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 resident or corporate taxpayer subject to the tax imposed by this chapter, an energy storage tax credit for each utility scale renewable energy storage property:

(1) That is used primarily to store electricity generated from renewable sources;

(2) For which the taxpayer enters into an agreement after June 30, 2014, and on or before December 31, 2020, for the sale of the electricity produced by the utility scale renewable energy storage property to an electric utility; 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 may be claimed in either but not both of the following forms:

(1) An investment credit equal to not more than twenty per cent of the basis, apportioned as follows:

(A) During the first taxable year of the operation of the utility scale renewable energy storage property, eight per cent of the basis, up to a maximum of $80,000 per megawatt-hour of energy storage capacity;

(B) During the second taxable year of the operation of the utility scale renewable energy storage property, six per cent of the basis, up to a maximum of $60,000 per megawatt-hour of energy storage capacity;

(C) During the third taxable year of the operation of the utility scale renewable energy storage property, four per cent of the basis, up to a maximum of $40,000 per megawatt-hour of energy storage capacity; and

(D) During the fourth taxable year of the operation of the utility scale renewable energy storage property, two per cent of the basis, up to a maximum of $20,000 per megawatt-hour of energy storage capacity;

provided, however, that no utility scale renewable energy storage property that receives an investment credit under this paragraph may also receive a utilization credit under paragraph (2); or

(2) A utilization credit equal to the total product of multiplying:

(A) The energy storage capacity measured in kilowatt-hours;

(B) The number of calendar days in the period for which the credit applies; and

provided, however, that no utility scale renewable energy storage property that receives a utilization credit under this paragraph may also receive an investment credit under paragraph (1).

(c) 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 (d).

(d) For any utility scale renewable 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 renewable 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.

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

(f) Multiple owners of a single utility scale renewable 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 renewable energy storage property.

(g) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for every eligible utility scale renewable 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.

(h) 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.

(i) 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.

(j) 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.

(k) An association of owners under chapter 421I, 421J, 514A, or 514B may claim the credit allowed under this section in its own name for utility scale renewable energy storage property and facilities placed in service and located on common areas.

(l) No credit under this section shall be allowed to any federal, state, or local government or any political subdivision, agency, or instrumentality thereof.

(m) 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 renewable 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;

(D) Refundability type (refundable or nonrefundable); and

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

(A) Impact on the economy, including:

(i) Economic boost;

(ii) Net flow of money into or out of the State; and

(iii) General excise and income tax revenue generated; and

(B) Jobs, including:

(i) Number of jobs maintained;

(ii) Number of jobs created; and

(iii) Average pay.

(n) For the purposes of this section:

"Basis" means costs related to the utility scale renewable 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;

(2) Costs for energy storage equipment that is required by an electric utility as a condition for interconnection of a renewable energy generation facility; provided that costs for energy storage equipment that is required by an electric utility as a condition for interconnection of a renewable energy generation facility but that can also be utilized by an electric utility for interconnecting more renewable energy facilities shall be included in the basis; and

(3) Costs for equipment that is unrelated to the functioning of the utility scale renewable 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 renewable 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.

"Electricity generated from renewable sources" means electricity generated from resources that are continually replenished on a human timescale, such as solar energy, wind energy, biomass and biofuels, geothermal energy, ocean thermal gradient energy, and wave energy.

"Energy storage capacity" means the amount of electricity measured in 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 renewable energy storage property" means equipment that receives electricity generated from renewable sources, stores said electricity, and delivers said electricity to an electric utility. Furthermore, utility scale renewable energy storage property shall have an energy storage capacity of at least one megawatt-hour. The construction, reconstruction, or erection of the utility scale renewable 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, upon its approval, shall apply to taxable years beginning after December 31, 2013.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2933
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII