SECTION 1. The legislature finds that the State's streams, groundwater, and ocean are being harmed by water pollution from nonpoint contamination sources that flow off the land directly rather than through pipes or ditches. Cesspools constitute a nonpoint contamination source of grave concern. These substandard systems are essentially holes in the ground that discharge raw, untreated sewage. Groundwater, drinking water sources, streams, and the ocean are contaminated by cesspool pollution from systems that do not treat wastewater but merely dispose of it.

The legislature further finds that cesspools in Hawaii release approximately 55,000,000 gallons of untreated sewage into the ground each day. There are approximately 90,000 cesspools in the State, with nearly 50,000 located on Hawaii island, approximately 14,000 on Kauai, over 12,000 on Maui, over 11,000 on Oahu, and over 1,400 on Molokai. Reducing the number of cesspools in the State is a matter of great importance.

The purpose of this Act is to offer financial assistance to owners of cesspools who:

(1) Upgrade or convert a cesspool into a septic system or an aerobic treatment unit system; or

(2) Connect a cesspool to a sewer system,

by establishing a cesspool upgrade, conversion, or connection income tax credit.

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

"§235- Cesspool upgrade, conversion, or connection; income tax credit. (a) There shall be allowed to each individual and corporate taxpayer subject to the tax imposed under this chapter, a cesspool upgrade, conversion, or connection income tax credit that shall be applied against the Hawaii state individual or corporate net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The cesspool upgrade, conversion, or connection income tax credit shall be equal to per cent of the qualified expenses of the taxpayer or $ , whichever is less. There shall be allowed a maximum of one cesspool upgrade, conversion, or connection income tax credit per cesspool.

(1) Shall prepare forms that may be necessary to claim a tax deduction under this section;

(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the deduction made under this section; and

(3) May adopt rules under chapter 91 as necessary to implement this section.

(d) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability shall be refunded to the taxpayer; provided that no refund on account of the tax credit allowed by this section shall be made for amounts less than $1. 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.

(e) This section shall not apply to taxable years beginning after December 31, 2020.

(f) As used in this section:

"Aerobic treatment unit system" means an individual wastewater system that consists of an aerobic treatment unit tank, aeration device, piping, and a discharge method that is in accordance with rules adopted by the department of health relating to household aerobic units.

"Cesspool" means an individual wastewater system consisting of an excavation in the ground whose depth is greater than its widest surface dimension, which receives untreated wastewater, and retains or is designed to retain the organic matter and solids discharged into it, but permits the liquid to seep through its bottom or sides to gain access to the underground geographic formation.

"Qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading or converting a cesspool into a septic system or an aerobic treatment unit system, or connecting a cesspool to a sewer system.

"Septic system" means an individual wastewater system that typically consists of a septic tank, piping, and a drainage field where there is natural biological decontamination as wastewater discharged into the system is filtered through soil.

"Sewer system" means a system of piping, with appurtenances, for collecting and conveying wastewater from source to discharge following treatment.

"Wastewater" means any liquid waste, whether or not treated and whether animal, mineral, or vegetable, including agricultural, industrial, and thermal wastes."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2015; provided that this Act shall be repealed on December 31, 2020.

HOUSE OF REPRESENTATIVES	H.B. NO.	1140
TWENTY-EIGHTH LEGISLATURE, 2015		H.D. 1
STATE OF HAWAII