§235-110.3  Ethanol facility tax credit. 
(a)  Each year during the credit period, there shall be allowed to each
taxpayer subject to the taxes imposed by this chapter, an ethanol facility tax
credit that shall be applied to the taxpayer's net income tax liability, if
any, imposed by this chapter for the taxable year in which the credit is
properly claimed.



For each qualified ethanol production facility,
the annual dollar amount of the ethanol facility tax credit during the
eight-year period shall be equal to thirty per cent of its nameplate capacity
if the nameplate capacity is greater than five hundred thousand but less than
fifteen million gallons.  A taxpayer may claim this credit for each qualifying
ethanol facility; provided that:



(1)  The claim for this credit by any taxpayer of a
qualifying ethanol production facility shall not exceed one hundred per cent of
the total of all investments made by the taxpayer in the qualifying ethanol
production facility during the credit period;



(2)  The qualifying ethanol production facility
operated at a level of production of at least seventy-five per cent of its
nameplate capacity on an annualized basis;



(3)  The qualifying ethanol production facility is in
production on or before January 1, 2017; and



(4)  No taxpayer that claims the credit under this
section shall claim any other tax credit under this chapter for the same
taxable year.



(b)  As used in this section:



"Credit period" means a maximum
period of eight years beginning from the first taxable year in which the
qualifying ethanol production facility begins production even if actual
production is not at seventy-five per cent of nameplate capacity.



"Investment" means a nonrefundable
capital expenditure related to the development and construction of any qualifying
ethanol production facility, including processing equipment, waste treatment
systems, pipelines, and liquid storage tanks at the facility or remote
locations, including expansions or modifications.  Capital expenditures shall
be those direct and certain indirect costs determined in accordance with
section 263A of the Internal Revenue Code, relating to uniform capitalization
costs, but shall not include expenses for compensation paid to officers of the
taxpayer, pension and other related costs, rent for land, the costs of
repairing and maintaining the equipment or facilities, training of operating
personnel, utility costs during construction, property taxes, costs relating to
negotiation of commercial agreements not related to development or construction,
or service costs that can be identified specifically with a service department
or function or that directly benefit or are incurred by reason of a service
department or function.  For the purposes of determining a capital expenditure
under this section, the provisions of section 263A of the Internal Revenue Code
shall apply as it read on March 1, 2004.  For purposes of this section,
investment excludes land costs and includes any investment for which the
taxpayer is at risk, as that term is used in section 465 of the Internal
Revenue Code (with respect to deductions limited to amount at risk).



"Nameplate capacity" means the
qualifying ethanol production facility's production design capacity, in gallons
of motor fuel grade ethanol per year.



"Net income tax liability" means net
income tax liability reduced by all other credits allowed under this chapter.



"Qualifying ethanol production" means
ethanol produced from renewable, organic feedstocks, or waste materials,
including municipal solid waste.  All qualifying production shall be fermented,
distilled, gasified, or produced by physical chemical conversion methods such
as reformation and catalytic conversion and dehydrated at the facility.



"Qualifying ethanol production
facility" or "facility" means a facility located in Hawaii which
produces motor fuel grade ethanol meeting the minimum specifications by the
American Society of Testing and Materials standard D-4806, as amended.



(c)  In the case of a taxable year in which the
cumulative claims for the credit by the taxpayer of a qualifying ethanol
production facility exceeds the cumulative investment made in the qualifying
ethanol production facility by the taxpayer, only that portion that does not
exceed the cumulative investment shall be claimed and allowed.



(d)  The department of business, economic
development, and tourism shall:



(1)  Maintain records of the total amount of
investment made by each taxpayer in a facility;



(2)  Verify the amount of the qualifying investment;



(3)  Total all qualifying and cumulative investments
that the department of business, economic development, and tourism certifies;
and



(4)  Certify the total amount of the tax credit for
each taxable year and the cumulative amount of the tax credit during the credit
period.



Upon each determination, the department of
business, economic development, and tourism shall issue a certificate to the
taxpayer verifying the qualifying investment amounts, the credit amount
certified for each taxable year, and the cumulative amount of the tax credit
during the credit period.  The taxpayer shall file the certificate with the
taxpayer's tax return with the department of taxation.  Notwithstanding the
department of business, economic development, and tourism's certification
authority under this section, the director of taxation may audit and adjust
certification to conform to the facts.



If in any year, the annual amount of certified
credits reaches $12,000,000 in the aggregate, the department of business,
economic development, and tourism shall immediately discontinue certifying
credits and notify the department of taxation.  In no instance shall the total
amount of certified credits exceed $12,000,000 per year.  Notwithstanding any
other law to the contrary, this information shall be available for public
inspection and dissemination under chapter 92F.



(e)  If the credit under this section exceeds
the taxpayer's income tax liability, the excess of credit over liability shall
be refunded to the taxpayer; provided that no refunds or payments on account of
the tax credit allowed by this section shall be made for amounts less than $1. 
All claims for a credit under this section must be properly 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 the foregoing provision
shall constitute a waiver of the right to claim the credit.



(f)  If a qualifying ethanol production
facility or an interest therein is acquired by a taxpayer prior to the
expiration of the credit period, the credit allowable under subsection (a) for
any period after such acquisition shall be equal to the credit that would have
been allowable under subsection (a) to the prior taxpayer had the taxpayer not
disposed of the interest.  If an interest is disposed of during any year for
which the credit is allowable under subsection (a), the credit shall be
allowable between the parties on the basis of the number of days during the
year the interest was held by each taxpayer.  In no case shall the credit allowed
under subsection (a) be allowed after the expiration of the credit period.



(g)  Once the total nameplate capacities of
qualifying ethanol production facilities built within the State reaches or
exceeds a level of forty million gallons per year, credits under this section
shall not be allowed for new ethanol production facilities.  If a new
facility's production capacity would cause the statewide ethanol production
capacity to exceed forty million gallons per year, only the ethanol production
capacity that does not exceed the statewide forty million gallon per year level
shall be eligible for the credit.



(h)  Prior to construction of any new
qualifying ethanol production facility, the taxpayer shall provide written
notice of the taxpayer's intention to begin construction of a qualifying
ethanol production facility.  The information shall be provided to the
department of taxation and the department of business, economic development,
and tourism on forms provided by the department of business, economic development,
and tourism, and shall include information on the taxpayer, facility location,
facility production capacity, anticipated production start date, and the
taxpayer's contact information.  Notwithstanding any other law to the contrary,
this information shall be available for public inspection and dissemination
under chapter 92F.



(i)  The taxpayer shall provide written notice
to the director of taxation and the director of business, economic development,
and tourism within thirty days following the start of production.  The notice
shall include the production start date and expected ethanol fuel production
for the next twenty-four months.  Notwithstanding any other law to the
contrary, this information shall be available for public inspection and dissemination
under chapter 92F.



(j)  If a qualifying ethanol production
facility fails to achieve an average annual production of at least seventy-five
per cent of its nameplate capacity for two consecutive years, the stated
capacity of that facility may be revised by the director of business, economic
development, and tourism to reflect actual production for the purposes of
determining statewide production capacity under subsection (g) and allowable
credits for that facility under subsection (a).  Notwithstanding any other law
to the contrary, this information shall be available for public inspection and
dissemination under chapter 92F.



(k)  Each calendar year during the credit
period, the taxpayer shall provide information to the director of business,
economic development, and tourism on the number of gallons of ethanol produced
and sold during the previous calendar year, how much was sold in Hawaii versus
overseas, feedstocks used for ethanol production, the number of employees of
the facility, and the projected number of gallons of ethanol production for the
succeeding year.



(l)  In the case of a partnership, S
corporation, estate, or trust, the tax credit allowable is for every qualifying
ethanol production facility.  The cost 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 235-110.7(a).



(m)  Following each year in which a credit
under this section has been claimed, the director of business, economic development,
and tourism shall submit a written report to the governor and legislature
regarding the production and sale of ethanol.  The report shall include:



(1)  The number, location, and nameplate capacities of
qualifying ethanol production facilities in the State;



(2)  The total number of gallons of ethanol produced
and sold during the previous year; and



(3)  The projected number of gallons of ethanol
production for the succeeding year.



(n)  The director of taxation shall prepare
forms that may be necessary to claim a credit under this section. 
Notwithstanding the department of business, economic development, and tourism's
certification authority under this section, the director may audit and adjust
certification to conform to the facts.  The director may also require the
taxpayer to furnish 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. [L 2000, c 289, §2; am L 2004,
c 140, §2; am L 2007, c 128, §1]