RELATING TO TAXATION.

HB2526

HOUSE OF REPRESENTATIVES

H.B. NO.

2526

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to taxation
.

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 climate change has
warmed ocean waters, which has shifted the spawning area for hurricanes near
Mexico farther north.
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This has caused
hurricanes, which historically have passed several hundred miles south of the
State, to follow paths aimed directly at the State.

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The
legislature further finds that the warmer ocean waters have also strengthened
the intensity of hurricanes; as a result, hurricanes classified as Category 3,
4, and 5 have become stronger and more frequent.
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This strengthening has led climate change
assessment models to modify predictions of Category 5 hurricanes with two
hundred miles per hour sustained winds from occurring every eight years to
every year by 2080.
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These storms are
also expected to mostly occur in the northern Pacific, in which Hawaii is
located.

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The
legislature finds that when Hurricane Melissa hit Jamaica in 2025, most of the
houses on the island were made of wood, and that thirty-six per cent of all the
houses were either badly damaged or destroyed.
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At the same time, many wooden buildings lost their roofs and windows,
but almost all concrete buildings were left standing.
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The legislature finds that of the roughly two
hundred thousand stand alone houses in the State, nearly all are made of wood.
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If a super Category 5 hurricane were to hit
the State, and if thirty-six per cent of these houses were badly damaged or
destroyed, that would be sixty-four thousand homes badly damaged or destroyed,
leaving roughly two hundred thousand people homeless.

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The
legislature further finds that while it is commonly perceived that the costs of
building concrete structures are much greater than the costs of building with
wood, the costs are quite close, and the benefits of building with concrete, such
as significantly cheaper energy bills, make it an affordable and cost
competitive choice.

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The
legislature recognizes that there are four common modes of building with
concrete in the State.
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Among them are
building with concrete brick, building with insulated concrete forms, building
with structural insulated concrete panels, and building with poured
concrete.
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The cost of building concrete
homes in the State is five to twelve per cent higher than the cost of building
with wood.
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However, this cost difference
would be lowered significantly if concrete house construction became more common.

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The
legislature finds that concrete has several additional advantages over
wood.
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Utility costs for wood-framed
houses are $0.10 per square foot per month, while they are $0.03 per square
foot per month for concrete, a seventy per cent reduction in energy use.
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Concrete has a lifespan of three hundred or
more years, as opposed to one hundred with wood.
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Concrete homes can withstand three hundred miles
per hour winds, whereas wood can only withstand between one hundred twenty and
one hundred fifty miles per hour winds.
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In
addition, wooden houses burn immediately, whereas concrete has a four-hour fire
resistance.
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Rats and termites are also a
persistent problem for wooden houses in the State, unlike concrete homes.
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Concrete also allows less than one-third of
the sound intrusion that comes with wooden walls.

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The
legislature additionally finds that glass windows and sliding doors that can
withstand two hundred miles per hour winds are now being sold locally for forty
per cent more than regular windows.
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However,
this cost difference would be lowered significantly if these fortified windows
and doors became more common.

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The
legislature further finds that the increased risk of hurricane damage poses a
significant danger to the State.
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Many of
the State's refuge areas do not meet the standard to be deemed hurricane
shelters, with few areas able to withstand a Category 2 hurricane.
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Additionally, the refuge areas are only
capable of sheltering one hundred thousand persons, but the estimated demand could
likely be two hundred thousand persons.
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As a result, many residents will need to rely on their own residence;
however, many wooden homes are not constructed to withstand even a Category 1
hurricane.
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The legislature believes
there is a deep moral obligation to the people of the State and future
generations for the State to encourage homeowners to prepare their homes to
withstand hurricanes with sustained winds more than two hundred miles per hour.

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The
legislature also finds that the State imposes a general excise tax on business
activity, including the sale of newly constructed residential housing and
residential buildings, and that any reduction in general excise tax liability
under this Act would apply only to new or incremental economic activity and
would not reduce existing tax revenues.

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The
legislature further finds that providing targeted tax incentives to encourage
the construction and retrofit of hurricane-resilient residential structures will
protect residents of the State, reduce long-term disaster recovery costs, and
increase the resilience of the State's housing stock.

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Accordingly,
the purpose of this Act is to incentivize the construction of new residential
buildings and the retrofit of existing residential structures that are capable
of withstanding extreme hurricane conditions, through targeted state tax
incentives tied to certified performance standards.

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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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Hurricane resistance retrofit tax credit.
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(a)
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There shall be allowed to each
taxpayer who is not eligible to be claimed as a dependent for federal or state
income taxes by another and who files an individual income tax return for a
taxable year, a one-time nonrefundable hurricane resistance retrofit tax credit
that shall be deductible from the taxpayer's net income tax liability imposed
by this chapter.

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(b)
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The amount of the
nonrefundable tax credit shall be equal to fifty per cent of the actual costs
incurred by the taxpayer for:

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(1)
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Retrofitting existing residential
structures to increase wind resistance, including but not limited to the
installation of wind-resistant windows, doors, roofing systems, and related
structural components certified as capable of withstanding sustained wind
speeds of at least two hundred miles per hour;

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(2)
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The purchase, installation, or
construction, including design and materials, of a hurricane shelter on the
taxpayer's property, certified by a licensed building inspector or design
professional; or

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(3)
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Fortification of high-rise apartment
and condominium buildings or units therein in excess of applicable building
code standards, including costs for the installation of wind-resistant windows,
doors, roofing systems, and related structural components certified as capable
of withstanding sustained wind speeds of at least two hundred miles per hour.

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(c)
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Certification of windows, doors, roofing
systems, related structural components, and hurricane shelters to
withstand sustained wind speeds of at least two hundred
miles per hour
shall be provided to the department of taxation by a
licensed building inspector or design professional in a form prescribed by the
director of taxation.

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(d)
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All claims for the 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
properly claim the credit shall constitute a waiver of the right to claim the
credit.

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(e)
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If the tax credit under this
section exceeds the taxpayer's net income tax liability, the excess of the tax
credit may be used as a credit against the taxpayer's income tax liability in
subsequent years until exhausted; provided that no credit under this section
may exceed a period of years.

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(f)
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No taxpayer who claims the tax
credit under this section shall claim any other credit for the same expenses or
costs.

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(g)
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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 proof of the claim for
the tax credit; and

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(3)
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May adopt rules pursuant to chapter
91 to effectuate the purposes of this section.

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(h)
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For the purposes of this section, "h
urricane shelter" means a windowless
room within a residence or within an accessory building to a residence,
designed and constructed to withstand sustained wind speeds of at least two
hundred miles per hour and to resist impact from windborne debris; provided
that the room:

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(1)
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Is not located in a flood zone,
storm surge, or other area susceptible to flooding;

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(2)
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Is readily accessible to persons
residing within the residence; and

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(3)
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Is designed and constructed pursuant
to hurricane standards that are, at a minimum, in compliance with:

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(A)
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Federal Emergency Management Agency
Publication 320 "Taking Shelter from the Storm:
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Building or Installing a Safe Room for Your
Home", March 2021 edition, as amended; and

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(B)
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Federal Emergency Management Agency
Publication 361 "Safe Rooms for Tornadoes and Hurricanes:
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Guidance for Community and Residential Safe
Rooms", April 2021 edition, as amended.
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SECTION
3.
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Chapter 237, Hawaii Revised Statutes,
is amended by adding a new section to be appropriately designated and to read
as follows:

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"
�237-
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Reduced rate; concrete residential
development.
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(a)
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Notwithstanding section 237-13 to the contrary, beginning January 1,
2027, there is hereby levied and shall be assessed and collected a tax
equivalent to half the rate that would have applied pursuant to section 237-13
of the gross proceeds or income received from the sale of a certified
hurricane-resistant residential project; provided that for a high-rise certified
hurricane-resistant residential project, the reduced rate of tax under this
section shall apply only to the portion of gross proceeds or gross income
attributable to the incremental cost of windows, doors, roofing systems, and
related structural components that are certified to withstand sustained wind
speeds of at least two hundred miles per hour.

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(b)
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Certification of
windows, doors, roofing systems, and related structural components to withstand
sustained wind speeds of at least two hundred miles per hour shall be provided
by a licensed building inspector or design professional to the department of
taxation in a form prescribed by the director of taxation.

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(c)
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For the purposes
of this section:

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"Certified hurricane-resistant residential project"
means a residential housing project that:

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(1)
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Is newly constructed using a
concrete structural system, including but not limited to constructing with
concrete masonry unit, insulated concrete forms, structural insulated concrete
panels, or placed concrete;

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(2)
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Incorporates windows, doors, roofing
systems, and related structural components that are certified by a licensed
building inspector or design professional to withstand sustained wind speeds of
at least two hundred miles per hour, and that have been installed in accordance
with applicable building codes and approved plans; and

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(3)
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Has written certification of
compliance as required under this section.

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"High-rise" means
a building classified as a high-rise building under the applicable county
building code.
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SECTION
4.
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New statutory material is
underscored.

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SECTION
5.
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This Act, upon its approval, shall
apply to taxable years beginning after December 31, 2026; provided that this
Act shall be repealed on December 31, 2030.

INTRODUCED BY:

_____________________________

Report Title:

Department
of Taxation; Income Tax Credit; Hurricane Resistance Retrofit; General Excise
Tax; Rate Reduction

Description:

Establishes a nonrefundable individual income tax credit
for a certain percentage of expenses paid to retrofit a residence with wind
resistive devices or to purchase, install, or construct, a hurricane shelter on
the taxpayer's property.
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Reduces the general excise tax rate
on the gross proceeds or income from the sale of a concrete certified
hurricane-resistant residential project or certain hurricane-resistant
components of a high-rise condominium.
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Applies to taxable years beginning after 12/31/2026.
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Sunsets 12/31/2030.

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