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

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

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

(2)  The qualifying ethanol production facilityoperated at a level of production of at least seventy-five per cent of itsnameplate capacity on an annualized basis;

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

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

(b)  As used in this section:

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

"Investment" means a nonrefundablecapital expenditure related to the development and construction of any qualifyingethanol production facility, including processing equipment, waste treatmentsystems, pipelines, and liquid storage tanks at the facility or remotelocations, including expansions or modifications.  Capital expenditures shallbe those direct and certain indirect costs determined in accordance withsection 263A of the Internal Revenue Code, relating to uniform capitalizationcosts, but shall not include expenses for compensation paid to officers of thetaxpayer, pension and other related costs, rent for land, the costs ofrepairing and maintaining the equipment or facilities, training of operatingpersonnel, utility costs during construction, property taxes, costs relating tonegotiation of commercial agreements not related to development or construction,or service costs that can be identified specifically with a service departmentor function or that directly benefit or are incurred by reason of a servicedepartment or function.  For the purposes of determining a capital expenditureunder this section, the provisions of section 263A of the Internal Revenue Codeshall apply as it read on March 1, 2004.  For purposes of this section,investment excludes land costs and includes any investment for which thetaxpayer is at risk, as that term is used in section 465 of the InternalRevenue Code (with respect to deductions limited to amount at risk).

"Nameplate capacity" means thequalifying ethanol production facility's production design capacity, in gallonsof motor fuel grade ethanol per year.

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

"Qualifying ethanol production" meansethanol 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 suchas reformation and catalytic conversion and dehydrated at the facility.

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

(c)  In the case of a taxable year in which thecumulative claims for the credit by the taxpayer of a qualifying ethanolproduction facility exceeds the cumulative investment made in the qualifyingethanol production facility by the taxpayer, only that portion that does notexceed the cumulative investment shall be claimed and allowed.

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

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

(2)  Verify the amount of the qualifying investment;

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

(4)  Certify the total amount of the tax credit foreach taxable year and the cumulative amount of the tax credit during the creditperiod.

Upon each determination, the department ofbusiness, economic development, and tourism shall issue a certificate to thetaxpayer verifying the qualifying investment amounts, the credit amountcertified for each taxable year, and the cumulative amount of the tax creditduring the credit period.  The taxpayer shall file the certificate with thetaxpayer's tax return with the department of taxation.  Notwithstanding thedepartment of business, economic development, and tourism's certificationauthority under this section, the director of taxation may audit and adjustcertification to conform to the facts.

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

(e)  If the credit under this section exceedsthe taxpayer's income tax liability, the excess of credit over liability shallbe refunded to the taxpayer; provided that no refunds or payments on account ofthe 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 beforethe end of the twelfth month following the close of the taxable year for whichthe credit may be claimed.  Failure to comply with the foregoing provisionshall constitute a waiver of the right to claim the credit.

(f)  If a qualifying ethanol productionfacility or an interest therein is acquired by a taxpayer prior to theexpiration of the credit period, the credit allowable under subsection (a) forany period after such acquisition shall be equal to the credit that would havebeen allowable under subsection (a) to the prior taxpayer had the taxpayer notdisposed of the interest.  If an interest is disposed of during any year forwhich the credit is allowable under subsection (a), the credit shall beallowable between the parties on the basis of the number of days during theyear the interest was held by each taxpayer.  In no case shall the credit allowedunder subsection (a) be allowed after the expiration of the credit period.

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

(h)  Prior to construction of any newqualifying ethanol production facility, the taxpayer shall provide writtennotice of the taxpayer's intention to begin construction of a qualifyingethanol production facility.  The information shall be provided to thedepartment 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 thetaxpayer's contact information.  Notwithstanding any other law to the contrary,this information shall be available for public inspection and disseminationunder chapter 92F.

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

(j)  If a qualifying ethanol productionfacility fails to achieve an average annual production of at least seventy-fiveper cent of its nameplate capacity for two consecutive years, the statedcapacity of that facility may be revised by the director of business, economicdevelopment, and tourism to reflect actual production for the purposes ofdetermining statewide production capacity under subsection (g) and allowablecredits for that facility under subsection (a).  Notwithstanding any other lawto the contrary, this information shall be available for public inspection anddissemination under chapter 92F.

(k)  Each calendar year during the creditperiod, the taxpayer shall provide information to the director of business,economic development, and tourism on the number of gallons of ethanol producedand sold during the previous calendar year, how much was sold in Hawaii versusoverseas, feedstocks used for ethanol production, the number of employees ofthe facility, and the projected number of gallons of ethanol production for thesucceeding year.

(l)  In the case of a partnership, Scorporation, estate, or trust, the tax credit allowable is for every qualifyingethanol production facility.  The cost upon which the tax credit is computedshall be determined at the entity level.  Distribution and share of creditshall be determined pursuant to section 235-110.7(a).

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

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

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

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

(n)  The director of taxation shall prepareforms that may be necessary to claim a credit under this section. Notwithstanding the department of business, economic development, and tourism'scertification authority under this section, the director may audit and adjustcertification to conform to the facts.  The director may also require thetaxpayer to furnish information to ascertain the validity of the claim forcredit made under this section and may adopt rules necessary to effectuate thepurposes of this section pursuant to chapter 91. [L 2000, c 289, §2; am L 2004,c 140, §2; am L 2007, c 128, §1]