HOUSE OF REPRESENTATIVES |
H.B. NO. |
1805 |
THIRTY-FIRST LEGISLATURE, 2022 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to cesspools.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that Hawaii has nearly 88,000 cesspools that release more than 50,000,000 gallons of raw sewage into the State's groundwater and surface waters every day. Cesspools are an antiquated technology for disposal of untreated sewage that have the potential to pollute groundwater and harm streams and coastal resources, including coral reefs.
The legislature further finds that Act 125, Session Laws of Hawaii 2017 (Act 125), established a requirement for the conversion of all cesspools in the State to department of health approved wastewater management systems by 2050. However, in order to achieve this goal by 2050, the State must begin to take action now.
The legislature further finds that one mechanism commonly used by other states that have faced similar challenges is to require that existing cesspool are converted at the point of sale, or when a property is sold in a real estate transaction. This requirement would systematically reduce the number of cesspools in Hawaii, protect homebuyers by ensuring that the wastewater management system on the property they are buying will not be illegal in 2050, and open up financing options for the cost of the conversion. Rhode Island, New York, Massachusetts, and New Jersey are examples of states that have enacted point-of-sale cesspool conversion requirements.
The legislature also finds that the cost of cesspool conversion can be a challenge for low- and middle-income residents and that offering an income tax credit to offset the cost of cesspool conversion would help to mitigate the financial burden on these individuals. Act 125 offered a temporary income tax credit for the cost of upgrading, converting, or connecting a cesspool.
Therefore, the purpose of this Act is to:
(1) Require cesspool upgrades, conversions, or connections at the point of sale of real property, with certain exemptions; and
(2) Provide a tax credit for the upgrade or conversion of a cesspool to a department-approved wastewater system or connection of a cesspool to a sewerage system.
SECTION 2. Chapter 342D, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows:
"§342D- Cesspool
upgrade, conversion, or connection; point of sale. (a)
Any cesspool on real property that is sold
or whose ownership is transferred on or after January 1, 2024, shall be:
(1) Upgraded or converted
to a department-approved wastewater system; or
(2) Connected to a
sewerage system,
at the time of sale or transfer of ownership of the real property.
(b) The department of health shall adopt rules
pursuant to chapter 91 to implement this section, including any exemptions from
this section that the department deems necessary; provided that the rules shall
include at least the following exemptions:
(1) Cesspools on real property transferred between joint tenants or tenants in common;
(2) Cesspools on real
property transferred to a spouse, child, or parent; and
(3) Cesspools on real
property transferred between spouses resulting from a decree of dissolution of
marriage, a decree of legal separation, or a property settlement agreement that
is incidental to the decree.
(c) As used in this section, "cesspool" has
the same meaning as in section 342D-72."
SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:
"§235- Cesspool upgrade, conversion, or connection; income tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed under this chapter a cesspool upgrade, conversion, or connection income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.
(b) In the case of a partnership, S corporation,
estate, or trust, the tax credit allowable is for qualified expenses incurred
by the entity for the taxable year. The
expenses upon which the tax credit is computed shall be determined at the
entity level. Distribution and share of
credit shall be determined by rule.
(c) The amount of the tax credit shall be equal to
the qualified expenses of the taxpayer, up to a maximum of:
(1) $15,000 per residential
dwelling connected to the cesspool, for a taxpayer with an adjusted gross
income of less than $ ;
(2) $10,000 per residential
dwelling connected to the cesspool, for a taxpayer with an adjusted gross
income of at least $
but less than $ ;
(3) $7,500 per
residential dwelling connected to the cesspool, for a taxpayer with an adjusted
gross income of at least $
but less than $ ; and
(4) $0 per residential
dwelling connected to the cesspool, for a taxpayer with an adjusted gross
income greater than $ .
(d) A maximum of one tax credit may be issued per cesspool. The tax credit shall be available only for
the taxable year in which the taxpayer's qualified expenses are certified by
the appropriate government agency.
(e) The total amount of tax credits allowed under
this section shall not exceed $
for all taxpayers in any taxable year; provided that any taxpayer who is not
eligible to claim the credit in a taxable year due to the cap having been
exceeded for that taxable year shall be eligible to claim the credit in the
subsequent taxable year.
(f) The department of health shall:
(1) Collect and
maintain a record of all qualified expenses certified by an appropriate
government agency for the taxable year; and
(2) Certify to each
taxpayer the amount of credit the taxpayer may claim; provided that if, in any
year, the annual amount of certified credits reaches $
in the aggregate, the appropriate government agency shall immediately
discontinue certifying credits and notify the department of taxation.
The director of health shall adopt rules under
chapter 91 as necessary to implement the certification requirements under this
section.
(g) The director of taxation:
(1) Shall prepare
any forms that may be necessary to claim a tax credit under this section;
(2) May require the
taxpayer to furnish reasonable information to ascertain the validity of the
claim for the tax credit made under this section; and
(3) Shall adopt rules under chapter 91 as necessary to implement this section.
(h) If the tax credit claimed by the taxpayer
under this section exceeds the amount of the income tax payments due from the
taxpayer, the excess of credit over payments due shall be refunded to the
taxpayer; provided that the tax credit properly claimed by a taxpayer who has
no income tax liability shall be paid to the taxpayer; provided further 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 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 the foregoing
provision shall constitute a waiver of the right to claim the credit.
(i) This section shall apply to taxable years
beginning after December 31, 2021, and ending before January 1, 2036.
(j) As used in this section:
"Cesspool" has the same
meaning as in section 342D-72.
"Qualified expenses"
means costs that are necessary and directly incurred by the taxpayer for upgrading
or converting a cesspool to a department-approved wastewater system or
connecting a cesspool to a sewerage system, and that are certified as such by the
appropriate government agency.
"Sewerage system" has the
same meaning as in section 342D-1.
"Wastewater" means any liquid waste, whether or not treated and whether animal, mineral, or vegetable, including agricultural, industrial, and thermal wastes."
SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 5. New statutory material is underscored.
SECTION 6. This Act shall take effect upon its approval; provided that section 3 shall apply to taxable years beginning after December 31, 2023, and shall be repealed on December 31, 2035.
INTRODUCED BY: |
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Report Title:
Cesspools; Point of Sale; Upgrade, Conversion, or Connection; Income Tax Credit
Description:
Requires the upgrade, conversion, or connection of cesspools upon sale of real property, with certain exemptions. Establishes a temporary income tax credit until 12/31/2035 for costs of cesspool upgrade, conversion, or connection.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.