HB2079 • 2026

RELATING TO CESSPOOLS.

Taxes

Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor: NAKAMURA (Introduced by request of another party)
Last action: 2026-02-18
Official status: Passed Second Reading as amended in HD 1 and referred to the committee(s) on FIN with none voting aye with reservations; none voting no (0) and none excused (0).
Effective date: Not listed

Plain English Breakdown

The bill summary does not provide specific details about the process of establishing rules and forms for claiming the tax credit.

Cesspool Upgrade, Conversion, or Connection Income Tax Credit

This bill reestablishes an income tax credit to help people upgrade, convert, or connect their cesspools to better wastewater systems.

What This Bill Does

Reinstates the cesspool upgrade, conversion, or connection income tax credit for taxpayers who make improvements to their cesspools.
Sets a cap on the amount of the tax credit based on the type of improvement made: $14,000 for upgrading to a septic system, $17,500 for converting to an aerobic treatment unit, and $28,000 for connecting to a sewerage system.
Requires taxpayers who receive grants from federal or state sources to support cesspool improvements to be ineligible for the tax credit.
Allows unused portions of the tax credit to be carried over to future years until used up.

Who It Names or Affects

Taxpayers who upgrade, convert, or connect their cesspools to better wastewater systems can claim this tax credit.
The Department of Health will maintain records and certify expenses related to these improvements.
The Department of Taxation will prepare forms for claiming the tax credit.

Terms To Know

Cesspool: A substandard system that discharges raw sewage into the ground, posing a risk to water resources.
Qualified expenses: The costs necessary and directly incurred for upgrading or converting a cesspool, certified by an appropriate government agency.

Limits and Unknowns

This bill applies only to taxable years beginning after December 31, 2026.
Taxpayers who receive grants from federal, state, county, or private sources for these improvements are not eligible for the tax credit.
The exact amount of the tax credit is capped and varies based on the type of improvement made.

Amendments

These notes stay tied to the official amendment files and metadata from the legislature.

HD1

Hawaii published version HD1

Plain English: This amendment reinstates an income tax credit for upgrading, converting, or connecting cesspools to approved wastewater systems or sewerage systems.

Reinstates the cesspool upgrade, conversion, or connection income tax credit that was previously available until December 31, 2020.
Sets a cap of $10,000 for each cesspool upgraded or converted to an approved wastewater system or connected to a sewerage system.
Establishes rules for the Department of Health and Director of Taxation to implement and manage the tax credit.

The exact distribution and share of the tax credit for partnerships, S corporations, estates, or trusts is determined by rule and not fully detailed in this amendment.
Details on how refunds are handled if a taxpayer's adjusted gross income falls below a certain threshold are incomplete.

Bill History

2026-02-18 H
Passed Second Reading as amended in HD 1 and referred to the committee(s) on FIN with none voting aye with reservations; none voting no (0) and none excused (0).
2026-02-18 H
Reported from EEP (Stand. Com. Rep. No. 386-26) as amended in HD 1, recommending passage on Second Reading and referral to FIN.
2026-02-05 H
The committee on EEP recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 7 Ayes: Representative(s) Lowen, Perruso, Chun, Kahaloa, Kusch, Quinlan, Matsumoto; Ayes with reservations: none; Noes: none; and Excused: none.
2026-02-02 H
Bill scheduled to be heard by EEP on Thursday, 02-05-26 9:00AM in House conference room 325 VIA VIDEOCONFERENCE.
2026-01-30 H
Re-referred to EEP, FIN, referral sheet 5
2026-01-28 H
Referred to EEP, WAL, FIN, referral sheet 3
2026-01-26 H
Introduced and Pass First Reading.
2026-01-23 H
Pending introduction.

Official Summary Text

RELATING TO CESSPOOLS.
Hawaii Council of Mayors Package; Wastewater; Cesspool Upgrade, Conversion, or Connection; Income Tax Credit
Reestablishes the cesspool upgrade, conversion, or connection income tax credit. Applies to taxable years beginning after 12/31/2026. Effective 7/1/3000. (HD1)

Current Bill Text

Read the full stored bill text

HB2079

HOUSE OF REPRESENTATIVES

H.B. NO.

2079

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO CESSPOOLS
.

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 water pollution
from nonpoint contamination sources that flow off the land directly, rather
than through pipes or ditches, poses a significant threat to the State's water
resources, including streams, groundwater, and the ocean.
�
As a nonpoint contamination source, cesspools
are substandard systems that discharge raw, untreated sewage into the ground.
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Cesspool pollution poses a significant risk to
the State's finite groundwater, drinking water, streams, ocean, and other
aquatic resources.

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The legislature additionally finds
that cesspools in Hawaii release approximately fifty-three million gallons of
untreated sewage into the ground each day.
�
There are approximately eighty-eight thousand
cesspools in the State, with nearly fifty thousand located on Hawaii island,
approximately fourteen thousand on Kauai, over twelve thousand on Maui, over
eleven thousand on Oahu, and over one thousand four hundred on Molokai.
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Of these cesspools, forty-three thousand pose
a risk to the State's water resources.

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To address the ongoing threat of
water contamination caused by cesspools, the legislature passed Act 125,
Session Laws of Hawaii 2017, which requires the upgrade, conversion, or connection
of all cesspools before January 1, 2050.

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Prior to this, Act 120, Session Laws
of Hawaii 2015, established an income tax credit for the costs to upgrade or convert
a qualified cesspool into a septic system or an aerobic treatment unit system,
or to connect a qualified cesspool to a sewer system, effective for taxable
years beginning after December 31, 2015.
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This tax credit expired on December 31, 2020.
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Before its expiration, the tax credit was
claimed on sixty-four tax returns for tax year 2019, and the amounts claimed
totaled $371,000.
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For tax year 2018, the
tax credit was claimed on forty-one tax returns, and the amounts claimed totaled
$219,000, up from $143,000 claimed for tax year 2017.

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Current average costs to upgrade or
convert a cesspool to a septic system range between $20,000 and $40,000; to
convert to an aerobic treatment unit system, the cost ranges between $20,000
and $50,000. Current estimated costs to connect to a sewer system, the most
environmentally desirable option, approach $80,000.

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The purpose of this Act is to
reinstate the cesspool upgrade, conversion, or connection income tax credit,
with the credit amount adjusted for inflation since the original credit was
established in 2015.

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SECTION 2.
�
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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Cesspool upgrade, conversion, or
connection; income tax credit.
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(a)
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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.

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(b)
�

The cesspool upgrade, conversion, or connection income tax credit may be
claimed for every cesspool that undergoes an upgrade or conversion to a septic
system or aerobic treatment unit system, or connection to a sewerage system
that is installed and placed in service in the State by a taxpayer during the
taxable year for which it is claimed.
�

The amount of the credit shall be equal to either thirty-five per cent
of the qualified expenses of the taxpayer or the applicable cap amount
established by subsection (d), whichever is less; provided that in the case of
a qualified cesspool that is a residential large capacity cesspool, the amount
of the credit shall be equal to thirty-five per cent of the qualified expenses
of the taxpayer per residential dwelling connected to the cesspool or the
applicable cap amount established by subsection (d), whichever is less.

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(c)
�
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.
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The expenses upon which the tax
credit is computed shall be determined at the entity level.
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Distribution and share of credit shall be
determined by rule.

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(d)
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The
amount of credit allowed shall not exceed the applicable cap amount, which is
determined as follows:

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(1)
�
$14,000 for
each cesspool upgrade or conversion to a septic system;

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(2)
�
$17,500 for
each cesspool upgrade or conversion to an aerobic treatment unit system; and

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(3)
�
$28,000 for
each cesspool eliminated through connection to a sewerage system.

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(e)
�

Any taxpayer who has received a federal, state, county, or private grant
to support the upgrade or conversion to a septic system or aerobic treatment
unit system or connection to a sewerage system is ineligible for the tax
credit.

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(f)
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The
department of health shall:

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(1)
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Collect and
maintain a record of all qualified expenses certified by an appropriate
government agency for the taxable year; and

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(2)
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Certify to each
taxpayer the amount of credit the taxpayer may claim.

The
director of health may adopt rules under chapter 91 as necessary to implement
the certification requirements under this section.

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(g) The director of taxation:

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(1)
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Shall prepare
any forms that may be necessary to claim a tax 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
under chapter 91 necessary to effectuate the purposes of this section.

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(h)
�
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 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 their right to claim the
credit.

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(i)
�
As
used in this section:

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"Cesspool" has the same meaning as
in section 342D-72.

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"Qualified expenses" means costs
that are necessary and directly incurred by the taxpayer for upgrading or
converting a cesspool into a septic system or an aerobic treatment unit system,
or connecting a cesspool to a sewerage system, and that are certified as such
by the appropriate government agency.
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"Residential large capacity
cesspool" means a cesspool that is connected to more than one residential
dwelling.

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"Sewerage system" has the same
meaning as in section 342D‑1.
"

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SECTION
3
.
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Section 23-95, Hawaii Revised Statutes, is
amended by amending subsection (c) to read as follows:

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"(c)
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This section shall apply to the following:

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(1)
�
Section
235-5.5--Deduction for individual housing account deposit;

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(2)
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Section
235-7(f)--Deduction of property loss due to a natural disaster;

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(3)
�
Section [
235-16.5
]

235-
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--Credit for cesspool
upgrade, conversion, or connection;

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(4)
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Section
235-19--Deduction for maintenance of an exceptional tree;

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(5)
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Section
235-55.91--Credit for the employment of a vocational rehabilitation referral;

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(6)
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Section
235-110.2--Credit for in-kind services contribution for public school repair
and maintenance; and

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(7)
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Sections 235-110.8
and 241-4.7--Credit for ownership of a qualified low-income housing
building."

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SECTION
4.
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Statutory material to be repealed is
bracketed and stricken.
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New statutory
material is underscored.

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SECTION 5.
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This Act shall take effect on July 1, 2026,
and shall apply to taxable years beginning after December 31, 2026.

INTRODUCED BY:

_____________________________

By Request

Report Title:

Hawaii
Council of Mayors Package; Wastewater; Cesspool Upgrade, Conversion, or
Connection; Income Tax Credit

Description:

Reestablishes
the cesspool upgrade, conversion, or connection income tax credit.
�
Applies to taxable years beginning after
12/31/2026.

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