REPORT TITLE:
Income Tax Credit, Ethanol


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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2204
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO ETHANOL.



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

 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
 

 
Page 2                                                     2204
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 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
 

 
Page 3                                                     2204
                                     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
 

 
 
 
Page 4                                                     2204
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 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.