SB2866

Report Title:

Geothermal-to-Hydrogen Tax Credit

Description:

Provides for a tax credit of 20 percent of the total cost of the geothermal-to-hydrogen system erected or placed in service after December 31, 2002, and before December 31, 2010.

THE SENATE	S.B. NO.	2866
TWENTY-FIRST LEGISLATURE, 2002
STATE OF HAWAII

A BILL FOR AN ACT

 

relating to a geothermal-to-hydrogen tax credit.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that scientists have recognized hydrogen as a potential source of fuel for many years. Currently, hydrogen is used in industrial processes, rocket fuel, and spacecraft propulsion.

The United States Department of Energy and the private sector have funded hydrogen research and development for several years. With further research, development, and demonstration, the expanded use of hydrogen could one day competitively serve as an alternative source of energy for fueling vehicles and generating electricity.

The legislature recognizes the potential for hydrogen use in the islands and that Hawaii represents an excellent site to attract government and industry investments to develop the hydrogen infrastructure. The availability of indigenous renewable resources (e.g., geothermal energy), excellent research capabilities at the University of Hawaii, and high transportation fuel costs are incentives for the development of hydrogen for fuel infrastructure.

The 2000 legislature requested a study to identify, evaluate, and recommend candidate actions to establish hydrogen as a future ingredient in the State's energy economy. The Hawaii natural energy institute of the University of Hawaii conducted this study and concluded that large-scale hydrogen use for transportation could be competitive this decade. The conclusion assumes technological advancement using hydrogen as a fuel source. Act 283 of the 2001 legislature allocated funds to address some of the candidate action plans which would initiate the hydrogen development in the State.

Major companies are investing in the development of fossil fuel-based fuel cells for both stationary and mobile power. Automakers are projecting the commercial availability of fossil fuel-based fuel cell powered vehicles that could be fueled by hydrogen within this decade. Significant investments are being made to develop fossil fuel-based fuel cell technology which will benefit the development of geothermal-to-hydrogen technology.

With its traditional high fuel costs and abundance of renewable energy resources, Hawaii could attract advanced technology development companies for research, development, and demonstration. The University of Hawaii is recognized as a "center for excellence in hydrogen research" by the United States Department of Energy. These factors can lead to the development of a hydrogen-based economy where Hawaii produces more of its own environmentally clean fuels, thus reducing its dependence on fossil fuels, and resulting in job growth, reduced pollution, and a more robust state economy.

Geothermal development has been limited to the island of Hawaii. Puna Geothermal Ventures has a contract to supply thirty megawatts of power to Hawaii Electric Light Company, with the utility in turn providing the geothermal-generated electricity to its customers. Expansion of this firm renewable resource is in part limited by the low electrical demand during the late evening and early mornings.

Producing hydrogen during periods of low electrical demand during the late evening and early morning could increase geothermal development and produce an indigenous hydrogen fuel in the islands. The collocation of hydrogen production with geothermal energy would ensure that the production of hydrogen reduces the amount of fossil fuel used in the State.

The legislature believes that the State should do more to support efforts to enhance hydrogen production and use in Hawaii. Accordingly, the purpose of this Act is to establish a tax credit for the production of hydrogen using collocated geothermal resources.

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

"§235-     Geothermal-to-hydrogen tax credit. (a) Each individual or corporate resident taxpayer who files an individual or corporate net income tax return for a taxable year may claim a tax credit under this section against the Hawaii state individual or corporate net income tax. The tax credit is equal to twenty per cent of the total cost of the geothermal-to-hydrogen system. The tax credit shall apply only to the actual cost of the geothermal-to-hydrogen system, its accessories, and installation.

(b) The tax credit shall be applicable only with respect to geothermal-to-hydrogen systems which are erected and placed in service after December 31, 2001, but before December 31, 2010. The geothermal-to-hydrogen system must be collocated on the same or immediately adjacent parcel of land.

(c) The tax credit shall be claimed against net income tax liability for the year in which the geothermal-to-hydrogen system was purchased and placed in use in Hawaii.

(d) Tax credits that exceed the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years without restriction until exhausted.

(e) The director of taxation shall prepare such forms as may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(f) As used in this section:

"Geothermal energy system" means any existing or new identifiable facility, equipment, or apparatus that makes use of geothermal energy to produce electricity.

"Geothermal-to-hydrogen system" means a hydrogen gas production system using any new identifiable facility, equipment, or apparatus that makes use of geothermal energy to produce the hydrogen gas. This includes a geothermal energy system only if it is a new geothermal energy system with at least fifty per cent of its energy output dedicated to producing hydrogen gas."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval and shall apply to taxable years beginning December 31, 2002.

INTRODUCED BY:	_____________________________