REPORT TITLE:
Construction Waste; Recycling


DESCRIPTION:
Establishes an income tax credit for a percentage of the costs of
recycling construction and demolition waste, including trucking
and transportation costs and recycling processor fees.  Exempts
from the general excise tax the gross proceeds received from the
sale of recycled construction material.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2331
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT
RELATING TO CONSTRUCTION AND DEMOLITION WASTE.



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

 1      SECTION 1.  The legislature finds that landfill space in the
 
 2 State is rapidly decreasing.  As an island state, there is
 
 3 limited available land for landfilling.  In particular,
 
 4 construction and demolition material has been targeted for
 
 5 landfill diversion by the counties because of the significant
 
 6 amount of waste generated by the construction industry.
 
 7      The legislature further finds that the volume of
 
 8 construction and demolition material -- including concrete,
 
 9 asphalt, brick, wood waste, glass, soil, trees, and other waste
 
10 resulting from the construction or demolition of buildings,
 
11 roads, and other structures -- is growing as older buildings are
 
12 being demolished to make way for new ones.  Over the last few
 
13 years on Oahu, a number of major downtown and military structures
 
14 have been torn down as urban densities increase.  The majority of
 
15 this material ends up in Oahu's landfills, although a significant
 
16 amount is disposed of in an increasing number of illegal dumps.
 
17 Studies conducted by the various counties have shown that in
 
18 1995, over two million tons of solid waste was generated in the
 

 
Page 2                                                     2331
                                     H.B. NO.           
                                                        
                                                        


 1 State; of that amount, as much as thirty per cent, or six hundred
 
 2 thousand tons per year, was estimated to be construction and
 
 3 demolition material.
 
 4      Construction and demolition material can be recycled into a
 
 5 number of useful products.  For example, concrete and asphalt can
 
 6 be crushed for use as aggregate base in road construction.  Metal
 
 7 can be sold as scrap to recycling processors.  Untreated wood and
 
 8 green wastes can be used as mulch or processed into compost.  New
 
 9 drywall scrap can be used to amend organic compost or for direct
 
10 land application.  Corrugated cardboard can be recycled into new
 
11 cardboard packaging.  Each of these recycling efforts helps to
 
12 conserve natural resources.
 
13      In addition, a number of materials can be separated and
 
14 reused or sold in their existing form, either at the site itself
 
15 or by other businesses at other sites.  For example, doors,
 
16 windows, fixtures, and equipment may be sold or donated to local
 
17 nonprofit groups for self-help projects.  Selling, donating, or
 
18 exchanging materials may reduce hauling and disposal fees,
 
19 helping both the company and the community.  In addition, there
 
20 can be considerable cost savings for construction and demolition
 
21 contractors who reduce or recycle these materials.  These savings
 
22 are expected to increase as landfill capacity diminishes and
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1 disposal costs increase in the coming years.
 
 2      The State has already enacted legislation requiring the
 
 3 counties to develop policies aimed at reducing the waste sent to
 
 4 landfills.  While the counties' integrated solid waste management
 
 5 plans have helped to divert a significant amount of solid waste
 
 6 from Hawaii's landfills, the legislature finds that there is a
 
 7 continuing need for additional measures to move Hawaii toward
 
 8 sustainable waste management as a first priority and disposal as
 
 9 a final resort.  In particular, it is essential that the
 
10 construction and demolition waste stream be managed through
 
11 source reduction, reuse, and recycling efforts.
 
12      The purpose of this Act is to further encourage the reuse,
 
13 sale, and recycling of construction and demolition materials by:
 
14      (1)  Providing for a temporary income tax credit for the
 
15           costs of recycling construction and demolition waste,
 
16           including trucking and transportation costs and
 
17           recycling processor fees, not exceeding five per cent
 
18           of the total construction and demolition waste
 
19           recycling and transportation costs; and
 
20      (2)  Providing for a temporary general excise tax exemption
 
21           for the gross proceeds received from the sale or resale
 
22           of recycled construction material.
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "235-    Construction and demolition waste; income tax
 
 5 credit.  (a)  For taxable years ending before January 1, 2005,
 
 6 each individual and corporate resident taxpayer who files an
 
 7 individual or corporate net income tax return for a taxable year,
 
 8 may claim a tax credit under this section against the Hawaii
 
 9 state individual or corporate net income tax.  The tax credit may
 
10 be claimed for the costs of recycling construction and demolition
 
11 waste, including trucking and transportation costs and recycling
 
12 processor fees, if any.
 
13      (b)  The amount of the tax credit shall not exceed five per
 
14 cent of the total construction and demolition waste recycling and
 
15 transportation costs.  The credit shall be claimed against net
 
16 income tax liability for the year in which the construction and
 
17 demolition waste was recycled.  Tax credits which exceed the
 
18 taxpayer's income tax liability may be used as a credit against
 
19 the taxpayer's income tax liability in subsequent years until
 
20 exhausted.
 
21      (c)  As used in this subsection:
 
22      "Construction and demolition waste" means solid, largely
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1 inert waste resulting from the construction, repair, demolition,
 
 2 or razing of buildings, roads, and other structures.  The term
 
 3 includes the land clearing debris from the clearing of land for
 
 4 construction, concrete, brick, asphalt, gypsum, wood waste,
 
 5 roofing, roofing paper, glass, ferrous and nonferrous metals,
 
 6 soil, trees, and shrubs.  The term does not include materials
 
 7 contaminated with hazardous substances, asbestos, lead paints,
 
 8 solvents, sealers, adhesives, or similar materials that must be
 
 9 managed as municipal solid waste.
 
10      "Recycling" has the same meaning as defined in section
 
11 342G-1.
 
12      (d)  The director of taxation shall prepare such forms as
 
13 may be necessary to claim a credit under this section.  The
 
14 director may also require the taxpayer to furnish reasonable
 
15 information to ascertain the validity of the claim for credit
 
16 made under this section and may adopt rules necessary to
 
17 effectuate the purposes of this section pursuant to chapter 91.
 
18      (e)  All claims for tax credits under this section,
 
19 including any amended claims, shall be filed on or before the end
 
20 of the twelfth month following the close of the taxable year for
 
21 which the credits may be claimed.  Failure to comply with the
 
22 foregoing provision shall constitute a waiver of the right to
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1 claim the credit."
 
 2      SECTION 3.  Section 237-24.7, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "237-24.7  Additional amounts not taxable.  In addition to
 
 5 the amounts not taxable under section 237-24, this chapter shall
 
 6 not apply to:
 
 7      (1)  Amounts received by the operator of a hotel from the
 
 8           owner of the hotel in amounts equal to and which are
 
 9           disbursed by the operator for employee wages, salaries,
 
10           payroll taxes, insurance premiums, and benefits,
 
11           including retirement, vacation, sick pay, and health
 
12           benefits.  As used in this paragraph:
 
13                "Employee" means employees directly engaged in the
 
14           day-to-day operation of the hotel and employed by the
 
15           operator.
 
16                "Hotel" means an operation licensed under section
 
17           445-92.
 
18                "Operator" means any person who, pursuant to a
 
19           written contract with the owner of a hotel, operates or
 
20           manages the hotel for the owner.
 
21                "Owner" means the fee owner or lessee under a
 
22           recorded lease of a hotel;
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1      (2)  Amounts received by the operator of a county
 
 2           transportation system operated under an operating
 
 3           contract with a political subdivision, where the
 
 4           political subdivision is the owner of the county
 
 5           transportation system.  As used in this paragraph:
 
 6                "County transportation system" means a mass
 
 7           transit system of motorized buses providing regularly
 
 8           scheduled transportation within a county.
 
 9                "Operating contract" or "contract" means a
 
10           contract to operate and manage a political
 
11           subdivision's county transportation system, which
 
12           provides that:
 
13                (A)  The political subdivision shall exercise
 
14                     substantial control over all aspects of the
 
15                     operator's operation;
 
16                (B)  The political subdivision controls the
 
17                     development of transit policy, service
 
18                     planning, routes, and fares; and
 
19                (C)  The operator develops in advance a draft
 
20                     budget in the same format as prescribed for
 
21                     agencies of the political subdivision.  The
 
22                     budget must be subject to the same
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1                     constraints and controls regarding the lawful
 
 2                     expenditure of public funds as any public
 
 3                     sector agency, and deviations from the budget
 
 4                     must be subject to approval by the
 
 5                     appropriate political subdivision officials
 
 6                     involved in the budgetary process.
 
 7                "Operator" means any person who, pursuant to an
 
 8           operating contract with a political subdivision,
 
 9           operates or manages a county transportation system.
 
10                "Owner" means a political subdivision that owns or
 
11           is the lessee of all the properties and facilities of
 
12           the county transportation system (including buses, real
 
13           estate, parking garages, fuel pumps, maintenance
 
14           equipment, office supplies, etc.), and that owns all
 
15           revenues derived therefrom;
 
16      (3)  Surcharge taxes on rental motor vehicles imposed by
 
17           chapter 251 and passed on and collected by persons
 
18           holding certificates of registration under that
 
19           chapter;
 
20      (4)  Amounts received by the operator of orchard properties
 
21           from the owner of the orchard property in amounts equal
 
22           to and which are disbursed by the operator for employee
 

 
 
 
Page 9                                                     2331
                                     H.B. NO.           
                                                        
                                                        


 1           wages, salaries, payroll taxes, insurance premiums, and
 
 2           benefits, including retirement, vacation, sick pay, and
 
 3           health benefits.  As used in this paragraph:
 
 4                "Employee" means an employee directly engaged in
 
 5           the day-to-day operations of the orchard properties and
 
 6           employed by the operator.
 
 7                "Operator" means a producer who, pursuant to a
 
 8           written contract with the owner of the orchard
 
 9           property, operates or manages the orchard property for
 
10           the owner where the property contains an area
 
11           sufficient to make the undertaking economically
 
12           feasible.
 
13                "Orchard property" means any real property that is
 
14           used to raise trees with a production life cycle of
 
15           fifteen years or more producing fruits or nuts having a
 
16           normal period of development from the initial planting
 
17           to the first commercially saleable harvest of not less
 
18           than three years.
 
19                "Owner" means a fee owner or lessee under a
 
20           recorded lease of orchard property;
 
21      (5)  Taxes on nursing facility income imposed by chapter
 
22           346E and passed on and collected by operators of
 

 
 
 
Page 10                                                    2331
                                     H.B. NO.           
                                                        
                                                        


 1           nursing facilities;
 
 2      (6)  Amounts received under property and casualty insurance
 
 3           policies for damage or loss of inventory used in the
 
 4           conduct of a trade or business located within the State
 
 5           or a portion thereof that is declared a natural
 
 6           disaster area by the governor pursuant to section
 
 7           209-2;
 
 8      (7)  Amounts received as compensation by community
 
 9           organizations, school booster clubs, and nonprofit
 
10           organizations under a contract with the chief election
 
11           officer for the provision and compensation of precinct
 
12           officials and other election-related personnel,
 
13           services, and activities, pursuant to section 11-5;
 
14      (8)  Interest received by a person domiciled outside the
 
15           State from a trust company (as defined in section
 
16           412:8-101) acting as payment agent or trustee on behalf
 
17           of the issuer or payees of an interest bearing
 
18           instrument or obligation, if the interest would not
 
19           have been subject to tax under this chapter if paid
 
20           directly to the person domiciled outside the State
 
21           without the use of a paying agent or trustee; provided
 
22           that if the interest would otherwise be taxable under
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1           this chapter if paid directly to the person domiciled
 
 2           outside the State, it shall not be exempt solely
 
 3           because of the use of a Hawaii trust company as a
 
 4           paying agent or trustee;
 
 5      (9)  Amounts received by a management company from related
 
 6           entities engaged in the business of selling interstate
 
 7           or foreign common carrier telecommunications services
 
 8           in amounts equal to and which are disbursed by the
 
 9           management company for employee wages, salaries,
 
10           payroll taxes, insurance premiums, and benefits,
 
11           including retirement, vacation, sick pay, and health
 
12           benefits.  As used in this paragraph:
 
13                "Employee" means employees directly engaged in the
 
14           day-to-day operation of related entities engaged in the
 
15           business of selling interstate or foreign common
 
16           carrier telecommunications services and employed by the
 
17           management company.
 
18                "Management company" means any person who,
 
19           pursuant to a written contract with a related entity
 
20           engaged in the business of selling interstate or
 
21           foreign common carrier telecommunications services,
 
22           provides managerial or operational services to that
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1           entity.
 
 2                "Related entities"means:                          
 
 3           (A)  An affiliated group of corporations within the
 
 4                meaning of section 1504 (with respect to
 
 5                affiliated group defined) of the federal Internal
 
 6                Revenue Code of 1986, as amended;
 
 7                (B)  A controlled group of corporations within the
 
 8                     meaning of section 1563 (with respect to
 
 9                     definitions and special rules) of the federal
 
10                     Internal Revenue Code of 1986, as amended;
 
11                (C)  Those entities connected through ownership of
 
12                     at least eighty per cent of the total value
 
13                     and at least eighty per cent of the total
 
14                     voting power of each such entity (or
 
15                     combination thereof), including partnerships,
 
16                     associations, trusts, S corporations,
 
17                     nonprofit corporations, limited liability
 
18                     partnerships, or limited liability companies;
 
19                     and
 
20                (D)  Any group or combination of the entities
 
21                     described in paragraph (C) constituting a
 
22                     unitary business for income tax purposes;
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1           whether or not the entity is located within or without
 
 2           the State or licensed under this chapter; [and]
 
 3     (10)  Amounts received as grants under section 206M-15[.];
 
 4           and
 
 5     (11)  Amounts received from the sale or resale of recycled
 
 6           construction material.  For the purposes of this
 
 7           paragraph, "recycled construction material" means
 
 8           materials that are separated, collected, and salvaged
 
 9           for sale or reuse during construction or demolition
 
10           projects that would otherwise be discarded, including
 
11           such items as used cabinets, scrap wood, architectural
 
12           woodwork, light fixtures, appliances, partially used
 
13           paint, doors, windows, fixtures, and other equipment.
 
14           The director may require the taxpayer applying for an
 
15           exemption under this paragraph to furnish information
 
16           to ascertain the validity of the exemption claim and
 
17           may adopt rules pursuant to chapter 91 as may be
 
18           necessary to administer this paragraph.  The exemption
 
19           allowed under this paragraph shall be available for
 
20           amounts received after June 30, 2000, and before
 
21           July 1, 2005."
 
22      SECTION 4.  Statutory material to be repealed is bracketed.
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1 New statutory material is underscored.
 
 2      SECTION 5.  This Act shall take effect on July 1, 2000;
 
 3 provided that section 2 of this Act, upon its approval, shall
 
 4 apply to taxable years beginning after December 31, 1999.
 
 5 
 
 6                           INTRODUCED BY:_________________________