SB 547: RELATING TO WATER CONSERVATION.

A BILL FOR AN ACT

RELATING TO WATER CONSERVATION.

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

     SECTION 1.  The legislature finds that Hawaii faces ongoing challenges related to water scarcity due to chronic drought conditions and increasing demands on its water resources.  Promoting water conservation technologies, such as gray water recycling systems and atmospheric water generators, is essential for ensuring a sustainable and secure water future for the State.

     Accordingly, the purpose of this Act is to encourage the installation and use of gray water recycling systems and atmospheric water generators in the State.

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

     "§235-    Water conservation income tax credit.  (a)  There shall be allowed to each taxpayer subject to the tax imposed by this chapter, a water conservation 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.

     (b)  In the case of a partnership, S corporation, estate, or trust, the tax credit allowable shall be as provided under subsection (c) for the taxable year.  The cost upon which the credit is computed shall be determined at the entity level.  Distribution and share of the credit shall be determined pursuant to administrative rule.  If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the qualified expense for which the deduction is taken.

     (c)  The amount of the tax credit shall be equal to:

     (1)  For each residential property in which an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards is installed and placed in service, twenty-five per cent of the cost of the installation or $10,000, whichever is less; and

     (2)  For each commercial property in which an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards is installed and placed in service, twenty per cent of the cost of the installation or $50,000, whichever is less.

     (d)  Notwithstanding subsection (c), a low-income homeowner who installs and places in service an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards may qualify for a tax credit of thirty-five per cent of the cost of the installation or $12,500, whichever is less.

     (e)  Beginning July 1, 2028, only atmospheric water generators that are fully NSF P343-certified shall be eligible for tax credits under this section.

     (f)  If the tax 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 income tax liability in subsequent years until exhausted; provided that no credit forward may be claimed more than five years after the initial claim for credit is made under this section.

     (g)  The director of taxation shall:

     (1)  Prepare any forms necessary to claim a credit under this section;

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

     (3)  Adopt rules pursuant to chapter 91 necessary to effectuate the purposes of this section.

     (h)  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 in which the water conservation system is placed in service.  Failure to comply with this provision shall constitute a waiver of the right to claim the credit.

     (i)  For the purposes of this section:

     "Atmospheric water generator" means a device that extracts water from ambient air humidity.

     "Area median income" means the median income for each of the counties of Honolulu, Hawaii, Maui, and Kauai as determined by the United States Department of Housing and Urban Development, from time to time, and as adjusted by family size.

     "Gray water" shall have the same meaning as defined in section 342D-1.

     "Low-income homeowner" means a person with an ownership interest in the property who resides at the property as their principal residence and whose adjusted gross income is eighty per cent or less of the area median income.

     "NSF/ANSI 350-certified" means certified to meet the National Sanitation Foundation/American National Standards Institute 350 certification for onsite residential and commercial water reuse treatment systems.

     "NSF/ANSI 350-certified gray water recycling system effluent" means effluent from an NSF/ANSI 350-certified gray water recycling system that is used only for subsurface disposal or subsurface irrigation in compliance with department of health rules and recycle or reuse water guidelines.

     "NSF P343" means the National Sanitation Foundation Protocol P343 - health and sanitation requirements for atmospheric water generators.

     "NSF P343-certified" means certified to meet NSF P343 for atmospheric water generators.

     "Water conservation system" means an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards."

     SECTION 3.  (a)  The department of business, economic development, and tourism shall establish a rebate program to incentivize the installation of gray water recycling systems and atmospheric water generators.

     (b)  Rebates shall be awarded as follows:

     (1)  For each residential property in which an NSF/ANSI 350 certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards is installed and placed in service, thirty per cent of the cost of the installation or $7,500, whichever is less; and

     (2)  For each commercial property in which an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards is installed and placed in service, twenty-five per cent of the cost of the installation or $35,000, whichever is less.

     (c)  A low-income homeowner who installs and places in service an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards may qualify for a rebate of forty per cent of the cost of the installation or $10,000, whichever is less.

     (d)  Beginning July 1, 2028, only atmospheric water generators that are fully NSF P343-certified shall be eligible for rebates under this section.

     (e)  The department of business, economic development, and tourism shall adopt rules pursuant to chapter 91 necessary to implement this section.

     (f)  For the purposes of this section, the definitions established in section 235-  , Hawaii Revised Statutes, shall apply.

     SECTION 4.  (a)  The state building code council shall adopt the International Association of Plumbing and Mechanical Officials' 2023 water efficiency and sanitation standard, incorporating provisions regulating the design, installation, and maintenance of gray water recycling systems and atmospheric water generators in the State.

     (b)  The state building code council shall adopt rules pursuant to chapter 91 necessary to implement this section.

     SECTION 5.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2050; provided that section 2 shall apply to taxable years beginning after December 31, 2025.

Report Title:

DOTAX; DBEDT; Water Conservation; Water Conservation Income Tax Credit; Graywater Recycling Systems; Atmospheric Water Generators; Rebate Program; State Building Code Council; Water Efficiency and Sanitation Standard

Description:

Incentivizes the installation and use of gray water recycling systems and atmospheric water generators in the State by establishing an income tax credit to be administered by the Department of Taxation.  Requires the Department of Business, Economic Development, and Tourism to establish a rebate program.  Requires the State Building Code Council to adopt certain standards on gray water recycling systems and atmospheric water generators in the State.  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 water conservation.

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

     SECTION 1.  The legislature finds that Hawaii faces ongoing challenges related to water scarcity due to chronic drought conditions and increasing demands on its water resources.  Promoting water conservation technologies, such as gray water recycling systems and atmospheric water generators, is essential for ensuring a sustainable and secure water future for the State.

     Accordingly, the purpose of this Act is to encourage the installation and use of gray water recycling systems and atmospheric water generators in the State.

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

     "§235-    Water conservation income tax credit.  (a)  There shall be allowed to each taxpayer subject to the tax imposed by this chapter, a water conservation 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.

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

     (1)  For residential properties:  $10,000, or twenty-five per cent of the cost of installing an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less; and

     (2)  For commercial properties:  $50,000, or twenty per cent of the cost of installing an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

     (c)  Notwithstanding subsection (b), low-income homeowners may qualify for a tax credit of $12,500, or thirty-five per cent of the cost of installing an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

     (d)  Beginning July 1, 2028, only atmospheric water generators that are fully NSF P343-certified shall be eligible for tax credits under this section.

     (e)  If the tax 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 income tax liability in subsequent years until exhausted.

     (f)  The director of taxation shall:

     (1)  Prepare any forms necessary to claim a credit under this section;

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

     (3)  Adopt rules pursuant to chapter 91 necessary to effectuate the purposes of this section.

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

     (h)  For the purposes of this section:

     "Atmospheric water generator" means a device that extracts water from ambient air humidity.

     "Gray water" shall have the same meaning as defined in section 342D-1.

     "Low-income homeowner" means a homeowner that earns eighty per cent or less of the area median income.

     "NSF/ANSI 350-certified" means certified to meet the National Sanitation Foundation International Standard/American National Standard 350 for onsite residential and commercial water reuse treatment systems.

     "NSF P343" means the National Sanitation Foundation Protocol P343 - health and sanitation requirements for atmospheric water generators.

     "NSF P343-certified" means certified to meet NSF P343 for atmospheric water generators."

     SECTION 3.  (a)  The department of business, economic development, and tourism shall establish a rebate program to incentivize the installation of gray water recycling systems and atmospheric water generators.

     (b)  Rebates shall be awarded as follows:

     (1)  For residential properties:  $7,500, or thirty per cent of the cost of installing an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less; and

     (2)  For commercial properties:  $35,000, or twenty-five per cent of the cost of installing an NSF/ANSI 350‑certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

     (c)  Low-income homeowners may qualify for a rebate of $10,000, or forty per cent of the cost of installing an NSF/ANSI 350-certified gray water recycling system or an atmospheric water generator that meets NSF P343 test results and component standards, whichever is less.

     (d)  Beginning July 1, 2028, only atmospheric water generators that are fully NSF P343-certified shall be eligible for rebates under this section.

     (e)  The department of business, economic development, and tourism shall adopt rules pursuant to chapter 91 necessary to implement this section.

     (f)  For the purposes of this section, the definitions established in section 235-  , Hawaii Revised Statutes, shall apply.

     SECTION 4.  (a)  The state building code council shall adopt the International Association of Plumbing and Mechanical Officials' 2023 water efficiency and sanitation standard, incorporating provisions regulating the design, installation, and maintenance of gray water recycling systems and atmospheric water generators in the State.

     (b)  The state building code council shall adopt rules pursuant to chapter 91 necessary to implement this section.

     SECTION 5.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2025; provided that section 2 shall apply to taxable years beginning after December 31, 2025.

Report Title:

DOTAX; DBEDT; Water Conservation; Water Conservation Income Tax Credit; Graywater Recycling Systems; Atmospheric Water Generators; Rebate Program; State Building Code Council; Water Efficiency and Sanitation Standard

Description:

Incentivizes the installation and use of gray water recycling systems and atmospheric water generators in the State by establishing an income tax credit to be administered by the Department of Taxation.  Requires the Department of Business, Economic Development, and Tourism to establish a rebate program.  Requires the State Building Code Council to adopt certain standards on gray water recycling systems and atmospheric water generators in the State.

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. 635

Honolulu, Hawaii

RE:    S.B. No. 547

       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 Agriculture and Environment, Public Safety and Military Affairs, and Economic Development and Tourism, to which was referred S.B. No. 547 entitled:

"A BILL FOR AN ACT RELATING TO WATER CONSERVATION,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish a Water Conservation Income Tax Credit to be administered by the Department of Taxation;

     (2)  Require the Department of Business, Economic Development, and Tourism to establish a rebate program for gray water recycling systems and atmospheric water generators; and

     (3)  Require the State Building Code Council to adopt certain standards on gray water recycling systems and atmospheric water generators in the State.

     Your Committees received testimony in support of this measure from Hawaiʻi Food+ Policy, Eco Technology, and ten individuals.

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

     Your Committees find that Hawaii faces ongoing challenges related to water scarcity due to chronic drought conditions and increasing demands on its water resources.  Your Committees believe that promoting water conservation technologies is essential for ensuring a sustainable and secure water future for the State.  This measure incentivizes the installation and use of gray water recycling systems and atmospheric water generators by offering tax credits and rebates, particularly to low-income households, for the installation of these water conservation technologies, and further facilitates the use of atmospheric water generators by establishing a phased strategy to adopt certain safety and efficiency standards for these water conservation systems in the State.

     Your Committees have amended this measure by:

     (1)  Inserting language to clarify the process to claim the Water Conservation Tax Credit for entities;

     (2)  Clarifying that the Water Conservation Tax Credit and rebate program apply to NSF/ANSI 350-certified gray water recycling systems or atmospheric water generators that meet NSF P343 test results and component standards, and the related costs incurred for installation;

     (3)  Limiting claims for the Water Conservation Tax Credit to five years after a water conservation system is placed into service;

     (4)  Specifying that the initial taxable year in which the Water Conservation Tax Credit may be claimed is the taxable year in which the water conservation system is placed in service;

     (5)  Inserting definitions for "area median income", "NSF/ANSI 350-certified gray water recycling system effluent", and "water conservation system";

     (6)  Amending definitions for "low-income homeowner" and "NSF/ANSI 350-certified";

     (7)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (8)  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 Agriculture and Environment, Public Safety and Military Affairs, and Economic Development and Tourism that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 547, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 547, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Agriculture and Environment, Public Safety and Military Affairs, and Economic Development and Tourism,