SB 697: RELATING TO AN INCOME TAX CREDIT.

A BILL FOR AN ACT

RELATING TO AN INCOME TAX CREDIT.

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 also finds that the natural features surrounding the State, including cooler surrounding waters, lower-level trade winds, and stronger upper-level winds in the opposite direction, have protected the State by tearing apart approaching hurricanes.  However, the warming waters and the loss of two days of trade winds each year for the past fifty years have eroded the number of days the State enjoys those protective features to only half of the days of the year.

     The legislature finds that the increased risk to 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 will 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 a Category 1 hurricane.

     Therefore, the legislature believes there is a deep moral obligation to the people of Hawaii and future generations for the State to encourage homeowners to prepare their homes to withstand hurricanes with sustained winds in excess of two hundred miles per hour.

     Accordingly, the purpose of this Act is to establish a nonrefundable income tax credit to financially assist qualified homeowners with the installation of approved wind resistive devices for hurricane preparedness of their homes.

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

     "§235-    Wind 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 wind 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       per cent of the actual costs incurred by the taxpayer for the wind resistance retrofit project, including the costs of construction to make the taxpayer's primary residence meet specified wind resistance standards determined pursuant to subsection (c); provided that no payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

     (c)  The standards for eligibility for the tax credit shall be determined by the insurance commissioner or the insurance commissioner's designee by rule.  The taxpayer shall apply to the insurance division of the department of commerce and consumer affairs to pre-certify eligible wind resistance retrofit credit costs before wind resistance retrofit work begins.  The insurance division shall cap the number of credits certified to two thousand in the first year of eligibility and four thousand in the second year of eligibility.

     (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."

     SECTION 3.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the pre-certification of the wind resistance retrofit tax credits, established pursuant to section 2 of this Act.

     The sums appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2050; provided that this Act, upon its approval, shall apply to taxable years beginning after December 31, 2025; provided further that this Act shall be repealed on January 1, 2028.

Report Title:

DOTAX; DCCA; Income Tax Credit; Wind Resistance Retrofit; Hurricane Preparedness; Insurance; Appropriations

Description:

Establishes a nonrefundable individual income tax credit for expenses paid to retrofit a residence with wind resistive devices.  Requires the Department of Taxation to prepare forms.  Requires the Department of Commerce and Consumer Affairs to pre-certify claims.  Appropriates funds.  Applies to taxable years beginning after 12/31/2025.  Sunsets 1/1/2028.  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 an income tax credit.

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 also finds that the natural features surrounding the State, including cooler surrounding waters, lower-level trade winds, and stronger upper-level winds in the opposite direction, have protected the State by tearing apart approaching hurricanes.  However, the warming waters and the loss of two days of trade winds each year for the past fifty years have eroded the number of days the State enjoys those protective features to only half of the days of the year.

     The legislature finds that the increased risk to 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 will 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 a Category 1 hurricane.

     Therefore, the legislature believes there is a deep moral obligation to the people of Hawaii and future generations for the State to encourage homeowners to prepare their homes to withstand hurricanes with sustained winds in excess of two hundred miles per hour.

     Accordingly, the purpose of this Act is to establish a nonrefundable income tax credit to financially assist qualified homeowners with the installation of approved wind resistive devices for hurricane preparedness of their homes.

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

     "§235-     Wind 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 wind 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 $40,000 or the actual costs incurred by the taxpayer for the wind resistance retrofit project, whichever is less, including the costs of construction to make the taxpayer's primary residence meet specified wind resistance standards determined pursuant to subsection (c); provided that no payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

     (c)  The standards for eligibility for the tax credit shall be determined by the insurance commissioner or the insurance commissioner's designee by rule.  The taxpayer shall apply to the insurance division of the department of commerce and consumer affairs to pre-certify eligible wind resistance retrofit credit costs before wind resistance retrofit work begins.  The insurance division shall cap the number of credits certified to two thousand in the first year of eligibility and four thousand in the second year of eligibility.

     (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.

     (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."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2024.

Report Title:

Income Tax Credit; Wind Resistance Retrofit; Hurricane Preparedness; Insurance; DCCA; DOTAX

Description:

Establishes a nonrefundable individual income tax credit for expenses paid to retrofit a residence with wind resistive devices.

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. 169

Honolulu, Hawaii

RE:    S.B. No. 697

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 697 entitled:

"A BILL FOR AN ACT RELATING TO AN INCOME TAX CREDIT,"

begs leave to report as follows:

     The purpose and intent of this measure is to establish a nonrefundable individual income tax credit for expenses paid to retrofit a residence with wind resistive devices.

     Your Committee received testimony in support of this measure from the Department of Commerce and Consumer Affairs, Hawaiʻi Emergency Management Agency, National Association of Mutual Insurance Companies, Hawaii Insurers Council, and three individuals.

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

     Your Committee finds that the State is prone to an increasing number of catastrophic weather events, including hurricanes, that may cause significant damage from high force winds.  By allowing residents to offset costs to retrofit their properties with wind-resistant devices, households and communities statewide can mitigate personal risk and prevent or reduce the impacts of natural disasters, and potentially make their properties more insurable.  Your Committee further finds that, while public safety is of paramount importance, ensuring proper usage of financial incentives is necessary to prevent potential abuse.  Clarifying the terms of the tax credit proposed by this measure will help establish eligibility while preventing lost revenue to the State.  Amendments to this measure are therefore necessary to address this concern.

     Accordingly, your Committee has amended this measure by:

     (1)  Changing the amount of the wind resistance retrofit tax credit from the lesser of $40,000 or actual costs to an unspecified percentage of costs;

     (2)  Providing that no credit issued under the wind resistance retrofit tax credit may be carried forward for an unspecified number of years;

     (3)  Inserting a blank appropriation to the Department of Commerce and Consumer Affairs to pre-certify wind resistance retrofit tax credit claims;

     (4)  Changing the wind resistance retrofit tax credit to apply to taxable years beginning after December 31, 2025;

     (5)  Inserting a sunset date of January 1, 2028;

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

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

     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. 697, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 697, 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,