Income Tax Credit, Ethanol

Provides an income tax credit for the production of fuel grade
ethanol produced at a qualifying ethanol production facility
located in Hawaii.  (HB2204 HD2)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that ethanol can be
 2 produced from agricultural crops or its byproducts, municipal
 3 solid wastes, or other low or no value products.  This offers
 4 opportunities in Hawaii to establish businesses that can use
 5 indigenous feedstocks to produce ethanol, while benefiting the
 6 economy and environment and helping to decrease Hawaii's
 7 dependence on imported petroleum.
 8      Ethanol can be mixed with gasoline up to a ten per cent
 9 blend without changing the performance or operating reliability
10 of gasoline powered vehicles.  Ethanol may also be blended with
11 diesel or waste cooking oils that are produced from crops to
12 produce biodiesel as a replacement for diesel fuel.
13      As sugar producers in Hawaii face declining market prices
14 and Hawaii's agriculture land base deteriorates irreversibly to
15 nonagricultural uses, the integration of ethanol production with
16 the sugar industry can result in economic improvements that will
17 contribute to the long-term stability and sustainability of that
18 industry.
19      Further, in addition to traditional methods of producing
20 ethanol from molasses and sugar products, newly-developed

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 1 technology can also convert bagasse crop residues, newspaper,
 2 municipal solid waste, and other underutilized materials to
 3 ethanol.  As the cost of locating new landfills rises and
 4 pollution is of greater concern, the conversion of these wastes
 5 to ethanol can help reduce waste disposal problems.
 6      The legislature finds that the development of new
 7 infrastructure to maximize ethanol opportunities can be costly.
 8 Incentives are needed to stimulate private sector investments
 9 required to develop this type of opportunity in Hawaii.  Job
10 creation, environmental public benefits, and economic
11 opportunities that result from the granting of this incentive
12 will far outweigh the costs.
13      The purpose of this Act is to provide an income tax credit
14 to encourage private sector investment in Hawaii-based ethanol
15 production facilities.
16      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
17 by adding a new section to be appropriately designated and to
18 read as follows:
19      "235-     Ethanol producer income tax credit.  (a)  There
20 shall be allowed to each taxpayer subject to the taxes imposed by
21 this chapter, an income tax credit that shall be applied to the
22 taxpayer's net income tax liability, if any, imposed by this
23 chapter for the taxable year in which the credit is properly

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                                     H.B. NO.           H.D. 2

 1 claimed.  The amount of the credit shall be    cents per gallon
 2 of qualifying ethanol production of fuel grade ethanol produced
 3 at a qualifying ethanol production facility.
 4      (b)  The credit allowed under this section shall be claimed
 5 against the net income tax liability for the taxable year;
 6 provided that each qualified ethanol producer shall be eligible
 7 for the credit for a maximum period of ten years beginning from
 8 the first taxable year in which the credit is claimed.
 9      (c)  If the tax credit under this section exceeds the
10 taxpayer's income tax liability, the excess of credit over
11 liability shall be refunded to the taxpayer; provided that no
12 refunds or payments on account of the tax credit allowed by this
13 section shall be made for amounts less than $1.
14      (d)  The director of taxation shall prepare forms as may be
15 necessary to claim a credit under this section.  The director may
16 also require the taxpayer to furnish information to ascertain the
17 validity of the claim for credit made under this section.
18      (e)  As used in this section:
19      "Net income tax liability" means net income tax liability
20 reduced by all other credits allowed under this chapter.
21      "Qualifying ethanol production" means ethanol produced from
22 renewable, organic feedstocks, or waste materials, including

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 1 municipal solid waste.  All qualifying production shall be
 2 fermented, distilled, and dehydrated at the facility.
 3      "Qualifying ethanol production facility" means a facility
 4 located in Hawaii that produces motor fuel grade ethanol meeting
 5 the minimum specifications by the American Society of Testing and
 6 Materials Standard D-4806, as amended."
 7      SECTION 3.  New statutory material is underscored.
 8      SECTION 4.  This Act, upon its approval, shall apply to
 9 taxable years beginning after December 31, 2000.