Bill Text: HI SB2342 | 2014 | Regular Session | Introduced
Bill Title: Biofuels Facility; Nameplate Capacity; Certified Credits; Construction Industry Task Force
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-01-21 - Referred to ENE/EGH, WAM. [SB2342 Detail]
Download: Hawaii-2014-SB2342-Introduced.html
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THE SENATE |
S.B. NO. |
2342 |
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TWENTY-SEVENTH LEGISLATURE, 2014 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to biofuel facilities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. In 2008, Hawaii imported 41.5 million barrels of crude oil at a cost and loss to the State's economy of approximately $4,100,000,000. Unfortunately, well intended discussions and plans over many years have not been fruitful, and the outflow of Hawaii's scarce dollars for offshore fuel purchases continues unabated. The legislature finds that it is time for meaningful action that can result in significant, near-term commercial production of biomass-based fuels in Hawaii.
Given Hawaii's growing energy and economic security needs, it is imperative that Hawaii begin in earnest to generate its own fuel from local feedstock production and biofuel conversion. Hawaii's climate and rich natural resources provide a solid foundation upon which this local industry can be built and successfully sustained. Advanced and second generation feedstocks including sugarcane, sweet sorghum, and algae hold tremendous potential to displace fossil fuel imports given their relatively low input requirements, exceptionally high yields, and potential to produce a portfolio of products including liquid fuels, renewable power, feed, and other bio-based co-products through various bioconversion pathways.
Notwithstanding its great potential to reduce fossil fuel imports and stimulate the local economy, bio-based fuel production in Hawaii can only be realized through near term initial investments in feedstock production and bioconversion facilities. While the existing ethanol facility tax credit under section 235-110.3, Hawaii Revised Statutes, was created to provide such support, its scope limits the State's ability to diversify its fuel mix and displace other imported fossil fuels upon which Hawaii is critically dependent, including but not limited to diesel and aviation fuel. For example, in 2008 alone, Hawaii consumed over 208.4 million gallons of highway and off-highway diesel at an average cost per gallon of $4.63, resulting in an approximate outflow of $965,000,000 based on statistics from the department of business, economic development, and tourism. The State consumed an additional 195 million gallons of aviation fuel at an average of $3.08 per gallon, for another $600,600,000 in estimated outflows over the same period. Expanding production of bio-based fuel capable of displacing gasoline and diesel fuels is imperative if Hawaii is to increase its energy security and meet its stated renewable energy targets.
Hawaii's ability to secure the substantial capital required for large-scale commercial facilities requires providing a degree of assurance to private investors (banks, organizations and individuals) that they will be able to recover their investment within a reasonable time horizon. Extending the current ethanol facility tax credit to incorporate biofuels more broadly would help to attract a broader set of investors and provide additional financial support needed to stimulate and diversify Hawaii's renewable energy base.
In 2009, the legislature adopted senate concurrent resolution no. 132, S.D. 1, which established the construction industry task force (task force) to determine the economic value of the construction industry in Hawaii. As directed in the concurrent resolution, the task force was charged with developing a series of recommendations to stimulate the construction industry and create new jobs in the local construction industry. Unfortunately, to date, many of the task force's recommendations have yet to be enacted by the legislature. The intent of this Act is to enact and implement one of the recommendations of the task force in an effort to support the local construction industry.
This Act provides tax credit incentives designed to attract needed renewable fuel investment to the State, minimize capital investment requirements of production facilities, and retain billions of dollars in the State's economy. The incentive program would be self-sustaining as the additional business and income tax revenue generated by the industry would be applied to future tax credits. As such, the legislation directly ties the incentives to the local market, enables the removal of the current 40 million gallon production cap, and provides support to a range of advanced and more efficient production technologies.
The purpose of this Act is to enhance Hawaii's economic vitality through renewable energy resources that are self-sufficient, affordable, and produced locally.
SECTION 2. Section 235-110.3, Hawaii Revised Statutes, is amended to read as follows:
"§235-110.3 [Ethanol] Biofuel
facility tax credit. (a) Each year during the credit period, there shall
be allowed to each taxpayer subject to the taxes imposed by this chapter, [an
ethanol] a biofuel facility 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 [qualified ethanol] qualifying
biofuel production facility, the annual dollar amount of the [ethanol]
biofuel facility tax credit during the eight-year period shall be equal
to thirty per cent of its nameplate capacity [if the nameplate capacity is
greater than five hundred thousand but less than] up to the first
fifteen million gallons[.] of production. A taxpayer may claim
this credit for each qualifying [ethanol] biofuel production
facility; provided that:
(1) The claim for this credit by any taxpayer of a
qualifying [ethanol] biofuel production facility shall not exceed
one hundred per cent of the total of all investments made by the taxpayer in
the qualifying [ethanol] biofuel production facility during construction
of the facility and the credit period;
(2) The qualifying [ethanol] biofuel
production facility operated at a level of production of at least seventy-five
per cent of its nameplate capacity on an annualized basis;
(3) The qualifying biofuel production facility shall be located within the State and use locally grown feedstock for at least seventy-five per cent of its production output;
[(3)] (4) The qualifying [ethanol]
biofuel production facility [is in] commences production
on or after January 1, 2015, and before January 1, [2017;] 2020;
and
[(4)] (5) No taxpayer that claims the
credit under this section shall claim any other tax credit under this chapter
for the same taxable year.
(b) As used in this section:
"Credit period" means a maximum
period of eight years beginning from the first taxable year in which the
qualifying [ethanol] biofuel production facility begins
production even if actual production is not at seventy-five per cent of
nameplate capacity.
"Investment" means a nonrefundable
capital expenditure related to the development and construction of any
qualifying [ethanol] biofuel production facility, including
processing equipment, waste treatment systems, pipelines, and liquid storage
tanks at the facility or remote locations, including expansions or modifications.
Capital expenditures shall be those direct and certain indirect costs
determined in accordance with section 263A (with respect to capitalization
and inclusion in inventory costs of certain expenses) of the Internal
Revenue Code, relating to uniform capitalization costs, but shall not include
expenses for compensation paid to officers of the taxpayer, pension and other
related costs, rent for land, the costs of repairing and maintaining the
equipment or facilities, inventory, training of operating personnel,
utility costs during construction, property taxes, costs relating to
negotiation of commercial agreements not related to development or
construction, or service costs that can be identified specifically with a
service department or function or that directly benefit or are incurred by
reason of a service department or function. For the purposes of determining a
capital expenditure under this section, the provisions of section 263A of the
Internal Revenue Code shall apply as it read on March 1, 2004. For purposes of
this section, investment excludes land costs and includes any investment for
which the taxpayer is at risk, as that term is used in section 465 (with
respect to deductions limited to amount at risk) of the Internal Revenue
Code [(with respect to deductions limited to amount at risk)].
"Nameplate capacity" means the
qualifying [ethanol] biofuel production facility's production
design capacity, in gallons of [motor] fuel grade [ethanol] biofuel
per year. Nameplate capacity shall be determined by the facility owner and
shall not exceed the amount of production actually recorded during a
consecutive seven-day period multiplied by fifty-two.
"Net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.
"Qualifying [ethanol] biofuel
production" means ethanol, biodiesel, biobutanol, bio-based diesel,
bio-based gasoline, or bio-based jet fuel produced from renewable[, organic]
feedstocks[,] or waste materials, including fats, oils, grease,
algae, and municipal solid waste. All qualifying production shall be
fermented, distilled, gasified, or produced by physical chemical conversion
methods such as reformation and catalytic conversion and dehydrated at the
facility.
"Qualifying [ethanol] biofuel
production facility" or "facility" means a facility located in
Hawaii [which] that, if intended for transport vehicles, produces
[motor] fuel grade [ethanol] biofuel meeting the minimum
specifications by [the American Society of Testing and Materials] ASTM
International standard D-4806, or D-6751, as amended.
(c) In the case of a taxable year in which the
cumulative claims for the credit by the taxpayer of a qualifying [ethanol]
biofuel production facility exceeds the cumulative investment made in
the qualifying [ethanol] biofuel production facility by the
taxpayer, only that portion that does not exceed the cumulative investment
shall be claimed and allowed.
(d) The department of business, economic development, and tourism shall:
(1) Maintain records of the total amount of investment made by each taxpayer in a facility;
(2) Verify the amount of the qualifying investment;
(3) Total all qualifying and cumulative investments that the department of business, economic development, and tourism certifies; and
(4) Certify the total amount of the tax credit for each taxable year and the cumulative amount of the tax credit during the credit period.
Upon each determination, the department of business, economic development, and tourism shall issue a certificate to the taxpayer verifying the qualifying investment amounts, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period. The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation. Notwithstanding the department of business, economic development, and tourism's certification authority under this section, the director of taxation may audit and adjust certification to conform to the facts.
If in any year, the annual amount of certified
credits reaches [$12,000,000] $20,000,000 in the aggregate, the
department of business, economic development, and tourism shall immediately
discontinue certifying credits and notify the department of taxation. In no
instance shall the total amount of certified credits exceed [$12,000,000]
$20,000,000 per year. Notwithstanding any other law to the contrary,
this information shall be available for public inspection and dissemination
under chapter 92F.
(e) If the credit under this section exceeds
the taxpayer's income tax liability, the excess of credit over liability shall
be refunded to the taxpayer; provided 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 a credit under this section [must] 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 shall constitute a waiver of the right to claim the
credit.
(f) If a qualifying [ethanol] biofuel
production facility or an interest therein is acquired by a taxpayer prior to
the expiration of the credit period, the credit allowable under subsection (a)
for any period after [such] the acquisition shall be equal to the
credit that would have been allowable under subsection (a) to the prior
taxpayer had the taxpayer not disposed of the interest. If an interest is
disposed of during any year for which the credit is allowable under subsection
(a), the credit shall be allowable between the parties on the basis of the
number of days during the year the interest was held by each taxpayer. In no
case shall the credit allowed under subsection (a) be allowed after the
expiration of the credit period.
[(g) Once the total nameplate capacities of
qualifying ethanol production facilities built within the State reaches or
exceeds a level of forty million gallons per year, credits under this section
shall not be allowed for new ethanol production facilities. If a new facility's
production capacity would cause the statewide ethanol production capacity to
exceed forty million gallons per year, only the ethanol production capacity
that does not exceed the statewide forty million gallon per year level shall be
eligible for the credit.
(h)] (g) Prior to construction
of any new qualifying [ethanol] biofuel production facility, the
taxpayer shall provide written notice of the taxpayer's intention to begin
construction of a qualifying [ethanol] biofuel production
facility. The information shall be provided to the department of taxation and
the department of business, economic development, and tourism on forms provided
by the department of business, economic development, and tourism, and shall
include information on the taxpayer, facility location, facility production
capacity, anticipated production start date, and the taxpayer's contact
information. Notwithstanding any other law to the contrary, this information
shall be available for public inspection and dissemination under chapter 92F.
[(i)] (h) The taxpayer shall
provide written notice to the director of taxation and the director of
business, economic development, and tourism within thirty days following the
start of production. The notice shall include the production start date and
expected [ethanol fuel] biofuel production for the next
twenty-four months. Notwithstanding any other law to the contrary, this
information shall be available for public inspection and dissemination under
chapter 92F.
[(j)] (i) If a qualifying [ethanol]
biofuel production facility fails to achieve an average annual
production of at least seventy-five per cent of its nameplate capacity for two
consecutive years, the stated capacity of that facility may be revised by the
director of business, economic development, and tourism to reflect actual
production for the purposes of determining [statewide production capacity
under subsection (g) and] allowable credits for that facility under
subsection (a). Notwithstanding any other law to the contrary, this
information shall be available for public inspection and dissemination under
chapter 92F.
[(k)] (j) Each calendar year
during the credit period, the taxpayer shall provide information to the director
of business, economic development, and tourism on the number of gallons of [ethanol]
biofuel produced and sold during the previous calendar year, how much
was sold in Hawaii versus overseas, percentage of Hawaii-grown feedstocks
and other feedstocks used for [ethanol] biofuel
production, the number of employees of the facility, and the projected number
of gallons of [ethanol] biofuel production for the succeeding
year.
[(l)] (k) In the case of a
partnership, S corporation, estate, or trust, the tax credit allowable is for
every qualifying [ethanol] biofuel production facility. The cost
upon which the tax credit is computed shall be determined at the entity level.
Distribution and share of credit shall be determined pursuant to section
235-110.7(a).
[(m)] (l) Following each year in
which a credit under this section has been claimed, the director of business,
economic development, and tourism shall submit a written report to the governor
and legislature regarding the production and sale of [ethanol.] biofuel.
The report shall include:
(1) The number, location, and nameplate capacities of
qualifying [ethanol] biofuel production facilities in the State;
(2) The total number of gallons of [ethanol] biofuel
produced and sold during the previous year; and
(3) The projected number of gallons of [ethanol]
biofuel production for the succeeding year.
[(n)] (m) The director of
taxation shall prepare forms that may be necessary to claim a credit under this
section. Notwithstanding the department of business, economic development, and
tourism's certification authority under this section, the director may audit
and adjust certification to conform to the facts. The director may also
require the taxpayer to furnish information to ascertain the validity of the
claim for credit made under this section and may adopt rules necessary to
effectuate the purposes of this section pursuant to chapter 91."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2014.
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INTRODUCED BY: |
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Report Title:
Biofuels Facility; Nameplate Capacity; Certified Credits; Construction Industry Task Force
Description:
Expands the facility tax credit to include various biofuels; amends the definition of nameplate capacity; requires a qualifying facility to be located within the State and utilize locally grown feed stock for at least seventy-five per cent of its production output; increases the maximum annual amount of certified credits from $12,000,000 to $20,000,000; and removes the 40,000,000 gallon production per year cap. Applies to taxable years after 12/31/14.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
