SB2326

SECTION 1. The legislature finds that the State is ground zero for the climate crisis. In 2021, Hawaii became the first state in the nation to officially declare a climate emergency by adopting S.C.R. No. 44, S.D. 1, H.D. 1 (2021), which called for an immediate just transition and emergency mobilization effort to restore a safe climate. Through the adoption of this concurrent resolution, statewide commitments were made to provide financial and regulatory assistance to transform and decarbonize the economy, including investing in clean energy and other beneficial projects and infrastructure, such as zero emissions energy installations.

The legislature further finds that distributed solar energy, which refers to solar energy generated at or near the point of electricity consumption and interconnected to the distribution system, is the State's largest source of clean, renewable energy. Distributed solar energy systems reduce the amount of land needed for energy facilities, reduce the need for new transmission lines, and can provide local power during grid‑wide disturbances. The legislature recognizes that maximizing the use of distributed solar energy, such as through rooftop solar and solar carports and canopies, will be critical to meeting the State's clean energy needs and can reduce competition for land use across the State.

The legislature notes that on January 27, 2025, the Governor signed Executive Order No. 25-01 to promote and expedite the development of renewable energy in the State, urging the public utilities commission to maximize the use of distributed clean, renewable energy resources across the state to improve resilience and energy security. The executive order explicitly urged the commission to focus on maximizing distributed energy resources in public safety power shutoff areas, on rooftops, and as canopies over parking lots and shared spaces on land-constrained Oahu.

The legislature finds that solar canopies, including solar carports, are a smart way to utilize existing underutilized built spaces such as parking lots at malls, offices, and businesses, turning them into dual-purpose areas for parking and power generation. The legislature notes that parking lots are ideal locations for solar installations because the lots already occupy enormous surface areas in urban and suburban environments, receive direct sunlight, and are structurally simple to build over. While generating clean energy and helping reduce electric bills for businesses, solar canopies also provide benefits such as shade for vehicles, reduction in urban heat island effects, and additional charging locations for electric vehicles.

The legislature also finds that changes to federal solar tax credits pursuant to Public Law 119-21 (139 stat. 72), commonly known as the One Big Beautiful Bill Act significantly reduce currently available federal tax incentives, which will dramatically increase the cost of solar energy systems, including solar canopies. The legislature further finds that it is in the interest of the State to encourage and enable the development of renewable energy generation, including the construction of solar canopies on commercial parking lots, which allow land to be used for renewable energy generation without interfering with existing uses. Furthermore, promoting the use of solar canopies could significantly contribute towards reducing greenhouse gas emissions from the electricity sector and satisfying the State's need for increased solar energy generation capacity. The legislature additionally recognizes that as existing federal tax credits are phased out, providing additional state tax incentives for solar canopy installations will help to fill the gap and make it more feasible for local businesses to invest in solar canopies by reducing the initial financial burden and improving the return on investment.

Accordingly, the purpose of this Act is to establish a solar canopy installation tax credit to incentivize the installation of solar canopies on commercial parking lots, thereby boosting the local generation of renewable energy.

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

"§235- Solar canopy installation tax credit. (a) There shall be allowed to each taxpayer subject to the tax imposed under this chapter, a solar canopy installation tax credit that shall be applied against 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) The solar canopy installation tax credit shall be equal to thirty per cent of the qualified expenses of the taxpayer in the taxable year, up to a maximum of $500,000 per taxpayer.

(c) In the case of a partnership, S corporation, estate, trust, or other pass-through entity, the tax credit allowable is for the qualified costs incurred by the entity for the taxable year. The qualified expenses upon which the tax credit is computed shall be determined at the entity level. Distribution and share of the credit shall be determined by rule.

(d) 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 necessary to effectuate the purposes of this section.

(e) If the tax credit under this section exceeds the taxpayer's net income tax liability for the taxable year, 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.

(f) All claims for a tax credit under this section, including any 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.

(g) For the purposes of this section:

"Solar canopy" means an outdoor shade-providing structure that:

(1) Is composed of components that primarily serve a function related to solar energy generation;

(2) Hosts photovoltaic panels located above a parking or driving area, pedestrian walkway, courtyard, or other utilized surface; and

(3) Is installed in a manner that maintains the functionality of the area beneath the structure.

"Solar canopy" includes a functional carport designed with mounted photovoltaic panels for solar energy generation. "Solar canopy" does not include a structure composed of traditional structural components that serves only a general roofing or structural purpose, even if solar photovoltaic panels are mounted atop the components.

"Qualified expenses" means costs that are directly incurred by the taxpayer to purchase and install a solar canopy placed in service in the State."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2026.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2326
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII