RELATING TO TAX CREDITS.

HB1265

HOUSE OF REPRESENTATIVES

H.B. NO.

1265

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to tax credits
.

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

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SECTION 1.
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The legislature finds that promoting the use
of recycled materials and waste inputs in business operations reduces
environmental impacts, conserves natural resources, and supports the circular
economy.
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Providing tax incentives to
businesses that incorporate recycled or waste materials into their products or
services would encourage sustainable practices and help mitigate the
environmental challenges facing the State.

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Therefore, the purpose of this Act
is to establish a tax credit for businesses that use recycled or waste inputs
as part of their operations.

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

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"
�235-
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Recycled
or waste inputs tax credit.
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(a)
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There shall be allowed to each taxpayer subject to the tax imposed by this
chapter, a tax credit for using recycled or waste inputs in the taxpayer's
business operations, which 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.

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(b)
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The amount of the tax credit shall be:

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(1)
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Ten per cent of
the cost of recycled or waste inputs used by the taxpayer in the taxable year,
up to a maximum of $500,000 per taxpayer per taxable year; or

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(2)
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Fifteen per
cent of the cost of recycled or waste inputs used by the taxpayer in the
taxable year if the taxpayer's principal place of business is located in a
rural area, up to a maximum of $750,000 per taxpayer per taxable year.

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(c)
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To
qualify for the tax credit, the recycled or waste inputs used by the taxpayer
shall meet the following requirements:

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(1)
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The inputs
shall consist of materials that have been diverted from the waste stream,
including post-consumer or post-industrial materials;

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(2)
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The inputs
shall be used as raw materials in the production of goods or services; and

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(3)
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The inputs
shall be sourced from certified recycling or waste recovery facilities.

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(d)
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If
the tax credit under this section exceeds 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.
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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.
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Failure to comply with
the foregoing provision shall constitute a waiver of the right to claim the
credit.

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(e)
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Every
claim, including any amended claims, for a tax credit under this section shall include:

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(1)
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Documentation
that verifies the recycled or waste inputs used, including invoices, receipts,
or other relevant records;

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(2)
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Certification
from the supplier of the recycled or waste inputs confirming compliance with
the requirements of this section; and

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(3)
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Any other
information required by the department of taxation to determine the taxpayer's
eligibility for the tax credit.

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(f)
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The
director of taxation:

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(1)
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Shall prepare
any forms necessary for a taxpayer to claim a credit under this section;

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(2)
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May require the
taxpayer to furnish reasonable information to ascertain the validity of the
claim for the tax credit made under this section; and

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(3)
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May adopt rules
pursuant to chapter 91 to implement this section.

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(g)
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As
used in this section:

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"Recycled or waste inputs" means
materials that have been diverted from the waste stream and used as raw
materials in the production of goods or services.
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"Recycled or waste inputs" includes
post-consumer materials, post-industrial materials, and other recovered
materials certified by the department of taxation.

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"Rural area" means any area outside
of a standard metropolitan statistical area as defined by the United States
Census Bureau or any area designated as rural by the department of business,
economic development, and tourism.
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SECTION 3.
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New statutory material is underscored.

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SECTION 4.
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This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Recycled
or Waste Inputs Tax Credit

Description:

Establishes
a Recycled or Waste Inputs Tax Credit.
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Applies to taxable years beginning after 12/31/25.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.