Bill Text: HI SB995 | 2025 | Regular Session | Introduced
Bill Title: Relating To Renewable Fuel.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Introduced) 2025-01-17 - Introduced. [SB995 Detail]
Download: Hawaii-2025-SB995-Introduced.html
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THE SENATE |
S.B. NO. |
995 |
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THIRTY-THIRD LEGISLATURE, 2025 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to renewable fuel.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that Hawaii is at a critical crossroad in the State's ongoing quest to reduce greenhouse gas emissions. In 2021, Hawaii became the first state in the nation to declare a climate emergency and is now poised to lead by example in mitigating the impacts of climate change through adaptive and preemptive actions to transition toward a multi-sector decarbonized economy. This is aligned with the ambitious Hawaii clean energy initiative, which seeks to achieve the nation's first-ever one hundred per cent renewable portfolio standards by the year 2045. The legislature acknowledged the necessity to analyze pathways and develop recommendations to achieve economy-wide decarbonization goals by adopting Act 238, Sessions Laws of Hawaii 2022.
The legislature additionally finds that the State has made progress in reducing greenhouse gas pathways by adopting alternatives to fossil fuel for electrical power generation and introducing alternatives for ground transportation, including the use of electric vehicles. Additionally, sustainable aviation fuel for air transportation is another pathway that deserves more robust exploration. Hawaii has the opportunity to accelerate its progress toward achieving net-zero or net-negative targets as quickly as practicable, but no later than 2045. As an island state heavily reliant on air transportation, it is important to provide incentives within the airline industry to encourage practices that lower carbon footprints.
The legislature acknowledges that total jet fuel consumption in Hawaii is seventeen million barrels (seven hundred fourteen million gallons) per year between civilian and military consumption. To provide greater energy security for the State, the legislature finds that instead of investing in imported crude oil or refined petroleum products and perpetuating the State's dependence on fossil fuels, local sustainable fuel production will allow investment in the local economy and support job creation.
The legislature further acknowledges that while sustainable aviation fuel offers multiple benefits, the cost of its production is several times that of conventional fuels. Thus, creating a regulatory framework to support local sustainable aviation fuel production is critical. As with other states, Hawaii must look at policies that will work in tandem with federal policies to make sustainable aviation fuel production sustainable within the State.
Accordingly, the purpose of this Act is to advance Hawaii's commitment to reducing greenhouse gas emissions by:
(1) Establishing
the sustainable aviation fuel import tax credit;
(2) Increasing
the renewable fuels production tax credit amount;
(3) Repealing
the:
(A) Cap amount of claimable renewable fuels production tax credit;
(B) Requirement that the tax credit be claimed for fuels with lifecycle emissions below fossil fuels; and
(C) Prohibition on claiming other tax credits for the cost incurred to produce renewable fuels;
(4) Specifying
that the renewable fuels production tax credit can only be claimed for fuels
that meet the certain thresholds;
(5) Adding
an additional renewable fuels production tax credit value;
(6) Clarifying
that a taxpayer who previously claimed a renewable fuels production tax credit
may claim another one for taxable years beginning after December 31, 2024;
(7) Clarifying
and expanding required information in the certified statement for the renewable
fuels production tax credit; and
(8) Repealing the requirement that the Hawaii state energy office provide the taxpayer with a determination of whether the lifecycle greenhouse gas emissions for each type of qualified fuel produced is lower than that of fossil fuels.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part VI to be appropriately designated and to read as follows:
"§235- Sustainable
aviation fuel import tax credit. (a) There shall be allowed to each taxpayer
subject to the taxes imposed by this chapter a sustainable aviation fuel income
tax credit that shall be deducted 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.
For each taxpayer importing
sustainable aviation fuel into the State, the amount of the credit shall be $1 per
gallon of sustainable aviation fuel sold for distribution in the State;
provided that the tax credit shall only be claimed for sustainable aviation
fuel that meets the lifecycle greenhouse gas emissions reduction threshold.
(b) In the case of a partnership, S corporation,
estate, or trust, distribution and share of the renewable fuels production tax
credit shall be determined pursuant to section 704(b) (with respect to a
partner's distributive share) of the Internal Revenue Code of 1986, as
amended. For a fiscal year taxpayer, the
taxpayer shall report the credit in the taxable year in which the calendar year
end is included.
(c) No later than thirty days following the close
of the calendar year, every taxpayer claiming a credit under this section shall
complete and file an independent, third-party certified statement, at the
taxpayer's sole expense, with and in the form prescribed by the Hawaii state
energy office, providing the following information:
(1) The type and
quantity of sustainable aviation fuel imported and sold during the previous
calendar year;
(2) The feedstock
used to produce the imported sustainable aviation fuel;
(3) The proposed
total amount of credit to which the taxpayer is entitled for each calendar year
and the cumulative amount of the tax credit the taxpayer received the previous
calendar year;
(4) The number of
full-time and part-time employees of the facility and those employees' states
of residency, totaled per state;
(5) The number and
location of all renewable fuel facilities within and outside the State;
(6) The lifecycle
greenhouse gas emissions in kilograms of carbon dioxide equivalent per million
British thermal units for each type of qualified fuel imported; and
(7) The lifecycle
greenhouse gas emissions reported to the United States Department of the
Treasury if different than the emissions reported under paragraph (6).
(d) Within thirty calendar days after the due
date of the statement required under subsection (c), the Hawaii state energy
office shall:
(1) Acknowledge, in
writing, receipt of the statement; and
(2) Issue a certificate
to the taxpayer reporting the:
(A) Amount
of sustainable aviation fuel imported and sold;
(B) Amount
of credit that the taxpayer is entitled to claim for the previous calendar
year, inclusive of any carryover amount;
(C) Amount
of credit that the taxpayer is entitled to claim for any subsequent calendar
year; and
(D) Cumulative
amount of the tax credit during the previous calendar year.
(e) The taxpayer shall file the certificate
issued under subsection (d)(2) with the taxpayer's tax return with the
department of taxation. The director of
taxation may audit and adjust the certification to conform to the facts.
(f) The total amount of tax credits allowed under
this section for all eligible taxpayers shall not exceed:
(1) $5,000,000 for
calendar year 2025;
(2) $10,000,000 for
calendar year 2026;
(3) $20,000,000 for
calendar year 2027;
(4) $30,000,000 for
calendar year 2028; and
(5) $50,000,000 for
calendar years 2029 to 2036.
In the event that the credit claims under this
section exceed the total credits allowed for all eligible taxpayers in any
given calendar year, the total credits allowed shall be allocated
proportionally to each eligible taxpayer in proportion to the amount of such
taxpayer's credits under this section for the calendar year.
To the extent that the
limitations of this subsection reduce the amount of a taxpayer's credit, the
amount of the reduction shall be available to the taxpayer to be used as a
credit in the next subsequent calendar year but shall not be carried over for
any calendar year thereafter; provided that the carryover credit shall subject
to the limitations of this subsection.
(g) Notwithstanding any other law to the
contrary, the information collected and compiled by the Hawaii state energy
office under subsections (c) and (d) shall be available for public inspection
and dissemination pursuant to chapter 92F.
(h) If the 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 net income tax liability in
subsequent years until exhausted, unless otherwise elected by the taxpayer
pursuant to subsection (i) or (j). All
claims for a credit under this section 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 or to provide the certified statement required
under subsection (c) shall constitute a waiver of the right to claim the
credit.
(i) A taxpayer may elect to reduce the eligible
credit amount by thirty per cent and if this reduced amount exceeds the amount
of income tax payment due from the taxpayer, the excess of the credit amount
over payments due shall be refunded to the taxpayer; provided that tax credit
amounts properly claimed by a taxpayer who has no income tax liability shall be
paid to the taxpayer; provided further that no refund on account of the tax
credit allowed by this section shall be made for amounts less than $1.
(j) Notwithstanding subsection (i), an individual
taxpayer may elect to have any excess of the credit over payments due refunded
to the taxpayer, if:
(1) All of the
taxpayer's income is exempt from taxation under section 235-7(a)(2) or (3); or
(2) The taxpayer's
adjusted gross income is $20,000 or less or, if filing a tax return as married
filing jointly, $40,000 or less;
provided that tax credits properly claimed by a
taxpayer who has no income tax liability shall be paid to the taxpayer;
provided further that no refund on account of the tax credit allowed by this
section shall be made for amounts less than $1.
A married couple who does not
file a joint tax return shall only be entitled to make this election to the
extent that they would have been entitled to make the election had they filed a
joint tax return.
The election required by this
subsection shall be made in a manner prescribed by the director of taxation on
the taxpayer's return for the taxable year in which the credit is claimed. An election once made is irrevocable.
No more than one taxpayer shall
be allowed to claim a tax credit for the same purchase of eligible sustainable
aviation fuel.
(k) Before the importation of any sustainable
aviation fuel for the calendar year, the taxpayer shall provide written notice of
the taxpayer's intention to begin importation of sustainable aviation fuel to
the department of taxation and the Hawaii state energy office. The written notice shall include information
on the taxpayer, facility location, facility capacity, anticipated importation
start date, and the taxpayer's contact information. Notwithstanding any other law to the
contrary, the written notice under this subsection, including taxpayer and
facility information, shall be made available for public inspection and
dissemination pursuant to chapter 92F.
(l) The taxpayer shall provide written notice to
the director of taxation and the chief energy officer of the Hawaii state
energy office within thirty days following the start of importation. The notice shall include the importation
start date and expected sustainable aviation fuel importation for the next
twelve months. Notwithstanding any other
law to the contrary, the written notice described in this subsection shall be made
available for public inspection and dissemination pursuant to chapter 92F.
(m) Following each calendar year in which a
credit under this section has been claimed, the chief energy officer of the
Hawaii state energy office shall submit a written report to the governor and
legislature regarding the importation and sale of sustainable aviation
fuel. The report shall include:
(1) The number and
location of sustainable fuel facilities in the State and outside the State that
have claimed a credit under this section;
(2) The total
number gallons of sustainable aviation fuel imported and sold during the
previous calendar year; and
(3) The projected
number of gallons of sustainable aviation fuel imported for the succeeding
year.
(n) 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 necessary to effectuate the purposes of this section.
(o) As used in this section:
"Lifecycle greenhouse
gas emissions" has the same meaning as in section 235-110.32.
"Sustainable aviation fuel"
has the same meaning as in section 235-110.32."
SECTION 3. Section 235-110.32, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) Each year during the credit period, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter a renewable fuels production 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 taxpayer producing
renewable fuels, the annual dollar amount of the
renewable fuels production tax credit during the ten-year credit period shall
be equal to [20] 35 cents per seventy-six
thousand British thermal units of renewable fuels using the lower heating
value sold for distribution in the State; provided that [the]:
(1) The taxpayer's
production of renewable fuels is not less than two billion five hundred million
British thermal units of renewable fuels per calendar year; [provided
further that the amount of the tax credit claimed under this section by a
taxpayer shall not exceed $3,500,000 per taxable year; provided further that
the tax credit shall only be claimed for fuels with lifecycle emissions below
that of fossil fuels. No other tax
credit may be claimed under this chapter for the costs incurred to produce the
renewable fuels that are used to properly claim a tax credit under this section
for the taxable year.]
(2) The tax credit shall only be claimed
for fuels that meet the lifecycle greenhouse gas emissions reduction threshold
and product transportation emissions threshold;
(3) There shall be
an additional credit value of $1 per diesel gallon equivalent for low lifecycle
emissions renewable fuels; and
(4) There shall be
an additional credit value equal to $1 per gallon if the renewable fuel is
sustainable aviation fuel.
Each taxpayer, together with all of
its related entities as determined under section 267(b) of the Internal Revenue
Code and all business entities under common control, as determined under
sections 414(b), 414(c), and 1563(a) of the Internal Revenue Code, shall not be
eligible for more than a single [ten-year] credit period[.]; provided
that taxpayers who previously claimed a tax credit under this section before
the effective date of this Act may claim another tax credit for taxable years
beginning after December 31, 2024."
2. By amending subsections (c) and (d) to read:
"(c) No later than thirty days following the close of the calendar year, every taxpayer claiming a credit under this section shall complete and file an independent, third-party certified statement, at the taxpayer's sole expense, with and in the form prescribed by the Hawaii state energy office, providing the following information:
(1) The type, quantity, and British thermal unit value, using the lower heating value, of each qualified fuel, broken down by the type of fuel, produced and sold during the previous calendar year;
(2) The feedstock used for each type of qualified fuel;
(3) The proposed total amount of credit to which the taxpayer is entitled for each calendar year and the cumulative amount of the tax credit the taxpayer received during the credit period;
(4) The number of
full-time and [number of] part-time employees of the facility and those
employees' states of residency, totaled per state;
(5) The number and
location of all renewable fuel production facilities within and outside of the
State; [and]
(6) The lifecycle
greenhouse gas emissions [per] in kilograms of carbon dioxide
equivalent per million British thermal units for each type of qualified
fuel produced[.]; and
(7) The lifecycle
greenhouse gas emissions reported to the United States Department of the
Treasury, if different than the emissions reported pursuant to paragraph (6).
(d) Within thirty calendar days after the due date of the statement required under subsection (c), the Hawaii state energy office shall:
(1) Acknowledge, in
writing, receipt of the statement; and
(2) Issue a
certificate to the taxpayer reporting the amount of renewable fuels produced
and sold, the amount of credit that the taxpayer is entitled to claim for the
previous calendar year, and the cumulative amount of the tax credit during the
credit period[; and
(3) Provide the
taxpayer with a determination of whether the lifecycle greenhouse gas emissions
for each type of qualified fuel produced is lower than that of fossil fuels]."
3. By amending subsection (f) to read:
"(f) The total amount of tax credits allowed under
this section for all eligible taxpayers in any calendar year shall not
exceed [$20,000,000 for all eligible taxpayers in any calendar year.]:
(1) $40,000,000 for
calendar year 2025;
(2) $50,000,000 for
calendar year 2026;
(3) $60,000,000 for
calendar year 2027;
(4) $70,000,000 for
calendar year 2028; and
(5) $80,000,000 for
calendar year 2029 and thereafter.
In the event that the credit claims under this
section exceed [$20,000,000] the total amount allowed for all
eligible taxpayers in any given calendar year, the [$20,000,000] total
amount allowed shall be [divided between all] allocated
proportionally to eligible taxpayers [for that year] in proportion
to the total amount of renewable fuels [produced by all eligible
taxpayers. Upon reaching $20,000,000 in
the aggregate, the Hawaii state energy office shall immediately discontinue
issuing certificates and notify the department of taxation. In no instance shall the total dollar amount
of certificates issued exceed $20,000,000 per calendar year.] production
tax credits under this section for the calendar year. No taxpayer shall be eligible for more than seventy-five
per cent of the total amount allowed in any year. To the extent that the limitations of this subsection
reduce the amount of a taxpayer's credit, the amount of the reduction shall be
available to the taxpayer to be used as a credit in the subsequent calendar
year; provided that the credit shall not be carried over for any calendar year
thereafter; provided further that the carryover credit shall be subject to the
limitations of this subsection."
4. By amending subsection (o) to read:
"(o) As used in this section:
"Credit period" means a maximum
period of ten consecutive years, beginning from the first taxable year in which
a taxpayer begins renewable fuels production at a level of at least two billion
five-hundred million British thermal units of renewable fuels per calendar
year.
"Feedstock transportation
emissions threshold" means the carbon intensity contribution associated
with the oceangoing transportation of the feedstock from the feedstock producer
to the renewable fuel producer is less than grams per
megajoule as determined by the lifecycle greenhouse gas emissions analysis.
"Lifecycle
greenhouse gas emissions" means the aggregate attributional core lifecycle
greenhouse gas emissions values utilizing one of the following:
(1) The most recent
version of the United States Department of Energy's Argonne National
Laboratory's greenhouse gases, regulated emissions, and energy use in
technologies model, including agricultural practices and carbon capture and
sequestration.
(2) Carbon
offsetting and reduction scheme for international aviation; or
(3) Another
lifecycle methodology approved by the Hawaii state energy office.
"Lifecycle greenhouse gas
emissions reduction threshold" means a reduction in lifecycle greenhouse
gas emissions of fifty per cent compared to the fossil fuel for which the
renewable fuel is most likely to replace.
"Low lifecycle emissions
renewable fuels" means renewable fuel that meets the lifecycle greenhouse
gas emissions reduction threshold, product transportation emissions threshold,
and feedstock transportation emissions threshold.
"Net income tax liability" means
income tax liability reduced by all other credits allowed under this chapter.
"Product
transportation emissions threshold" means the carbon intensity
contribution associated with the oceangoing transportation of the finished fuel
from the renewable fuel producer to the final distribution storage facility is
less than grams per megajoule as determined by the
lifecycle greenhouse gas emissions analysis.
"Renewable feedstocks" means:
(1) Biomass crops and other renewable organic material, including but not limited to logs, wood chips, wood pellets, and wood bark;
(2) Agricultural residue;
(3) Oil crops, including but not limited to algae, camelina, canola, jatropha, palm, soybean, and sunflower;
(4) Sugar and starch crops, including but not limited to sugar cane and cassava;
(5) Other agricultural crops;
(6) Grease, fats, tallows, and waste cooking oil;
(7) Food wastes;
(8) Municipal solid
wastes [and], industrial wastes[;], and construction
and demolition wastes;
(9) Water, including
wastewater; [and]
(10) Bio-intermediate
ethanol produced from renewable feedstock; and
[(10)] (11) Animal residues and wastes,
that can be used to generate energy.
"Renewable fuels" means fuels produced from renewable feedstocks; provided that the fuel:
(1) Is sold as a fuel in the State; and
(2) Meets the relevant ASTM International specifications or other industry specifications for the particular fuel, including but not limited to:
(A) Methanol, ethanol, or other alcohols;
(B) Hydrogen;
(C) Biodiesel or renewable diesel;
(D) Biogas;
(E) Other biofuels;
(F) Renewable [jet
fuel or renewable] gasoline[;] or renewable naphtha;
(G) Renewable
propane or renewable liquid petroleum gases;
(H) Sustainable
aviation fuel; or
[(G)] (I) Logs, wood chips, wood pellets, or
wood bark.
"Sustainable aviation fuel"
means liquid fuel that:
(1) Consists of
synthesized hydrocarbons and meets the requirements of the American Society for
Testing and Materials International Standard D7566 or D1655; and
(2) Is derived from biomass resources, waste streams, renewable or zero carbon energy sources, or gaseous carbon oxides."
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2024; provided that section 2 shall be repealed on January 1, 2036.
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INTRODUCED BY: |
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Report Title:
Sustainable Aviation Fuel Import Tax Credit; Renewable Fuels Production Tax Credit
Description:
Establishes the sustainable aviation fuel import tax credit. Increases the renewable fuels production tax credit amount. Repeals the: (1) cap amount of claimable renewable fuels production tax credit; (2) requirement that the tax credit be claimed for fuels with lifecycle emissions below fossil fuels; and (3) prohibition on claiming other tax credits for the cost incurred to produce renewable fuels. Specifies that the renewable fuels production tax credit can only be claimed for fuels that meet the certain thresholds. Adds an additional tax credit value. Clarifies that a taxpayer who previously claimed a renewable fuels production tax credit may claim another one for taxable years beginning after 12/31/2024. Clarifies and expands required information in the certified statement for the tax credit. Repeals the requirement that the Hawaii State Energy Office provide the taxpayer with a determination of whether the lifecycle greenhouse gas emissions for each type of qualified fuel produced is lower than that of fossil fuels.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
