SB 376: RELATING TO TAX CREDITS.

A BILL FOR AN ACT

RELATING TO TAX CREDITS.

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

     SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Home fire safety improvement tax credit.  (a)  There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, a nonrefundable income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the nonrefundable credit is properly claimed.

     In the case of a partnership, S corporation, estate, or trust, the nonrefundable tax credit allowable shall be for qualified costs incurred by the entity for the taxable year.  The cost upon which the nonrefundable tax credit is computed shall be determined at the entity level.  Distribution and share of the nonrefundable credit shall be determined pursuant to section 704(b) of the Internal Revenue Code.

     (b)  Every taxpayer claiming a nonrefundable tax credit under this section shall submit a written, sworn statement to the department of taxation no later than ninety days following the end of each taxable year in which qualified costs were paid or incurred, identifying:

     (1)  Qualified costs, if any, paid or incurred in the previous taxable year; and

     (2)  The amount of nonrefundable tax credits claimed pursuant to this section, if any, in the previous taxable year.

     (c)  The department of taxation shall:

     (1)  Maintain records of the names and addresses of the taxpayers claiming the nonrefundable credit under this section and the total amount of the qualified costs upon which the nonrefundable tax credit is based;

     (2)  Verify the amount of the qualified costs;

     (3)  Total all qualified costs that the department of taxation certifies; and

     (4)  Provide a letter to the director of taxation specifying the amount of the nonrefundable tax credit for each taxable year and cumulative amount of the nonrefundable tax credit for all years claimed.

     Upon each determination made under this subsection, the department of taxation shall issue a letter to the taxpayer verifying the information submitted to that department, including the amount of qualified costs and the nonrefundable credit amount qualified for in each taxable year a nonrefundable credit is claimed.  The taxpayer shall file the letter from the department of taxation with the taxpayer's tax return.  The director of taxation may audit and adjust the nonrefundable tax credit amount to conform to the information filed by the taxpayer.

     (d)  A third party shall provide a certificate of approval for qualified home fire safety improvements implemented by taxpayers.

     (e)  The nonrefundable tax credit shall be equal to       per cent of the taxpayer's qualified costs subject to the following:

     (1)  The total nonrefundable credit allowed for a taxpayer in any taxable year shall not exceed $          ; and

     (2)  The total amount of nonrefundable tax credits allowed under this section shall not exceed $           for all taxpayers in any fiscal year.  If the total amount of nonrefundable credits claimed under this section by all taxpayers in any fiscal year exceeds $          , the nonrefundable credit shall be allowed to taxpayers based on the date of certification by the insurance commissioner on a first come, first served basis.  Any taxpayer who is certified by a third party in a fiscal year and who is not eligible to claim the nonrefundable credit due to the $           cap having been exceeded for that fiscal year shall be eligible to claim the nonrefundable credit in the subsequent year and shall receive priority for the nonrefundable credit over taxpayers who receive certification in the subsequent fiscal year.

     (f)  No taxpayer shall claim any other credit under this chapter for the same qualified costs used to properly claim a nonrefundable tax credit under this section for the taxable year.

     (g)  The director of taxation:

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

     (2)  May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the nonrefundable tax credit made under this section; and

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

     (h)  This section shall not apply to any amount paid or incurred before January 1, 2026.

     (i)  For the purposes of this section:

     "Qualified costs" means the expenses incurred in constructing or installing a qualified home fire safety improvement.

     "Qualified home fire safety improvement" means an improvement to a taxpayer's residence that increases the residence's fire safety rating as calculated by the taxpayer's homeowner's insurance policy."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on July 1, 2077, and shall apply to taxable years beginning after December 31, 2025.

Report Title:

Home Fire Safety Improvement Nonrefundable Tax Credit; Insurance Commissioner; Fire Safety; Homeowner's Insurance

Description:

Establishes a nonrefundable income tax credit for taxpayers who construct or install improvements to their residence that increase the residence's fire safety rating as calculated by the taxpayer's homeowner's insurance policy.  Applies to taxable years beginning after 12/31/2025.  Effective 7/1/2077.   (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 TAX CREDITS.

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

     SECTION 1.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Home fire safety improvement tax credit.  (a)  There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable shall be for qualified costs incurred by the entity for the taxable year.  The cost upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of the credit shall be determined pursuant to section 704(b) of the Internal Revenue Code.

     (b)  Every taxpayer claiming a tax credit under this section shall submit a written, sworn statement to the department of taxation no later than ninety days following the end of each taxable year in which qualified costs were paid or incurred, identifying:

     (1)  Qualified costs, if any, paid or incurred in the previous taxable year; and

     (2)  The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.

     (c)  The department of taxation shall:

     (1)  Maintain records of the names and addresses of the taxpayers claiming the credit under this section and the total amount of the qualified costs upon which the tax credit is based;

     (2)  Verify the amount of the qualified costs;

     (3)  Total all qualified costs that the department of taxation certifies; and

     (4)  Provide a letter to the director of taxation specifying the amount of the tax credit for each taxable year and cumulative amount of the tax credit for all years claimed.

     Upon each determination made under this subsection, the department of taxation shall issue a letter to the taxpayer verifying the information submitted to that department, including the amount of qualified costs and the credit amount qualified for in each taxable year a credit is claimed.  The taxpayer shall file the letter from the department of taxation with the taxpayer's tax return.  The director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.

     (d)  The insurance commissioner shall provide a certificate of approval for qualified home fire safety improvements implemented by taxpayers.  The insurance commissioner shall adopt rules pursuant to chapter 91 to implement the certification requirements under this section.

     (e)  The insurance commissioner, in consultation with the director of taxation, shall create a form that indicates a taxpayer made qualified home fire safety improvements.

     (f)  The tax credit shall be equal to       per cent of the taxpayer's qualified costs subject to the following:

     (1)  The total credit allowed for a taxpayer in any taxable year shall not exceed $          ; and

     (2)  The total amount of tax credits allowed under this section shall not exceed $           for all taxpayers in any fiscal year.  If the total amount of credits claimed under this section by all taxpayers in any fiscal year exceeds $          , the credit shall be allowed to taxpayers based on the date of certification by the insurance commissioner on a first come, first served basis.  Any taxpayer who is certified by the insurance commissioner in a fiscal year and who is not eligible to claim the credit due to the $           cap having been exceeded for that fiscal year shall be eligible to claim the credit in the subsequent year and shall receive priority for the credit over taxpayers who receive certification in the subsequent fiscal year.

     (g)  If the tax credit claimed by the taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that the tax credit properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.  All claims for the tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (h)  Any credit under this section shall be recaptured following the close of the taxable year for which the credit is claimed if the credit was claimed for qualified costs that are not certified under subsection (d) within one hundred eighty days of the completion of its construction or installation.

     The recapture shall be equal to       per cent of the amount of the total tax credit claimed under this section in the preceding three taxable years and shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs pursuant to this subsection.

     (i)  Every claim, including amended claims, for the tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (j)  No taxpayer shall claim any other credit under this chapter for the same qualified costs used to properly claim a tax credit under this section for the taxable year.

     (k)  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 to effectuate the purposes of this section.

     (l)  This section shall not apply to any amount paid or incurred before January 1, 2026.

     (m)  For the purposes of this section:

     "Qualified costs" means the expenses incurred in constructing or installing a qualified home fire safety improvement.

     "Qualified home fire safety improvement" means an improvement to a taxpayer's residence that increases the residence's fire safety rating as calculated by the taxpayer's homeowner's insurance policy."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2025.

Report Title:

Home Fire Safety Improvement Tax Credit; Insurance Commissioner; Fire Safety; Homeowner's Insurance

Description:

Establishes a refundable income tax credit for taxpayers who construct or install improvements to their residence that increase the residence's fire safety rating as calculated by the taxpayer's homeowner's insurance policy.  Applies to taxable years beginning after 12/31/2025.

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. 550

Honolulu, Hawaii

RE:    S.B. No. 376

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committees on Public Safety and Military Affairs and Commerce and Consumer Protection, to which was referred S.B. No. 376 entitled:

"A BILL FOR AN ACT RELATING TO TAX CREDITS,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish a refundable income tax credit for taxpayers who construct or install improvements to their residence that increase the residence's fire safety rating as calculated by the taxpayer's homeowner's insurance policy; and

     (2)  Apply to taxable years beginning after December 31, 2025.

     Your Committees received comments on this measure from the Department of Commerce and Consumer Affairs, Department of Taxation, and Tax Foundation of Hawaii.

     Your Committees find that making it easier for residents to increase the fire safety rating of their homes is important to the State.  This measure facilitates access to home improvement projects that make homes more resistant to fire damage by establishing a tax credit based on the residence's upgraded fire safety rating. 

     Your Committees note the comments provided by the Department of Commerce and Consumer Affairs in their testimony given at the public hearing held on this measure.  The Department of Commerce and Consumer Affairs has indicated that the Department's Insurance Division does not possess the expertise necessary to provide a certificate of approval for qualified home fire safety improvements implemented by taxpayers. 

     Your Committees also note the comments provided by the Department of Taxation in their testimony given at the public hearing held on this measure.  The Department of Taxation suggests that a third party certify the tax credit and that the credit be nonrefundable, as refundable credits are more susceptible to waste, fraud, and abuse. 

     Accordingly, your Committees have amended this measure by:

     (1)  Changing "tax credit" to "nonrefundable tax credit";

     (2)  Changing the issuer of the certification for the tax credit from the Insurance Commissioner to a third party;

     (3)  Deleting language that would have required the tax credit be recaptured;

     (4)  Deleting language that would have required every claim for the tax credit to be filed before the end of the twelfth month following the close of the tax credit or the tax credit be deemed waived;

     (5)  Making conforming amendments;

     (6)  Inserting an effective date of July 1, 2077, to encourage further discussion; and

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

     As affirmed by the records of votes of the members of your Committees on Public Safety and Military Affairs and Commerce and Consumer Protection that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 376, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 376, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Public Safety and Military Affairs and Commerce and Consumer Protection,