HB 976: RELATING TO RENEWABLE FUEL.

A BILL FOR AN ACT

RELATING TO RENEWABLE FUEL.

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

     SECTION 1.  The legislature finds that Hawaii is at a critical crossroad in the State's 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 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 encouraging 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 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 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 seventeen million barrels (seven hundred fourteen million gallons) per year between civilian and military consumption.  To provide greater energy security for the State, the legislature finds that 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 sustainable aviation fuel offers multiple benefits, the cost of its production is several times that of conventional fuels.  Thus, creating a regulatory framework to support local sustainable aviation fuel production is critical.  As with other states, Hawaii must look at policies that will work in tandem with federal policies to make sustainable aviation fuel production sustainable within the State.

     Accordingly, the purpose of this Act is to advance Hawaii's commitment to reducing greenhouse gas emissions by amending the renewable fuels production tax credit by:

     (1)  Increasing the tax credit rate;

     (2)  Specifying that the credit may be claimed for fuels that meet certain lifecycle greenhouse gas emissions and product transportation emissions thresholds;

     (3)  Adding credit values for low lifecycle emissions renewable fuels and sustainable aviation fuels produced;

     (4)  Allowing a taxpayer who previously claimed a credit to claim another one for taxable years beginning after December 31, 2024;

     (5)  Amending the credit period to be for a maximum period of ten consecutive years, beginning from the effective date of this Act; and

     (6)  Amending the required information in the certified statement for the credit.

     SECTION 2.  Section 235-110.32, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (a) to read:

     "(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 sold for distribution in the State; provided that [the]:

     (1)  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] that 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[.];

     (2)  The tax credit shall only be claimed for fuels that meet the lifecycle greenhouse gas emissions reduction threshold and product transportation emissions threshold;

     (3)  There shall be an additional credit value of $1 per diesel gallon equivalent for low lifecycle emissions renewable fuels; and

     (4)  There shall be an additional credit value equal to $1 per gallon if the renewable fuel is sustainable aviation fuel.

     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 a tax credit under this section before the effective date of this Act may claim another tax credit for taxable years beginning after December 31, 2024."

     2.  By amending subsections (c) and (d) to read:

     "(c)  No later than thirty 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 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)  Within thirty 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 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]."

     3.  By amending subsection (f) to read:

     "(f)  The total amount of tax credits allowed under this section shall not exceed $20,000,000 for all eligible taxpayers in any calendar year.  In the event that the credit claims under this section exceed [$20,000,000] the total amount allowed for all eligible taxpayers in any given calendar year, the [$20,000,000] total amount allowed shall be [divided between all] allocated to eligible taxpayers [for that year] 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.  No taxpayer shall be eligible for more than seventy-five per cent of the total amount allowed in any year.  The total aggregate amount of additional credit value for sustainable aviation fuel under subsection (a)(4) shall not exceed fifty per cent of the total aggregate amount of renewable fuels production tax credits allowed in any year.  To the extent that the limitations of this subsection reduce 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 limitations of this subsection."

     4.  By amending subsection (o) to read:

     "(o)  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.] the effective date of this Act.

     "Feedstock transportation emissions threshold" means the carbon intensity contribution associated with the oceangoing transportation of the feedstock from the feedstock producer to the renewable fuel producer is less than      grams per megajoule as determined by the lifecycle greenhouse gas emissions analysis.

     "Lifecycle greenhouse gas emissions" means the aggregate attributional core lifecycle greenhouse gas emissions values utilizing one of the following:

     (1)  The most recent version of the United States Department of Energy's Argonne National Laboratory's greenhouse gases, regulated emissions, and energy use in technologies model, including agricultural practices and carbon capture and sequestration; or

     (2)  Another lifecycle methodology approved by the Hawaii state energy office.

     "Lifecycle greenhouse gas emissions reduction threshold" means a reduction in lifecycle greenhouse gas emissions of fifty per cent compared to the fossil fuel for which the renewable fuel is most likely to replace.

     "Low lifecycle emissions renewable fuels" means renewable fuel that meets the lifecycle greenhouse gas emissions reduction threshold, product transportation emissions threshold, and feedstock transportation emissions threshold.

     "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

     "Product transportation emissions threshold" means the carbon intensity contribution associated with the oceangoing transportation of the finished fuel from the renewable fuel producer to the final distribution storage facility is less than      grams per megajoule as determined by the lifecycle greenhouse gas emissions analysis.

     "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, jatropha, palm, soybean, and sunflower;

     (4)  Sugar and starch crops, including but not limited to 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 feedstock;

   [(10)] (11)  Animal residues and wastes[,];

    (12)  Biogas or renewable natural gas;

    (13)  Gaseous carbon dioxide; and

    (14)  Renewable or zero carbon energy resources,

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 lifecycle greenhouse gas emissions reduction threshold; and

    [(2)] (3)  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 naphtha;

          (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 liquid fuel that consists of synthesized hydrocarbons and meets the requirements of the American Society for Testing and Materials International Standard D7566 or D1655."

     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, 2024.

Report Title:

Renewable Fuels Production Tax Credit

Description:

Amends the renewable fuels production tax credit by:  increasing the tax credit rate; specifying that the credit may be claimed for fuels that meet certain lifecycle greenhouse gas emissions and product transportation emissions thresholds; adding credit values for low lifecycle emissions renewable fuels and sustainable aviation fuels produced; allowing a taxpayer who previously claimed a credit to claim another credit for taxable years beginning after 12/31/2024; amending the credit period to be for a maximum period of ten consecutive years beginning from the effective date of this Act; and amending the required information in the certified statement.  Effective 7/1/3000.  (HD2)

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 FUEL.

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

     SECTION 1.  The legislature finds that Hawaii is at a critical crossroad in the State's 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 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 encouraging 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 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 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 seventeen million barrels (seven hundred fourteen million gallons) per year between civilian and military consumption.  To provide greater energy security for the State, the legislature finds that 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 sustainable aviation fuel offers multiple benefits, the cost of its production is several times that of conventional fuels.  Thus, creating a regulatory framework to support local sustainable aviation fuel production is critical.  As with other states, Hawaii must look at policies that will work in tandem with federal policies to make sustainable aviation fuel 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 sustainable aviation fuel import income tax credit; and

     (2)  Amending the renewable fuels production tax credit by:

          (A)  Increasing the tax credit rate;

          (B)  Repealing the cap on claimable credits per taxpayer per taxable year and increasing the cap on total claimable credits for all eligible taxpayers per calendar year;

          (C)  Specifying that the credit may be claimed for fuels with lifecycle greenhouse gas emissions and product transportation emissions below certain thresholds;

          (D)  Adding credit values for low lifecycle emissions renewable fuels and sustainable aviation fuels produced;

          (E)  Allowing a taxpayer who previously claimed a credit to claim another one for taxable years beginning after December 31, 2024;

          (F)  Amending the credit period to be for a maximum period of ten consecutive years, beginning from the effective date of this Act; and

          (G)  Amending the required information in the certified statement for the credit.

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

     "§235-     Sustainable aviation fuel import tax credit.  (a)  There shall be allowed to each taxpayer subject to the taxes imposed by this chapter a sustainable aviation fuel import income 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.

     For each taxpayer importing sustainable aviation fuel into the State, the amount of the credit shall be $1 per gallon of sustainable aviation fuel sold for distribution in the State; provided that the tax credit shall only be claimed for sustainable aviation fuel that meets the lifecycle greenhouse gas emissions reduction threshold.

     (b)  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)  No later than thirty 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 and quantity of sustainable aviation fuel imported and sold during the previous calendar year;

     (2)  The feedstock used to produce the imported sustainable aviation 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 and location of all renewable fuel facilities within and outside the State;

     (5)  The number of full-time and part-time employees of each renewable fuel facility within and outside the State and those employees' states of residency, totaled per 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 thirty 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:

          (A)  Amount of sustainable aviation fuel imported and sold;

          (B)  Amount of credit that the taxpayer is entitled to claim for the previous calendar year, inclusive of any carryover amount;

          (C)  Amount of credit that the taxpayer is entitled to claim for any subsequent calendar year; and

          (D)  Cumulative amount of the tax credit during the previous calendar year.

     (e)  The taxpayer shall file the certificate issued under subsection (d)(2) 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 for all eligible taxpayers shall not exceed:

     (1)  $           for calendar year 2025;

     (2)  $           for calendar year 2026;

     (3)  $           for calendar year 2027;

     (4)  $           for calendar year 2028; and

     (5)  $           for calendar years 2029 to 2036.

In the event that the credits claimed under this section exceed the total credits allowed for all eligible taxpayers in any given calendar year, the total credits allowed shall be allocated to each eligible taxpayer in proportion to the amount of each taxpayer's credits under this section for the calendar year.

     To the extent that the limitations of this subsection reduce 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 but shall not be carried over for any calendar year thereafter; provided that the carryover credit shall be subject to the limitations of this subsection.

     (g)  Notwithstanding any other law to the contrary, the information collected and compiled by the Hawaii state energy office under subsections (c) and (d) shall be available for public inspection and dissemination pursuant 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 net income tax liability in subsequent years until exhausted, unless otherwise elected by the taxpayer pursuant to subsection (i) or (j).  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) shall constitute a waiver of the right to claim the credit.

     (i)  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.

     (j)  Before the importation of any sustainable aviation fuel for the calendar year, the taxpayer shall provide written notice of the taxpayer's intention to begin importation of sustainable aviation fuel to the department of taxation and the Hawaii state energy office.  The written notice shall include information on the taxpayer, facility location, facility capacity, anticipated importation start date, and the taxpayer's contact information.  Notwithstanding any other law to the contrary, the written notice under this subsection, including taxpayer and facility information, shall be made available for public inspection and dissemination pursuant to chapter 92F.

     (k)  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 importation start date and expected amount of sustainable aviation fuel to be imported for the next twelve months.  Notwithstanding any other law to the contrary, the written notice described in this subsection shall be made available for public inspection and dissemination pursuant to chapter 92F.

     (l)  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 sustainable aviation fuel.  The report shall include:

     (1)  The number and location of sustainable fuel facilities in the State and outside the State that have claimed a credit under this section;

     (2)  The total number of gallons of sustainable aviation fuel imported and sold during the previous calendar year; and

     (3)  The projected number of gallons of sustainable aviation fuel that will be imported for the succeeding year.

     (m)  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.

     (n)  As used in this section:

     "Lifecycle greenhouse gas emissions" has the same meaning as in section 235-110.32.

     "Sustainable aviation fuel" has the same meaning as in section 235-110.32."

     SECTION 3.  Section 235-110.32, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (a) to read:

     "(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 sold for distribution in the State; provided that [the]:

     (1)  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] that 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[.];

     (2)  The tax credit shall only be claimed for fuels that meet the lifecycle greenhouse gas emissions reduction threshold and product transportation emissions threshold;

     (3)  There shall be an additional credit value of $1 per diesel gallon equivalent for low lifecycle emissions renewable fuels; and

     (4)  There shall be an additional credit value equal to $1 per gallon if the renewable fuel is sustainable aviation fuel.

     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 a tax credit under this section before the effective date of this Act may claim another tax credit for taxable years beginning after December 31, 2024."

     2.  By amending subsections (c) and (d) to read:

     "(c)  No later than thirty 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 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)  Within thirty 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 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]."

     3.  By amending subsection (f) to read:

     "(f)  The total amount of tax credits allowed under this section for all eligible taxpayers in any calendar year shall not exceed [$20,000,000 for all eligible taxpayers in any calendar year.]:

     (1)  $           for calendar year 2025;

     (2)  $           for calendar year 2026;

     (3)  $           for calendar year 2027;

     (4)  $           for calendar year 2028; and

     (5)  $           for calendar year 2029 and thereafter.

In the event that the credit claims under this section exceed [$20,000,000] the total amount allowed for all eligible taxpayers in any given calendar year, the [$20,000,000] total amount allowed shall be [divided between all] allocated to  eligible taxpayers [for that year] 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.  No taxpayer shall be eligible for more than seventy-five per cent of the total amount allowed in any year.  The total aggregate amount of additional credit value for sustainable aviation fuel under subsection (a)(4) shall not exceed fifty per cent of the total aggregate amount of renewable fuels production tax credits allowed in any year.  To the extent that the limitations of this subsection reduce 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 limitations of this subsection."

     4.  By amending subsection (o) to read:

     "(o)  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.] the effective date of this Act.

     "Feedstock transportation emissions threshold" means the carbon intensity contribution associated with the oceangoing transportation of the feedstock from the feedstock producer to the renewable fuel producer is less than      grams per megajoule as determined by the lifecycle greenhouse gas emissions analysis.

     "Lifecycle greenhouse gas emissions" means the aggregate attributional core lifecycle greenhouse gas emissions values utilizing one of the following:

     (1)  The most recent version of the United States Department of Energy's Argonne National Laboratory's greenhouse gases, regulated emissions, and energy use in technologies model, including agricultural practices and carbon capture and sequestration; or

     (2)  Another lifecycle methodology approved by the Hawaii state energy office.

     "Lifecycle greenhouse gas emissions reduction threshold" means a reduction in lifecycle greenhouse gas emissions of fifty per cent compared to the fossil fuel for which the renewable fuel is most likely to replace.

     "Low lifecycle emissions renewable fuels" means renewable fuel that meets the lifecycle greenhouse gas emissions reduction threshold, product transportation emissions threshold, and feedstock transportation emissions threshold.

     "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

     "Product transportation emissions threshold" means the carbon intensity contribution associated with the oceangoing transportation of the finished fuel from the renewable fuel producer to the final distribution storage facility is less than      grams per megajoule as determined by the lifecycle greenhouse gas emissions analysis.

     "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, jatropha, palm, soybean, and sunflower;

     (4)  Sugar and starch crops, including but not limited to 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 feedstock; 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 naphtha;

          (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 liquid fuel that:

     (1)  Consists of synthesized hydrocarbons and meets the requirements of the American Society for Testing and Materials International Standard D7566 or D1655; and

     (2)  Is derived from biomass resources, waste streams, renewable or zero carbon energy sources, or gaseous carbon oxides."

     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, 3000, and shall apply to taxable years beginning after December 31, 2024; provided that section 2 shall be repealed on January 1, 2036.

Report Title:

Sustainable Aviation Fuel Import Tax Credit; Renewable Fuels Production Tax Credit

Description:

Establishes a sustainable aviation fuel import income tax credit until 1/1/2036.  Amends the renewable fuels production tax credit by:  increasing the tax credit rate; repealing the cap on claimable credits per taxpayer per taxable year and increasing the cap on total claimable credits for all eligible taxpayers per calendar year; specifying that the credit may be claimed for fuels with lifecycle greenhouse gas emissions and product transportation emissions below certain thresholds; adding credit values for low lifecycle emissions renewable fuels and sustainable aviation fuels produced; allowing a taxpayer who previously claimed a credit to claim another one for taxable years beginning after 12/31/2024; amending the credit period to be for a maximum period of ten consecutive years beginning from the effective date of this Act; and amending the required information in the certified statement.  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 fuel.

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

     SECTION 1.  The legislature finds that Hawaii is at a critical crossroad in the State's 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 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 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 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 seventeen million barrels (seven hundred fourteen million gallons) per year between civilian and military consumption.  To provide greater energy security for the State, the legislature finds that 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 sustainable aviation fuel offers multiple benefits, the cost of its production is several times that of conventional fuels.  Thus, creating a regulatory framework to support local sustainable aviation fuel production is critical.  As with other states, Hawaii must look at policies that will work in tandem with federal policies to make sustainable aviation fuel 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 the sustainable aviation fuel import tax credit;

     (2)  Increasing the renewable fuels production tax credit amount;

     (3)  Repealing the:

          (A)  Cap amount of claimable renewable fuels production tax credit;

          (B)  Requirement that the tax credit be claimed for fuels with lifecycle emissions below fossil fuels; and

          (C)  Prohibition on claiming other tax credits for the cost incurred to produce renewable fuels;

     (4)  Specifying that the renewable fuels production tax credit can only be claimed for fuels that meet the certain thresholds;

     (5)  Adding an additional renewable fuels production tax credit value;

     (6)  Clarifying that a taxpayer who previously claimed a renewable fuels production tax credit may claim another one for taxable years beginning after December 31, 2024;

     (7)  Clarifying and expanding required information in the certified statement for the renewable fuels production tax credit; and

     (8)  Repealing the requirement that the Hawaii state energy office 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.

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

     "§235-     Sustainable aviation fuel import tax credit.  (a)  There shall be allowed to each taxpayer subject to the taxes imposed by this chapter a sustainable aviation fuel income 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.

     For each taxpayer importing sustainable aviation fuel into the State, the amount of the credit shall be $1 per gallon of sustainable aviation fuel sold for distribution in the State; provided that the tax credit shall only be claimed for sustainable aviation fuel that meets the lifecycle greenhouse gas emissions reduction threshold.

     (b)  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)  No later than thirty 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 and quantity of sustainable aviation fuel imported and sold during the previous calendar year;

     (2)  The feedstock used to produce the imported sustainable aviation 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 and 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 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 thirty 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:

          (A)  Amount of sustainable aviation fuel imported and sold;

          (B)  Amount of credit that the taxpayer is entitled to claim for the previous calendar year, inclusive of any carryover amount;

          (C)  Amount of credit that the taxpayer is entitled to claim for any subsequent calendar year; and

          (D)  Cumulative amount of the tax credit during the previous calendar year.

     (e)  The taxpayer shall file the certificate issued under subsection (d)(2) 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 for all eligible taxpayers shall not exceed:

     (1)  $5,000,000 for calendar year 2025;

     (2)  $10,000,000 for calendar year 2026;

     (3)  $20,000,000 for calendar year 2027;

     (4)  $30,000,000 for calendar year 2028; and

     (5)  $50,000,000 for calendar years 2029 to 2036.

In the event that the credit claims under this section exceed the total credits allowed for all eligible taxpayers in any given calendar year, the total credits allowed shall be allocated proportionally to each eligible taxpayer in proportion to the amount of such taxpayer's credits under this section for the calendar year.

     To the extent that the limitations of this subsection reduce 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 but shall not be carried over for any calendar year thereafter; provided that the carryover credit shall subject to the limitations of this subsection.

     (g)  Notwithstanding any other law to the contrary, the information collected and compiled by the Hawaii state energy office under subsections (c) and (d) shall be available for public inspection and dissemination pursuant 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 net income tax liability in subsequent years until exhausted, unless otherwise elected by the taxpayer pursuant to subsection (i) or (j).  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) shall constitute a waiver of the right to claim the credit.

     (i)  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.

     (j)  Notwithstanding subsection (i), 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, if filing a tax return as married filing jointly, $40,000 or less;

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 is irrevocable.

     No more than one taxpayer shall be allowed to claim a tax credit for the same purchase of eligible sustainable aviation fuel.

     (k)  Before the importation of any sustainable aviation fuel for the calendar year, the taxpayer shall provide written notice of the taxpayer's intention to begin importation of sustainable aviation fuel to the department of taxation and the Hawaii state energy office.  The written notice shall include information on the taxpayer, facility location, facility capacity, anticipated importation start date, and the taxpayer's contact information.  Notwithstanding any other law to the contrary, the written notice under this subsection, including taxpayer and facility information, shall be made available for public inspection and dissemination pursuant 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 importation start date and expected sustainable aviation fuel importation for the next twelve months.  Notwithstanding any other law to the contrary, the written notice described in this subsection shall be made available for public inspection and dissemination pursuant 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 sustainable aviation fuel.  The report shall include:

     (1)  The number and location of sustainable fuel facilities in the State and outside the State that have claimed a credit under this section;

     (2)  The total number gallons of sustainable aviation fuel imported and sold during the previous calendar year; and

     (3)  The projected number of gallons of sustainable aviation fuel 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)  As used in this section:

     "Lifecycle greenhouse gas emissions" has the same meaning as in section 235-110.32.

     "Sustainable aviation fuel" has the same meaning as in section 235-110.32."

     SECTION 3.  Section 235-110.32, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsection (a) to read:

     "(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 sold for distribution in the State; provided that [the]:

     (1)  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.]

     (2)  The tax credit shall only be claimed for fuels that meet the lifecycle greenhouse gas emissions reduction threshold and product transportation emissions threshold;

     (3)  There shall be an additional credit value of $1 per diesel gallon equivalent for low lifecycle emissions renewable fuels; and

     (4)  There shall be an additional credit value equal to $1 per gallon if the renewable fuel is sustainable aviation fuel.

     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 a tax credit under this section before the effective date of this Act may claim another tax credit for taxable years beginning after December 31, 2024."

     2.  By amending subsections (c) and (d) to read:

     "(c)  No later than thirty 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 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)  Within thirty 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 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]."

     3.  By amending subsection (f) to read:

     "(f)  The total amount of tax credits allowed under this section for all eligible taxpayers in any calendar year shall not exceed [$20,000,000 for all eligible taxpayers in any calendar year.]:

     (1)  $40,000,000 for calendar year 2025;

     (2)  $50,000,000 for calendar year 2026;

     (3)  $60,000,000 for calendar year 2027;

     (4)  $70,000,000 for calendar year 2028; and

     (5)  $80,000,000 for calendar year 2029 and thereafter.

In the event that the credit claims under this section exceed [$20,000,000] the total amount allowed for all eligible taxpayers in any given calendar year, the [$20,000,000] total amount allowed shall be [divided between all] allocated proportionally to eligible taxpayers [for that year] 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.  No taxpayer shall be eligible for more than seventy-five per cent of the total amount allowed in any year.  To the extent that the limitations of this subsection reduce 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 limitations of this subsection."

     4.  By amending subsection (o) to read:

     "(o)  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.

     "Feedstock transportation emissions threshold" means the carbon intensity contribution associated with the oceangoing transportation of the feedstock from the feedstock producer to the renewable fuel producer is less than      grams per megajoule as determined by the lifecycle greenhouse gas emissions analysis.

     "Lifecycle greenhouse gas emissions" means the aggregate attributional core lifecycle greenhouse gas emissions values utilizing one of the following:

     (1)  The most recent version of the United States Department of Energy's Argonne National Laboratory's greenhouse gases, regulated emissions, and energy use in technologies model, including agricultural practices and carbon capture and sequestration.

     (2)  Carbon offsetting and reduction scheme for international aviation; or

     (3)  Another lifecycle methodology approved by the Hawaii state energy office.

     "Lifecycle greenhouse gas emissions reduction threshold" means a reduction in lifecycle greenhouse gas emissions of fifty per cent compared to the fossil fuel for which the renewable fuel is most likely to replace.

     "Low lifecycle emissions renewable fuels" means renewable fuel that meets the lifecycle greenhouse gas emissions reduction threshold, product transportation emissions threshold, and feedstock transportation emissions threshold.

     "Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

     "Product transportation emissions threshold" means the carbon intensity contribution associated with the oceangoing transportation of the finished fuel from the renewable fuel producer to the final distribution storage facility is less than      grams per megajoule as determined by the lifecycle greenhouse gas emissions analysis.

     "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, jatropha, palm, soybean, and sunflower;

     (4)  Sugar and starch crops, including but not limited to 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 feedstock; 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 naphtha;

          (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 liquid fuel that:

     (1)  Consists of synthesized hydrocarbons and meets the requirements of the American Society for Testing and Materials International Standard D7566 or D1655; and

     (2)  Is derived from biomass resources, waste streams, renewable or zero carbon energy sources, or gaseous carbon oxides."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2024; provided that section 2 shall be repealed on January 1, 2036.

Report Title:

Sustainable Aviation Fuel Import Tax Credit; Renewable Fuels Production Tax Credit

Description:

Establishes the sustainable aviation fuel import tax credit.  Increases the renewable fuels production tax credit amount.  Repeals the:  (1) cap amount of claimable renewable fuels production tax credit; (2) requirement that the tax credit be claimed for fuels with lifecycle emissions below fossil fuels; and (3) prohibition on claiming other tax credits for the cost incurred to produce renewable fuels.  Specifies that the renewable fuels production tax credit can only be claimed for fuels that meet the certain thresholds.  Adds an additional tax credit value.  Clarifies that a taxpayer who previously claimed a renewable fuels production tax credit may claim another one for taxable years beginning after 12/31/2024.  Clarifies and expands required information in the certified statement for the tax credit.  Repeals the requirement that the Hawaii State Energy Office 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.

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.  654

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 976

      H.D. 2

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Economic Development & Technology, to which was referred H.B. No. 976, H.D. 1, entitled:

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

begs leave to report as follows:

     The purpose of this measure is to advance Hawaii's commitment to reducing greenhouse gas emissions by:

     (1)  Establishing a temporary Sustainable Aviation Fuel Import Income Tax Credit; and

     (2)  Amending the Renewable Fuels Production Tax Credit by:

          (A)  Increasing the tax credit rate;

          (B)  Repealing the cap on claimable credits per taxpayer per taxable year and increasing the cap on total claimable credits for all eligible taxpayers per calendar year;

          (C)  Specifying that the credit may be claimed for fuels that meet certain lifecycle greenhouse gas emissions and product transportation emissions;

          (D)  Adding credit values for low lifecycle emissions renewable fuels and sustainable aviation fuels produced;

          (E)  Allowing a taxpayer who previously claimed a credit to claim another credit for taxable years beginning after December 31, 2024;

          (F)  Amending the credit period to be for a maximum period of ten consecutive years, beginning from the effective date of this Act; and

          (G)  Amending the required information in the certified statement for the credit.

     Your Committee received testimony in support of this measure from the Department of Transportation; Coalition Earth; Pono Pacific; Hawaiʻi Renewable Fuels Coalition; Hawaiʻi Farm Bureau; Airlines for America; Biotechnology Innovation organization; Twelve Benefit Corporation; Par Hawaii; Aloha Carbon; Pacific Biodiesel; Japan Airlines; and Hawaiian Electric.  Your Committee received testimony in opposition to this measure from the Environmental Caucus of the Democratic Party of Hawaiʻi; Kauai Climate Action Coalition; Energy Justice Network; and numerous individuals.  Your Committee received comments on this measure from the Department of Taxation; Hawaii State Energy Office; Office of Planning and Sustainable Development; Tax Foundation of Hawaii; Simonpietri Enterprises; Hawaii Environmental Change Agents, Solid Waste Reduction Task Force; and one individual.

     Your Committee finds that the State is committed to reducing greenhouse gas emissions and transitioning to a decarbonized economy.  Your Committee further finds that increasing the use and production of renewable fuels will spur investment in the local economy and support job growth while providing substantial environmental benefits.

     Your Committee has amended this measure by:

     (1)  Removing the temporary Sustainable Aviation Fuel Import Income Tax Credit;

     (2)  Reinstating the $20,000,000 aggregate cap on Renewable Fuels Production Tax Credits claimable by all eligible taxpayers per taxable year and removing the incremental increases of this cap per calendar year;

     (3)  Including biogas or renewable natural gas, gaseous carbon dioxide, and renewable or zero carbon energy resources in the definition of "renewable feedstocks";

     (4)  Clarifying that fuels must meet the lifecycle greenhouse gas emissions reduction threshold to be considered "renewable fuels";

     (5)  Removing the qualification that liquid fuel must be derived from biomass resources, waste streams, renewable or zero carbon energy sources, or gaseous carbon oxides to meet the definition of "sustainable aviation fuel"; 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 Economic Development & Technology that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 976, H.D. 1, as amended herein, and recommends that it be referred to your Committee on Finance in the form attached hereto as H.B. No. 976, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Economic Development & Technology,

STAND. COM. REP. NO.  88

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 976

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Energy & Environmental Protection, to which was referred H.B. No. 976 entitled:

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

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Establish a temporary Sustainable Aviation Fuel Import Income Tax Credit; and

     (2)  Amend the Renewable Fuels Production Tax Credit by:

          (A)  Increasing the tax credit rate;

          (B)  Repealing the cap on claimable credits per taxpayer per taxable year and increasing the cap on total claimable credits for all eligible taxpayers per calendar year;

          (C)  Specifying that the credit may be claimed for fuels with lifecycle greenhouse gas emissions and product transportation emissions below certain thresholds;

          (D)  Repealing the prohibition on claiming other credits for the cost incurred to produce renewable fuels;

          (E)  Adding credit values for low lifecycle emissions renewable fuels and sustainable aviation fuels produced;

          (F)  Allowing a taxpayer who previously claimed a credit to claim another one for taxable years beginning after December 31, 2024; and

          (G)  Amending the required information in the certified statement for the credit.

     Your Committee received testimony in support of this measure from the Department of Transportation; Environmental Caucus of the Democratic Party of Hawaiʻi; Life of the Land; Climate Protectors Hawaiʻi; Hawaiʻi Renewable Fuels Coalition; Pono Pacific; Alaska Airlines and Hawaiian Airlines; Par Hawaii; Hawaiʻi Farm Bureau; Coalition Earth; Pacific Biodiesel Technologies; Airlines for America; Twelve; and two individuals.  Your Committee received testimony in opposition to this measure from Americans for Democratic Action, Hawaii Chapter; Energy Justice Network; and four individuals.  Your Committee received comments on this measure from the Department of Taxation; Hawaii State Energy Office; Tax Foundation of Hawaii; and Hawaiʻi Natural Energy Institute.

     Your Committee finds that encouraging increased sustainable aviation fuel production will help the State decrease its dependence on fossil fuels.  This measure addresses this need by establishing a temporary Sustainable Aviation Fuel Import Income Tax Credit and amending the Renewable Fuels Production Tax Credit by increasing the credit rate, repealing the cap on claimable credits per year, adding additional credit values, and allowing a taxpayers who previously claimed the credit to claim another.

     Your Committee has amended this measure by:

     (1)  Deleting the process by which a taxpayer may elect to receive a refund of credits in excess of payments due;

     (2)  Changing the total amount of credits allowed under the Sustainable Aviation Fuel Import Income Tax Credit and Renewable Fuels Production Tax Credit to unspecified amounts;

     (3)  Amending the Renewable Fuels Production Tax Credit by:

          (A)  Reverting to the existing statutory prohibition on claiming other credits for the costs incurred to produce renewable fuels;

          (B)  Establishing a cap on the total aggregate amount of additional credit value for sustainable aviation fuel in any year;

          (C)  Amending the credit period to be for a maximum period of ten consecutive years beginning from the effective date of this measure; and

          (D)  Narrowing the definition of "lifecycle greenhouse gas emissions" by deleting carbon offsetting and reduction scheme for international aviation from the methodologies used to calculate attributional core lifecycle greenhouse gas emissions;

     (4)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (5)  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. 976, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 976, H.D. 1, and be referred to your Committee on Economic Development & Technology.

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