SECTION 1. The purpose of this Act is to facilitate the greater use of renewable energy by encouraging cost-effective energy storage technologies and systems that directly promote the use of renewable energy by establishing a tax credit, limited in scope and duration, for energy storage properties.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Energy storage tax credit. (a) There shall be allowed to each individual or corporate taxpayer subject to the tax imposed by this chapter, an energy storage tax credit for each utility scale energy storage property:

(1) That is used primarily to store electricity;

(2) For which the taxpayer enters into an agreement with an electric utility after June 30, 2014, and on or before December 31, 2020; and

(3) That is installed and first placed in service by a taxpayer during a taxable year after December 31, 2014, and on or before December 31, 2024.

(b) The tax credit shall be claimed as an investment credit equal to not more than twenty per cent of the basis, apportioned as follows:

(1) During the first taxable year of the operation of the utility scale energy storage property, eight per cent of the basis;

(2) During the second taxable year of the operation of the utility scale energy storage property, six per cent of the basis;

(3) During the third taxable year of the operation of the utility scale energy storage property, four per cent of the basis; and

(4) During the fourth taxable year of the operation of the utility scale energy storage property, two per cent of the basis.

(c) To qualify for the tax credit, a taxpayer shall first obtain certification from the department of business, economic development, and tourism. When applying for certification, the taxpayer shall provide the department of business, economic development, and tourism with evidence that the taxpayer has control of the site for the proposed project, such as a copy of a deed, a lease, or an option to lease.

(d) The department of business, economic development, and tourism shall cease certifying tax credits for the year when the aggregate tax credit certifications for the year reaches $20,000,000; provided that the queue of remaining projects awaiting certifications shall carry over to the next year to await certification.

(e) A taxpayer who has received certification for a project shall, within twelve months of receiving the certification, provide the department of business, economic development, and tourism with evidence that the taxpayer has invested into the project an amount equal to at least five per cent of the amount of the taxpayer's projected cumulative tax credits. The department of business, economic development, and tourism shall rescind the certification of any taxpayer who fails to comply with this subsection and shall then consider the next taxpayer in the queue for certification.

(f) The department of business, economic development, and tourism shall notify the department of taxation of all certifications and rescissions of certifications.

(g) The tax credit shall be deductible from the taxpayer's net income tax liability imposed by this chapter for the taxable year in which the credit is properly claimed. If the tax credits under subsection (b) exceed the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted, unless otherwise elected by the taxpayer pursuant to subsection (h).

(h) For any utility scale energy storage property, 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, however, that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1.

The election required by this subsection shall be made in a manner prescribed by the director on the taxpayer's return for the taxable year in which the utility scale energy storage property is installed and placed in service. A separate election may be made for each separate property that generates a credit. An election once made is irrevocable.

(i) The dollar amount of any utility rebate shall be deducted from the basis of the qualifying utility scale energy storage property and its installation before applying the state tax credit.

(j) Multiple owners of a single utility scale energy storage property shall be entitled to a single tax credit, and the tax credit shall be apportioned between the owners in proportion to their contribution to the basis of the utility scale energy storage property.

(k) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible utility scale energy storage property that is installed and placed in service in the state by the entity. The basis 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 704(b) of the Internal Revenue Code.

(l) The director of taxation shall prepare any forms that may be necessary to claim a tax credit under this section, including forms identifying the property type of each tax credit claimed under this section. The director may also require the taxpayer to furnish reasonable 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.

(m) All claims for the tax credit under this section, including amended claims, shall be 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 this subsection shall constitute a waiver of the right to claim the credit.

(n) The tax credit provided for in this section shall be construed in accordance with the United States Treasury Regulations and judicial interpretations of similar provisions in sections 25D, 45, and 48 of the Internal Revenue Code.

(o) No credit under this section shall be allowed to any federal, state, or local government or any public sector agency.

(p) The department of taxation, in collaboration with the department of business, economic development, and tourism, shall submit an annual joint report to the legislature no later than twenty days prior to the convening of each regular session on the following for the preceding taxable year:

(1) The number of utility scale energy storage properties that have qualified for a tax credit during the calendar year by:

(A) Property type; and

(B) Taxpayer type (corporate and individual);

(2) The total cost of the tax credit to the State during the taxable year by:

(A) Property type;

(B) Taxpayer type; and

(3) The estimated economic benefit that may be attributable to the tax credit, including:

(A) Jobs created in the energy storage field;

(B) Jobs created in the renewable energy generation field;

(D) Monetization of the benefits of increased grid stability.

(q) For the purposes of this section:

"Basis" means costs related to the utility scale energy storage property, including storage devices, power conditioning equipment, transfer equipment, support structures, and parts related to the functioning of those items, including installation and development costs. "Basis" shall not include:

(1) Costs for which another credit is claimed under this chapter; and

(2) Costs for equipment that is unrelated to the functioning of the utility scale energy storage property.

The meaning of "basis" shall be consistent with section 25D or section 48 of the Internal Revenue Code; provided that, for the purposes of calculating the credit allowed under this section, the basis of the utility scale energy storage property shall not be reduced by the amount of any federal tax credit or other federally subsidized energy financing received by the taxpayer.

"Certification" means an affirmation from the department of business, economic development, and tourism that the taxpayer has met the minimum criteria to qualify for the tax credit for an utility scale energy storage property.

"Energy storage capacity" means the amount of electricity measured in megawatts or megawatt-hours that may be injected into storage for later retrieval. Energy storage capacity shall be determined based on the storage capability of the equipment, not its actual use when in operation.

"First placed in service" has the same meaning as in United States Treasury Regulation section 1.167(a)-11(e)(1).

"Public sector agency" means any political subdivision, agency, or instrumentality of the State or of the federal government.

"Utility scale energy storage property" means equipment that receives electricity generated from various sources, stores said electricity, and delivers said electricity to an electric utility. Furthermore, utility scale energy storage property shall have an energy storage capacity of at least one megawatt of power or one megawatt-hour of energy storage. The construction, reconstruction, or erection of the utility scale energy storage property shall be completed by the taxpayer, or shall be acquired by the taxpayer if the original use of the property commences with the taxpayer."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2014; provided that the tax credits shall apply to taxable years beginning after December 31, 2014.

THE SENATE	S.B. NO.	2933
TWENTY-SEVENTH LEGISLATURE, 2014		S.D. 1
STATE OF HAWAII