SB 2884: Department of Taxation; Income Tax Credit; Hurricane Resistance Retrofit; General Excise Tax; Rate Reduction

A BILL FOR AN ACT

RELATING TO TAXATION.

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

     SECTION 1.  The legislature finds that climate change has warmed ocean waters, which has shifted the spawning area for hurricanes near Mexico farther north.  This has caused hurricanes, which historically have passed several hundred miles south of the State, to follow paths aimed directly at the State.

     The legislature further finds that the warmer ocean waters have also strengthened the intensity of hurricanes; as a result, hurricanes classified as Category 3, 4, and 5 have become stronger and more frequent.  This strengthening has led climate change assessment models to modify predictions of Category 5 hurricanes with two hundred miles per hour sustained winds from occurring every eight years to every year by 2080.  These storms are also expected to mostly occur in the northern Pacific, in which Hawaii is located.

     The legislature finds that when Hurricane Melissa hit Jamaica in 2025, most of the houses on the island were made of wood, and that thirty-six per cent of all the houses were either badly damaged or destroyed.  At the same time, many wooden buildings lost their roofs and windows, but almost all concrete buildings were left standing.  The legislature finds that of the roughly two hundred thousand stand alone houses in the State, nearly all are made of wood.  If a super Category 5 hurricane were to hit the State, and if thirty-six per cent of these houses were badly damaged or destroyed, that would be sixty-four thousand homes badly damaged or destroyed, leaving roughly two hundred thousand people homeless.

     The legislature further finds that while it is commonly perceived that the costs of building concrete structures are much greater than the costs of building with wood, the costs are quite close, and the benefits of building with concrete, such as significantly cheaper energy bills, make it an affordable and cost competitive choice.

     The legislature recognizes that there are four common modes of building with concrete in the State.  Among them are building with concrete brick, building with insulated concrete forms, building with structural insulated concrete panels, and building with poured concrete.  The cost of building concrete homes in the State is five to twelve per cent higher than the cost of building with wood.  However, this cost difference would be lowered significantly if concrete house construction became more common.

     The legislature finds that concrete has several additional advantages over wood.  Utility costs for wood-framed houses are $0.10 per square foot per month, while they are $0.03 per square foot per month for concrete, a seventy per cent reduction in energy use.  Concrete has a lifespan of three hundred or more years, as opposed to one hundred with wood.  Concrete homes can withstand three hundred miles per hour winds, whereas wood can only withstand between one hundred twenty and one hundred fifty miles per hour winds.  In addition, wooden houses burn immediately, whereas concrete has a four-hour fire resistance.  Rats and termites are also a persistent problem for wooden houses in the State, unlike concrete homes.  Concrete also allows less than one-third of the sound intrusion that comes with wooden walls.

     The legislature additionally finds that glass windows and sliding doors that can withstand two hundred miles per hour winds are now being sold locally for forty per cent more than regular windows.  However, this cost difference would be lowered significantly if these fortified windows and doors became more common.

     The legislature further finds that the increased risk of hurricane damage poses a significant danger to the State.  Many of the State's refuge areas do not meet the standard to be deemed hurricane shelters, with few areas able to withstand a Category 2 hurricane.  Additionally, the refuge areas are only capable of sheltering one hundred thousand persons, but the estimated demand could likely be two hundred thousand persons.  As a result, many residents will need to rely on their own residence; however, many wooden homes are not constructed to withstand even a Category 1 hurricane.  The legislature believes there is a deep moral obligation to the people of the State and future generations for the State to encourage homeowners to prepare their homes to withstand hurricanes with sustained winds more than two hundred miles per hour.

     The legislature also finds that the State imposes a general excise tax on business activity, including the sale of newly constructed residential housing and residential buildings, and that any reduction in general excise tax liability under this Act would apply only to new or incremental economic activity and would not reduce existing tax revenues.

     The legislature further finds that providing targeted tax incentives to encourage the construction and retrofit of hurricane-resilient residential structures will protect residents of the State, reduce long-term disaster recovery costs, and increase the resilience of the State's housing stock.

     Accordingly, the purpose of this Act is to incentivize the construction of new residential buildings and the retrofit of existing residential structures that are capable of withstanding extreme hurricane conditions, through targeted state tax incentives tied to certified performance standards.

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

     "§235-    Hurricane resistance retrofit tax credit.  (a)  There shall be allowed to each taxpayer who is not eligible to be claimed as a dependent for federal or state income taxes by another and who files an individual income tax return for a taxable year, a one-time nonrefundable hurricane resistance retrofit tax credit that shall be deductible from the taxpayer's net income tax liability imposed by this chapter.

     (b)  The amount of the nonrefundable tax credit shall be equal to fifty per cent of the actual costs incurred by the taxpayer for:

     (1)  Retrofitting existing residential structures to increase wind resistance, including but not limited to the installation of wind-resistant windows, doors, roofing systems, and related structural components certified as capable of withstanding sustained wind speeds of at least two hundred miles per hour;

     (2)  The purchase, installation, or construction, including design and materials, of a hurricane shelter on the taxpayer's property, certified by a licensed building inspector or design professional; provided that a hurricane shelter shall meet all of the requirements specified in subsection (h); or

     (3)  Fortification of high-rise apartment and condominium buildings or units therein in excess of applicable building code standards, certified by a licensed building inspector or design professional, including costs for the installation of wind-resistant windows, doors, roofing systems, and related structural components certified as capable of withstanding sustained wind speeds of at least two hundred miles per hour.

     (c)  Certification of windows, doors, roofing systems, related structural components, and hurricane shelters to withstand sustained wind speeds of at least two hundred miles per hour shall be provided to the department of taxation by a licensed building inspector or design professional in a form prescribed by the director of taxation.

     (d)  All claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to properly claim the credit shall constitute a waiver of the right to claim the credit.

     (e)  If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess of the tax credit may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted; provided that no credit under this section may exceed a period of       years.

     (f)  No taxpayer who claims the tax credit under this section shall claim any other credit for the same expenses or costs.

     (g)  The director of taxation:

     (1)  Shall prepare any forms that may be necessary to claim a tax credit under this section;

     (2)  May require proof of the claim for the tax credit; and

     (3)  May adopt rules pursuant to chapter 91 to effectuate the purposes of this section.

     (h)  For the purposes of this section:

     "Hurricane shelter" means a windowless room within a residence or within an accessory building to a residence, designed and constructed to withstand sustained wind speeds of at least two hundred miles per hour and to resist impact from windborne debris; provided that the room:

     (1)  Is not located in a flood zone, storm surge, or other area susceptible to flooding;

     (2)  Is readily accessible to persons residing within the residence; and

     (3)  Is designed and constructed pursuant to hurricane standards that are, at a minimum, in compliance with:

          (A)  Federal Emergency Management Agency Publication 320 "Taking Shelter from the Storm:  Building or Installing a Safe Room for Your Home", March 2021 edition, as amended; and

          (B)  Federal Emergency Management Agency Publication 361 "Safe Rooms for Tornadoes and Hurricanes:  Guidance for Community and Residential Safe Rooms", April 2021 edition, as amended.

     "Related structural components" means elements of a building that contribute to its wind resistance and structural integrity, as determined by a licensed building inspector or registered design professional to be necessary for the construction, retrofitting, or fortification project to meet wind-resistance standards specified in this section."

     SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§237-    Reduced rate; concrete residential development.  (a)  Notwithstanding section 237-13 to the contrary, beginning January 1, 2027, there is hereby levied and shall be assessed and collected a tax equivalent to half the rate that would have applied pursuant to section 237-13 of the gross proceeds or income received from the sale of a certified hurricane-resistant residential project; provided that for a high-rise certified hurricane-resistant residential project, the reduced rate of tax under this section shall apply only to the portion of gross proceeds or gross income attributable to the incremental cost of windows, doors, roofing systems, and related structural components that are certified to withstand sustained wind speeds of at least two hundred miles per hour.

     (b)  Certification of windows, doors, roofing systems, and related structural components to withstand sustained wind speeds of at least two hundred miles per hour shall be provided by a licensed building inspector or design professional to the department of taxation in a form prescribed by the director of taxation.

     (c)  For the purposes of this section:

     "Certified hurricane-resistant residential project" means a residential housing project that:

     (1)  Is newly constructed using a concrete structural system, including but not limited to constructing with concrete masonry unit, insulated concrete forms, structural insulated concrete panels, or placed concrete;

     (2)  Incorporates windows, doors, roofing systems, and related structural components that are certified by a licensed building inspector or design professional to withstand sustained wind speeds of at least two hundred miles per hour, and that have been installed in accordance with applicable building codes and approved plans; and

     (3)  Has written certification of compliance as required under this section.

     "High-rise" means a building classified as a high-rise building under the applicable county building code.

     "Incremental cost" means the additional expense incurred by the taxpayer for windows, doors, roofing systems, and related structural components needed to meet wind-resistance standards specified in this section. Incremental cost shall be calculated as the difference between:

     (1)  The cost of windows, doors, roofing systems, and related structural components that can withstand wind speeds of at least two hundred miles per hour; and

     (2)  The cost of comparable windows, doors, roofing systems, and related structural components.  A comparable window, door, roofing system, or related structural component is one that is of similar size, type, and functional characteristic, but not designed or certified to withstand sustained wind speeds of at least two hundred miles per hour; provided that the comparable window, door, roofing system, or related structural component meets all applicable building code requirements.

     "Related structural components" shall have the same meaning as defined in section 235-  ."

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2026; provided that this Act shall be repealed on December 31, 2030.

Report Title:

Department of Taxation; Income Tax Credit; Hurricane Resistance Retrofit; General Excise Tax; Rate Reduction

Description:

Establishes a nonrefundable individual income tax credit for a certain percentage of expenses paid to retrofit a residence with wind resistive devices or to purchase, install, or construct, a hurricane shelter on the taxpayer's property.  Reduces the general excise tax rate on the gross proceeds or income from the sale of a concrete high-rise certified hurricane-resistant residential project or certain hurricane-resistant components of the project.  Applies to taxable years beginning after 12/31/2026.  Sunsets 12/31/2030.  Effective 7/1/2050.  (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 taxation.

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

     SECTION 1.  The legislature finds that climate change has warmed ocean waters, which has shifted the spawning area for hurricanes near Mexico farther north.  This has caused hurricanes, which historically have passed several hundred miles south of the State, to follow paths aimed directly at the State.

     The legislature further finds that the warmer ocean waters have also strengthened the intensity of hurricanes; as a result, hurricanes classified as Category 3, 4, and 5 have become stronger and more frequent.  This strengthening has led climate change assessment models to modify predictions of Category 5 hurricanes with two hundred miles per hour sustained winds from occurring every eight years to every year by 2080.  These storms are also expected to mostly occur in the northern Pacific, in which Hawaii is located.

     The legislature finds that when Hurricane Melissa hit Jamaica in 2025, most of the houses on the island were made of wood, and that thirty-six per cent of all the houses were either badly damaged or destroyed.  At the same time, many wooden buildings lost their roofs and windows, but almost all concrete buildings were left standing.  The legislature finds that of the roughly two hundred thousand stand alone houses in the State, nearly all are made of wood.  If a super Category 5 hurricane were to hit the State, and if thirty-six per cent of these houses were badly damaged or destroyed, that would be sixty-four thousand homes badly damaged or destroyed, leaving roughly two hundred thousand people homeless.

     The legislature further finds that while it is commonly perceived that the costs of building concrete structures are much greater than the costs of building with wood, the costs are quite close, and the benefits of building with concrete, such as significantly cheaper energy bills, make it an affordable and cost competitive choice.

     The legislature recognizes that there are four common modes of building with concrete in the State.  Among them are building with concrete brick, building with insulated concrete forms, building with structural insulated concrete panels, and building with poured concrete.  The cost of building concrete homes in the State is five to twelve per cent higher than the cost of building with wood.  However, this cost difference would be lowered significantly if concrete house construction became more common.

     The legislature finds that concrete has several additional advantages over wood.  Utility costs for wood-framed houses are $0.10 per square foot per month, while they are $0.03 per square foot per month for concrete, a seventy per cent reduction in energy use.  Concrete has a lifespan of three hundred or more years, as opposed to one hundred with wood.  Concrete homes can withstand three hundred miles per hour winds, whereas wood can only withstand between one hundred twenty and one hundred fifty miles per hour winds.  In addition, wooden houses burn immediately, whereas concrete has a four-hour fire resistance.  Rats and termites are also a persistent problem for wooden houses in the State, unlike concrete homes.  Concrete also allows less than one-third of the sound intrusion that comes with wooden walls.

     The legislature additionally finds that glass windows and sliding doors that can withstand two hundred miles per hour winds are now being sold locally for forty per cent more than regular windows.  However, this cost difference would be lowered significantly if these fortified windows and doors became more common.

     The legislature further finds that the increased risk of hurricane damage poses a significant danger to the State.  Many of the State's refuge areas do not meet the standard to be deemed hurricane shelters, with few areas able to withstand a Category 2 hurricane.  Additionally, the refuge areas are only capable of sheltering one hundred thousand persons, but the estimated demand could likely be two hundred thousand persons.  As a result, many residents will need to rely on their own residence; however, many wooden homes are not constructed to withstand even a Category 1 hurricane.  The legislature believes there is a deep moral obligation to the people of the State and future generations for the State to encourage homeowners to prepare their homes to withstand hurricanes with sustained winds more than two hundred miles per hour.

     The legislature also finds that the State imposes a general excise tax on business activity, including the sale of newly constructed residential housing and residential buildings, and that any reduction in general excise tax liability under this Act would apply only to new or incremental economic activity and would not reduce existing tax revenues.

     The legislature further finds that providing targeted tax incentives to encourage the construction and retrofit of hurricane-resilient residential structures will protect residents of the State, reduce long-term disaster recovery costs, and increase the resilience of the State's housing stock.

     Accordingly, the purpose of this Act is to incentivize the construction of new residential buildings and the retrofit of existing residential structures that are capable of withstanding extreme hurricane conditions, through targeted state tax incentives tied to certified performance standards.

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

     "§235-    Hurricane resistance retrofit tax credit.  (a)  There shall be allowed to each taxpayer who is not eligible to be claimed as a dependent for federal or state income taxes by another and who files an individual income tax return for a taxable year, a one-time nonrefundable hurricane resistance retrofit tax credit that shall be deductible from the taxpayer's net income tax liability imposed by this chapter.

     (b)  The amount of the nonrefundable tax credit shall be equal to fifty per cent of the actual costs incurred by the taxpayer for:

     (1)  Retrofitting existing residential structures to increase wind resistance, including but not limited to the installation of wind-resistant windows, doors, roofing systems, and related structural components certified as capable of withstanding sustained wind speeds of at least two hundred miles per hour;

     (2)  The purchase, installation, or construction, including design and materials, of a hurricane shelter on the taxpayer's property, certified by a licensed building inspector or design professional; or

     (3)  Fortification of high-rise apartment and condominium buildings or units therein in excess of applicable building code standards, including costs for the installation of wind-resistant windows, doors, roofing systems, and related structural components certified as capable of withstanding sustained wind speeds of at least two hundred miles per hour.

     (c)  Certification of windows, doors, roofing systems, related structural components, and hurricane shelters to withstand sustained wind speeds of at least two hundred miles per hour shall be provided to the department of taxation by a licensed building inspector or design professional in a form prescribed by the director of taxation.

     (d)  All claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to properly claim the credit shall constitute a waiver of the right to claim the credit.

     (e)  If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess of the tax credit may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted; provided that no credit under this section may exceed a period of       years.

     (f)  No taxpayer who claims the tax credit under this section shall claim any other credit for the same expenses or costs.

     (g)  The director of taxation:

     (1)  Shall prepare any forms that may be necessary to claim a tax credit under this section;

     (2)  May require proof of the claim for the tax credit; and

     (3)  May adopt rules pursuant to chapter 91 to effectuate the purposes of this section.

     (h)  For the purposes of this section, "hurricane shelter" means a windowless room within a residence or within an accessory building to a residence, designed and constructed to withstand sustained wind speeds of at least two hundred miles per hour and to resist impact from windborne debris; provided that the room:

     (1)  Is not located in a flood zone, storm surge, or other area susceptible to flooding;

     (2)  Is readily accessible to persons residing within the residence; and

     (3)  Is designed and constructed pursuant to hurricane standards that are, at a minimum, in compliance with:

          (A)  Federal Emergency Management Agency Publication 320 "Taking Shelter from the Storm:  Building or Installing a Safe Room for Your Home", March 2021 edition, as amended; and

          (B)  Federal Emergency Management Agency Publication 361 "Safe Rooms for Tornadoes and Hurricanes:  Guidance for Community and Residential Safe Rooms", April 2021 edition, as amended."

     SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§237-    Reduced rate; concrete residential development.  (a)  Notwithstanding section 237-13 to the contrary, beginning January 1, 2027, there is hereby levied and shall be assessed and collected a tax equivalent to half the rate that would have applied pursuant to section 237-13 of the gross proceeds or income received from the sale of a certified hurricane-resistant residential project; provided that for a high-rise certified hurricane-resistant residential project, the reduced rate of tax under this section shall apply only to the portion of gross proceeds or gross income attributable to the incremental cost of windows, doors, roofing systems, and related structural components that are certified to withstand sustained wind speeds of at least two hundred miles per hour.

     (b)  Certification of windows, doors, roofing systems, and related structural components to withstand sustained wind speeds of at least two hundred miles per hour shall be provided by a licensed building inspector or design professional to the department of taxation in a form prescribed by the director of taxation.

     (c)  For the purposes of this section:

     "Certified hurricane-resistant residential project" means a residential housing project that:

     (1)  Is newly constructed using a concrete structural system, including but not limited to constructing with concrete masonry unit, insulated concrete forms, structural insulated concrete panels, or placed concrete;

     (2)  Incorporates windows, doors, roofing systems, and related structural components that are certified by a licensed building inspector or design professional to withstand sustained wind speeds of at least two hundred miles per hour, and that have been installed in accordance with applicable building codes and approved plans; and

     (3)  Has written certification of compliance as required under this section.

     "High-rise" means a building classified as a high-rise building under the applicable county building code."

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2026; provided that this Act shall be repealed on December 31, 2030.

Report Title:

Department of Taxation; Income Tax Credit; Hurricane Resistance Retrofit; General Excise Tax; Rate Reduction

Description:

Establishes a nonrefundable individual income tax credit for a certain percentage of expenses paid to retrofit a residence with wind resistive devices or to purchase, install, or construct, a hurricane shelter on the taxpayer's property.  Reduces the general excise tax rate on the gross proceeds or income from the sale of a concrete certified hurricane-resistant residential project or certain hurricane-resistant components of a high-rise condominium.  Applies to taxable years beginning after 12/31/2026.  Sunsets 12/31/2030.

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. 2652

Honolulu, Hawaii

RE:     S.B. No. 2884

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 2884 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish a temporary nonrefundable individual income tax credit for a certain percentage of expenses paid to retrofit a residence with wind resistive devices or to purchase, install, or construct, a hurricane shelter on a taxpayer's property; and

     (2)  Reduce the general excise tax rate on the gross proceeds or income from the sale of a concrete certified hurricane-resistant residential project or certain hurricane-resistant components of the project.

     Your Committee received testimony in support of this measure from the Department of Defense, Department of Land and Natural Resources, and four individuals.

     Your Committee received comments on this measure from the Insurance Division of the Department of Commerce and Consumer Affairs and Department of Taxation.

     Your Committee finds that climate change is increasing both the frequency and intensity of hurricanes threatening the State.  This measure would enhance housing resilience, safeguard families from disasters, and reduce long-term recovery costs.

     Your Committee has amended this measure by:

     (1)  Inserting language that clarifies that a certified hurricane shelter shall meet certain requirements;

     (2)  Inserting language that clarifies that certain fortification standards of high-rise apartment and condominium buildings or units shall be certified by a licensed building inspector or design professional;

     (3)  Inserting definitions for "related structural components" and "incremental cost"; and

     (4)  Inserting an effective date of July 1, 2050, to encourage further discussion.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2884, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2884, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,