed systems.

     SECTION 2.  Section 235-12.5, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsections (a) to (c) to read:

     "(a)  Each individual or corporate taxpayer that files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax.  The tax credit may be claimed for every eligible renewable energy technology system that is installed and placed in service in the State by a taxpayer during the taxable year.  No taxpayer may claim a tax credit under this section for a solar energy system with the primary purpose other than using energy from the sun to heat water for household use that is installed and placed in service on a single-family residential property unless the taxpayer's adjusted gross income is $250,000 or less if filing as an individual or $350,000 or less if filing jointly; provided that this income restriction shall only apply to systems that are not third-party financed systems.  The tax credit may be claimed as follows:

     (1)  For each solar energy system:  thirty-five per cent of the actual cost or the cap amount determined in subsection (b); provided that:

          (A)  For taxable years beginning after December 31, 2019, and except as provided in subparagraphs (B) and (C), no tax credit may be claimed for a solar energy system that is five megawatts in total output capacity or larger and requires a power purchase agreement approved by the public utilities commission;

          (B)  A solar energy system that is five megawatts in total output capacity or larger, installed and placed in service pursuant to a power purchase agreement approved or pending approval by a decision and order by the public utilities commission prior to December 31, 2019, shall continue to receive a tax credit equal to thirty-five per cent of the actual cost, or $500,000 per solar energy system that has a total output capacity of at least one thousand kilowatts per system of direct current, whichever is less; and

          (C)  For each solar energy system integrated with a pumped hydroelectric energy storage system, the tax credit may be claimed for thirty-five per cent of the actual cost or the cap amount determined in subsection (b), whichever is less; provided that applicable project approval filings have been made to the public utilities commission by December 31, 2021; or

     (2)  For each wind-powered energy system:  twenty per cent of the actual cost or the cap amount determined in subsection (b), whichever is less;

provided further that multiple owners of a single system shall be entitled to a single tax credit; and provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service in the State by the entity.  The cost upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined pursuant to administrative rule.

     (b)  The amount of credit allowed for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined as follows:

     (1)  If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

          (A)  $2,250 per system for single-family residential property;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $250,000 per system for commercial property;

     (2)  For all other solar energy systems, the cap amounts shall be:

         [(A)  $5,000 per system for] For single-family residential property[;]:

              (i)  $5,000 per third-party financed system; or

             (ii)  No cap for a system that is not a third-party financed system;

              provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property; and

     (3)  For all wind-powered energy systems, the cap amounts shall be:

          (A)  $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

          (B)  $200 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property.

     (c)  For the purposes of this section:

     "Actual cost" means costs related to the renewable energy technology systems under subsection (a), including accessories and installation, but not including the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system and costs for which another credit is claimed under this chapter.

     "Household use" means any use to which heated water is commonly put in a residential setting, including commercial application of those uses.

     "Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as solar or wind energy, into:

     (1)  A usable source of thermal or mechanical energy;

     (2)  Electricity; or

     (3)  Fuel.

     "Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts solar or wind energy to useful thermal or electrical energy for heating, cooling, or reducing the use of other types of energy that are dependent upon fossil fuel for their generation.

     "Third-party financed system" means a renewable energy technology system for which a tax credit under this section is claimed by a taxpayer who is not the owner of the property on which the system is installed and placed into service."

     2.  By amending subsection (h) to read:

     "(h)  Notwithstanding subsection (g), for any renewable energy technology system, 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 system is not a third-party financed system and the taxpayer's adjusted gross income is [$20,000] $40,000 or less (or [$40,000] $60,000 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; [and] provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     [A husband and wife] Spouses who do 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 system is installed and placed in service.  A separate election may be made for each separate system that generates a credit.  An election once made is irrevocable."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000, and shall apply to taxable years beginning after December 31, 2026.

Report Title:

Renewable Energy Technologies; Income Tax Credit; Income Restriction; Solar Energy Systems; Third-party Financed Systems

Description:

Amends the renewable energy technologies income tax credit by:  beginning 12/31/26, limiting claims for certain solar energy systems that are not third-party financed systems and installed and placed in service on a single-family residential property to taxpayers with an adjusted gross income of $250,000 or less if filing as an individual or $350,000 or less if filing jointly; removing certain cap amounts for solar energy systems that are not third-party financed systems; and increasing the maximum adjusted gross income an individual taxpayer must be below in order to be eligible to have any excess credits refunded and limiting credit refundability to systems that are not third-party financed systems.  Effective 7/1/3000.  (HD1)

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

A BILL FOR AN ACT

relating to renewable energy.

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

     SECTION 1.  The legislature finds that the State's environmental commitments and goals necessitate the swift adoption of renewable energy.  Renewable energy systems that capture solar and wind energy and convert it to thermal or mechanical energy, electricity, and fuel will be key in the State's transition away from fossil fuels.  The legislature further finds that the renewable energy technologies income tax credit could be adjusted to better support low- and moderate- income families by limiting the credit to taxpayers in those income brackets.  The legislature additionally finds that such changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, helping to protect hundreds of jobs in the State's energy industry.

     Accordingly, the purpose of this Act is to amend the renewable energy technologies income tax credit by:

     (1)  Beginning December 31, 2026, prohibiting individually or jointly filing taxpayers with an adjusted gross income of $250,000 or greater from claiming a credit for certain solar energy systems installed and placed in service on a single-family residential property, with certain exemptions;

     (2)  Removing certain cap amounts for solar energy systems; and

     (3)  Increasing the adjusted gross income requirements for an individual taxpayer to elect to have any excess of the credit over payments due refunded.

     SECTION 2.  Section 235-12.5, Hawaii Revised Statutes, is amended to read as follows:

     "§235-12.5  Renewable energy technologies; income tax credit.  (a)  Each individual or corporate taxpayer that files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax.  The tax credit may be claimed for every eligible renewable energy technology system that is installed and placed in service in the State by a taxpayer during the taxable year.  The tax credit may be claimed as follows:

     (1)  For each solar energy system:  thirty-five per cent of the actual cost or the cap amount determined in subsection [(b);] (c); provided that:

          (A)  For taxable years beginning after December 31, 2019, and except as provided in subparagraphs (B) and (C), no tax credit may be claimed for a solar energy system that is five megawatts in total output capacity or larger and requires a power purchase agreement approved by the public utilities commission;

          (B)  A solar energy system that is five megawatts in total output capacity or larger, installed and placed in service pursuant to a power purchase agreement approved or pending approval by a decision and order by the public utilities commission prior to December 31, 2019, shall continue to receive a tax credit equal to thirty-five per cent of the actual cost, or $500,000 per solar energy system that has a total output capacity of at least one thousand kilowatts per system of direct current, whichever is less; and

          (C)  For each solar energy system integrated with a pumped hydroelectric energy storage system, the tax credit may be claimed for thirty-five per cent of the actual cost or the cap amount determined in subsection [(b),] (c), whichever is less; provided that applicable project approval filings have been made to the public utilities commission by December 31, 2021; or

     (2)  For each wind-powered energy system:  twenty per cent of the actual cost or the cap amount determined in subsection [(b),] (c), whichever is less;

provided further that multiple owners of a single system shall be entitled to a single tax credit; and provided further that the tax credit shall be apportioned between the owners in proportion to their contribution to the cost of the system.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible renewable energy technology system that is installed and placed in service in the State by the entity.  The cost upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined pursuant to administrative rule.

     (b)  For taxable years beginning after December 31, 2026, no taxpayer may claim a tax credit under this section for a solar energy system that is installed and placed in service on a single-family residential property unless the taxpayer's adjusted gross income is $250,000 or less if filing as an individual or jointly; provided that this income restriction shall not apply to a third party financing a solar energy system for single-family residential property; provided further that this income restriction shall not apply to any energy systems with the primary purpose of using energy from the sun to heat water for household use.

     [(b)] (c)  The amount of credit allowed for each eligible renewable energy technology system shall not exceed the applicable cap amount, which is determined as follows:

     (1)  If the primary purpose of the solar energy system is to use energy from the sun to heat water for household use, then the cap amounts shall be:

          (A)  $2,250 per system for single-family residential property;

          (B)  $350 per unit per system for multi-family residential property; and

          (C)  $250,000 per system for commercial property;

     (2)  For all other solar energy systems, the cap amounts shall be:

         [(A)  $5,000 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;

         (B)]  (A)  $350 per unit per system for multi-family residential property; and

        [(C)]  (B)  $500,000 per system for commercial property; and

     (3)  For all wind-powered energy systems, the cap amounts shall be:

          (A)  $1,500 per system for single-family residential property; provided that if all or a portion of the system is used to fulfill the substitute renewable energy technology requirement pursuant to section 196-6.5(a)(3), the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;

          (B)  $200 per unit per system for multi-family residential property; and

          (C)  $500,000 per system for commercial property.

     [(c)] (d)  For the purposes of this section:

     "Actual cost" means costs related to the renewable energy technology systems under subsection (a), including accessories and installation, but not including the cost of consumer incentive premiums unrelated to the operation of the system or offered with the sale of the system and costs for which another credit is claimed under this chapter.

     "Household use" means any use to which heated water is commonly put in a residential setting, including commercial application of those uses.

     "Renewable energy technology system" means a new system that captures and converts a renewable source of energy, such as solar or wind energy, into:

     (1)  A usable source of thermal or mechanical energy;

     (2)  Electricity; or

     (3)  Fuel.

     "Solar or wind energy system" means any identifiable facility, equipment, apparatus, or the like that converts solar or wind energy to useful thermal or electrical energy for heating, cooling, or reducing the use of other types of energy that are dependent upon fossil fuel for their generation.

     [(d)] (e)  For taxable years beginning after December 31, 2005, the dollar amount of any utility rebate shall be deducted from the cost of the qualifying system and its installation before applying the state tax credit.

     [(e)] (f)  The director of taxation shall prepare any forms that may be necessary to claim a tax credit under this section, including forms identifying the technology type of each tax credit claimed under this section, whether for solar or wind.  The director may also require the taxpayer to furnish reasonable information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

     [(f)] (g)  If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted, unless otherwise elected by the taxpayer pursuant to subsection [(g)] (h) or [(h).] (i).  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 this subsection shall constitute a waiver of the right to claim the credit.

     [(g)] (h)  For solar energy systems, 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; and 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 system is installed and placed in service.  A separate election may be made for each separate system that generates a credit.  An election once made is irrevocable.

     [(h)] (i)  Notwithstanding subsection [(g),] (h), for any renewable energy technology system, 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] $40,000 or less (or [$40,000] $60,000 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; [and] provided further that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

     A husband and wife who do 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 system is installed and placed in service.  A separate election may be made for each separate system that generates a credit.  An election once made is irrevocable.

     [(i)] (j)  No taxpayer shall be allowed a credit under this section for the portion of the renewable energy technology system required by section 196-6.5 that is installed and placed in service on any newly constructed single-family residential property authorized by a building permit issued on or after January 1, 2010.

     [(j)] (k)  To the extent feasible, using existing resources to assist the energy-efficiency policy review and evaluation, the department shall assist with data collection on the following for each taxable year:

     (1)  The number of renewable energy technology systems that have qualified for a tax credit during the calendar year by:

          (A)  Technology type; and

          (B)  Taxpayer type (corporate and individual); and

     (2)  The total cost of the tax credit to the State during the taxable year by:

          (A)  Technology type; and

          (B)  Taxpayer type.

     [(k)] (l)  This section shall apply to eligible renewable energy technology systems that are installed and placed in service on or after July 1, 2009."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2026.

Report Title:

Renewable Energy Technologies; Income Tax Credit; Income Restriction; Solar Energy Systems

Description:

Amends the renewable energy technologies income tax credit by beginning 12/31/26, prohibiting individually or jointly filing taxpayers with an adjusted gross income of $250,000 or greater from claiming a credit for certain solar energy systems installed and placed in service on a single-family residential property, with certain exemptions; removing certain cap amounts for solar energy systems; and increasing the adjusted gross income requirements for an individual taxpayer to elect to have any excess credits refunded.

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

STAND. COM. REP. NO.  937-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 2241

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 2241, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO RENEWABLE ENERGY,"

begs leave to report as follows:

     The purpose of this measure is to amend the Renewable Energy Technologies Income Tax Credit by:

     (1)  Beginning December 31, 2026, limiting claims for certain solar energy systems that are not third-party financed systems and installed and placed in service on a single-family residential property to taxpayers below certain income thresholds;

     (2)  Removing certain credit cap amounts for solar energy systems that are not third-party financed systems; and

     (3)  Increasing the maximum adjusted gross income an individual taxpayer must be below in order to be eligible for refundable credits and limiting credit refundability to systems that are not third-party financed systems.

     Your Committee received testimony in support of this measure from the Department of Research and Development of the County of Hawaiʻi.  Your Committee received testimony in opposition to this measure from the Hawaii Solar Energy Association; ELCCO Inc.; PV Tech; Solaray Corporation; Alternate Energy Inc.; and eight individuals.  Your Committee received comments on this measure from the Department of Taxation; Hawaiʻi State Energy Office; and Tax Foundation of Hawaii.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2241, H.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  724-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 2241

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

     Your Committee on Energy & Environmental Protection, to which was referred H.B. No. 2241 entitled:

"A BILL FOR AN ACT RELATING TO RENEWABLE ENERGY,"

begs leave to report as follows:

     The purpose of this measure is to amend the Renewable Energy Technologies Income Tax Credit by:

     (1)  Beginning December 31, 2026, prohibiting single or joint filers with an adjusted gross income greater than $250,000 from claiming a credit for solar energy systems with the primary purpose other than using solar energy to heat water for household use that are installed and placed in service on a single-family residential property, with certain exemptions;

     (2)  Removing certain cap amounts for solar energy systems; and

     (3)  Increasing the maximum adjusted gross income that makes an individual taxpayer eligible to have any excess of the credit over payments due refunded.

     Your Committee received testimony in support of this measure from Climate Protectors Hawaiʻi and three individuals.  Your Committee received testimony in opposition to this measure from PV Tech.  Your Committee received comments on this measure from the Department of Taxation; Hawaiʻi State Energy Office; Tax Foundation of Hawaii; Sunrun; Inception Financial LLC; Photonworks Engineering; Green Power Projects LLC; Centinel Public Partnerships LLC; The Solaray Corporation dba Inter-Island Solar Supply; Hawaii Solar Energy Association; Alternate Energy Inc; and three individuals.

     Your Committee finds that the State's environmental commitments and goals necessitate the swift adoption of renewable energy and that financial incentives encourage clean energy adoption.  Your Committee further finds that the Renewable Energy Technologies Income Tax Credit could be adjusted to better support low- and moderate- income families by limiting the credit to taxpayers in those income brackets.  Your Committee further finds that these changes would promote more equitable access to clean energy and help offset federal actions to limit tax incentives for renewable energy.

     Your Committee has amended this measure by:

     (1)  Changing the income restriction for claiming credits for solar energy systems with the primary purpose other than using solar energy to heat water for household use to $250,000 or less if filing as an individual or $350,000 or less if filing jointly and limiting the restriction to systems that are not third-party financed systems;

     (2)  Defining "third-party financed system" as a renewable energy technology system for which the tax credit is claimed by a taxpayer who is not the owner of the property on which the system is installed and placed into service;

     (3)  Limiting the removal of certain cap amounts to non- third-party financed systems;

     (4)  Allowing only non-third-party financed systems to be eligible for refundable credits;

     (5)  Changing the effective date to July 1, 3000; and

     (6)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Energy & Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2241, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2241, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Energy & Environmental Protection,