Hawaii-2014-SB3027-Introduced

SECTION 1. The legislature finds that imported oil supplies ninety per cent of Hawaii's energy. The State's dependence on oil threatens the land, air, and water. Furthermore, Hawaii's current way of meeting energy needs is not sustainable.

The legislature further finds that the Hawaii clean energy initiative looks to meet seventy per cent of Hawaii's energy needs by 2030 through energy efficiency and renewable energy. By exercising more energy efficient practices and better harnessing local energy supplies, the Hawaii clean energy initiative strives to work with public and private organizations at the national, state, county, and grassroots levels to achieve several key objectives, including fostering and demonstrating innovation in the use of clean energy technologies, creative financing, and public policy to accelerate Hawaii's transition to clean energy. For the Hawaii clean energy initiative to optimize working relationships with private organizations toward its goals, there are certain areas in the State that need the particular attention of government to help attract private sector investment. These incentives will encourage the development, growth, and expansion of the private sector, a cornerstone of our society that the people of the State have grown to depend on for their health, safety, and welfare.

SECTION 2. Chapter 201, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . Energy zone designation

§201‑A Definitions. As used in this part, unless the context otherwise requires:

"Department" means the department of business, economic development, and tourism.

"Director" means the director of business, economic development, and tourism.

"Qualified business" means a business that meets the eligibility requirements under section 201-D.

§201-B Administration. The department of business, economic development, and tourism shall administer this part and shall have the following powers and duties:

(1) To establish criteria for determining what areas qualify as energy zones; provided that the criteria shall be the minimum required for implementation of this part;

(2) To monitor the implementation and operation of this part;

(3) To conduct a continuing evaluation program of energy zones;

(4) To assist counties in obtaining the reduction of rules within energy zones;

(5) To submit annual reports evaluating the effectiveness of the program and any recommendations for legislation to the governor;

(6) To administer and enforce the rules adopted by the department; and

(7) To administer this part in such a manner that the area to be designated as an energy zone will most benefit the area and the State.

§201-C Energy zone designation. (a) The energy resources coordinator established in section 196-3 may declare an area as an energy zone.

(b) The governor, upon the recommendation of the director, shall approve the designation of up to six areas in each county as energy zones for a period of twenty years. Any such area shall be located in one United States census tract or two or more contiguous United States census tracts in accordance with the most recent decennial United States census. The census tract or tracts within which each energy zone is located also shall meet at least one of the following criteria:

(1) Twenty-five per cent or more of the population have incomes below eighty per cent of the median family income of the county;

(2) The unemployment rate is 1.5 times the state average; or

(3) An area with high density or potential energy-intensive production or use.

§201-D Eligibility; qualified business; sale of property or services. Any business may be eligible to be designated a qualified business for purposes of this part if the business:

(1) Begins the operation of a trade or business in an eligible business activity within an energy zone;

(2) During each taxable year has at least fifty per cent of its energy zone establishments' gross receipts attributable to the active conduct of trade or business within energy zones located within the same county;

(3) Increases its average annual number of full-time employees employed at the business' establishment or establishments within energy zones located within the same county by at least ten per cent by the end of its first tax year of participation, and during each subsequent taxable year at least maintains that higher level of employment; and

(4) Engages in the generation of electrical energy from renewable energy sources, including the use of falling water, wind, solar, geothermal, wave, and seawater cooling energy.

§201-E State business tax credit. (a) The department shall certify annually to the department of taxation the applicability of the tax credit provided in this part for a qualified business against any taxes due the State, except as provided in subsections (c) and (d). Except as applied to the general excise tax, the credit shall be equal to eighty per cent of the tax due for the first tax year, seventy per cent of the tax due for the second tax year, sixty per cent of the tax due for the third year, fifty per cent of the tax due the fourth year, forty per cent of the tax due the fifth year, thirty per cent of the tax due the sixth year, and twenty per cent of the tax due the seventh year. Any tax credit not usable shall not be applied to future tax years.

(b) When a partnership is eligible for a tax credit under this section, each partner shall be eligible for the tax credit provided for in this section on the partner's income tax return in proportion to the amount of income received by the partner from the partnership. Any qualified business having taxable income from business activity, both within and without the energy zone, shall allocate and apportion its taxable income attributable to the conduct of business. Tax credits provided for in this section shall only apply to taxable income of a qualified business attributable to the conduct of business within energy zones located within the same county.

(c) In addition to any tax credit authorized under this section, any qualified business shall be entitled to a tax credit against any taxes due the State in an amount equal to a percentage of unemployment taxes paid. The amount of the credit shall be equal to eighty per cent of the unemployment taxes paid during the first year, seventy per cent of the taxes paid during the second year, sixty per cent of the taxes paid during the third year, fifty per cent of the taxes paid during the fourth year, forty per cent of the taxes paid during the fifth year, thirty per cent of the taxes paid during the sixth year, and twenty per cent of the taxes paid during the seventh year.

(d) Tax credits provided for in subsection (c) shall only apply to the unemployment tax paid on employees employed at the qualified business' establishment or establishments within energy zones located within the same county. Any tax credit not usable shall not be applied to future tax years.

§201-F State general excise exemptions. The department shall certify annually to the department of taxation that any qualified business is exempt from the payment of general excise taxes on the gross proceeds from an eligible business activity as defined in this part. The gross proceeds received by a contractor licensed under chapter 444 shall be exempt from the general excise tax for construction within an energy zone performed for a qualified business within an energy zone or a business that has been approved by the department to enroll into the energy zone program.

§201-G Local incentives. (a) Any county that contains at least one energy zone may propose local incentives, including but not limited to:

(1) Reduction of permit fees;

(2) Reduction of user fees; and

(3) Reduction of real property taxes.

(b) The counties also may submit proposals for regulatory flexibility, including but not limited to:

(1) Special zoning districts;

(2) Permit process reform;

(3) Exemptions from local ordinances; and

(4) Other public incentives proposed in the locality's application, which shall be binding upon the locality upon designation of the energy zone.

§201-H Termination of energy zone. Upon designation of an area as an energy zone, the proposals for regulatory flexibility, tax incentives, and other public incentives specified in this part shall be binding upon the State or county to the extent and for the period of time specified by the energy resources coordinator. If the State or county is unable or unwilling to provide any of the incentives set forth in section 209E-12 or other incentives acceptable to the department, the energy zone shall terminate. Qualified businesses located in the energy zone shall be eligible to receive the state tax incentives provided by this part even though the zone designation has terminated. No business may become a qualified business after the date of zone termination."

SECTION 3. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2014.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3027
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII