RELATING TO CESSPOOLS.

HB376

HOUSE OF REPRESENTATIVES

H.B. NO.

376

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO CESSPOOLS
.

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

PART I

����
SECTION
1.
�
The legislature finds that the health
of Hawaii's people and quality of Hawaii's waters are being harmed by pollution
from cesspools.
�
Hawaii has more than
eighty thousand cesspools that discharge approximately fifty million gallons of
wastewater into the State's groundwater every day.
�
Cesspools are antiquated, substandard systems
that damage public health; pollute drinking water; and lower water quality in
streams, groundwaters, nearshore marine areas, and the ocean.
�
Cesspool pollution also harms public
recreation and the precious coral reefs on which Hawaii's economy, shoreline,
fisheries, and native species depend.

����
The
purpose of this Act is to implement various recommendations of the working
group established by Act 132, Session Laws of Hawaii 2018, including:

����
(1)
�
Accelerating the dates for required
upgrades, conversions, or connections of:

���������
(A)
�
The 13,821 priority level 1 cesspools
in the State to 2035, with certain exceptions; and

���������
(B)
�
The 12,367 priority level 2 cesspools
in the State to 2040;

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(2)
�
Appropriating moneys to provide
financing assistance via the cesspool compliance pilot grant project
established pursuant to Act 153, Session Laws of Hawaii 2022; and

����
(3)
�
Establishing a cesspool upgrade,
conversion, or connection income tax credit.

PART II

����
SECTION
2.
�
Chapter 342D, Hawaii Revised
Statutes, is amended by adding a new section to be appropriately designated and
to read as follows:

����
"
�342D-
��

��
Cesspools; mandatory
upgrade, conversion, or connection; priority level 1; priority level 2.
�
(a)
�
Every cesspool in the State designated as
priority level 1 according to the university of Hawaii's Hawaii cesspool
prioritization tool shall be:

����
(1)
�
Upgraded or converted to a
director-approved wastewater system; or

����
(2)
�
Connected to a sewerage system,

before January 1, 2035; provided that
priority level 1 cesspools on recreational residence leases within the Kokee
state park and Waimea canyon state park on the island of Kauai shall be
upgraded, converted, or connected before January 1, 2040.

����
(b)
�
Every cesspool in the State
designated as priority level 2 according to the university of Hawaii's Hawaii
cesspool prioritization tool shall be:

����
(1)
�
Upgraded or converted to a
director-approved wastewater system; or

����
(2)
�
Connected to a sewerage system,

before
January 1, 2040.

����
(c)
�
The director may grant an exemption from the
requirements of subsections (a) and (b) to the property owner of a cesspool who
applies for an exemption and presents documentation showing a legitimate reason
that makes it infeasible to upgrade, convert, or connect the cesspool.
�
For the purposes of this subsection, a
legitimate reason shall include but not be limited to:

����
(1)
�
Small lot size;

����
(2)
�
Steep topography;

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(3)
�
Poor soils;

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(4)
�
Accessibility issues; or

����
(5)
�
A planned development of sewerage
upgrades to an area.

����
(d)
�
The department may grant extensions of up to
five years at a time from the requirements of subsections (a) and (b) based on
demonstration of financial inability to pay for or finance a cesspool upgrade,
conversion, or connection; provided that the department of health may adopt
rules pursuant to chapter 91 necessary to effectuate the purposes of this
subsection.

����
(e)
�
Notwithstanding any law to the contrary, no
penalty or other assessment for any violation of this section shall constitute
a lien on the real property.
�

Notwithstanding any law to the contrary, no seizure of real property
shall be authorized for any violation of this section.

����
(f)
�
As used in this section, "cesspool"
has the same meaning as in section 342D-72.
"

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SECTION

3
.
�
Section
342D-72, Hawaii Revised Statutes, is amended by amending subsection (a) to read
as follows:

����
"(a)
�
[
Before
]
Except as otherwise
provided in section 342D-
��
, before

January 1, 2050, every cesspool in the State, excluding cesspools granted
exemptions by the director of health pursuant to subsection (b), shall be:

����
(1)
�
Upgraded or converted to a
director-approved wastewater system; or

����
(2)
�
Connected to a sewerage system."

PART III

����
SECTION
4.
�
There is appropriated out of the
general revenues of the State of Hawaii the sum of $
���������
or so much thereof as may be
necessary for fiscal year 2025-2026 to implement the cesspool compliance pilot
grant program established pursuant to Act 153, Session Laws of Hawaii 2022.

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The
sum appropriated shall be expended by the department of health for the purposes
of this part.

PART IV

����
SECTION
5.
�
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 cesspool upgrade,
conversion, or connection income tax credit shall be equal to the qualified
expenses of the taxpayer, up to a maximum of $10,000; 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 the qualified expenses of the taxpayer,
up to a maximum of $10,000 per residential dwelling connected to the cesspool,
as certified by the department of health pursuant to subsection (e).
�
There shall be allowed a maximum of one
cesspool upgrade, conversion, or connection income tax credit per qualified
cesspool.
�
The cesspool upgrade,
conversion, or connection income tax credit shall be available only for the
taxable year in which the taxpayer's qualified expenses are certified by the
department of health.

����
(d)
�
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 being
reached for that taxable year shall be eligible to claim the credit in the
subsequent taxable year.

����
(e)
�
The department of health
shall:

����
(1)
�
Certify all qualified cesspools for
the purposes of this section;

����
(2)
�
Collect and maintain a record of all
qualified expenses certified by the department of health for the taxable year; and

����
(3)
�
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 department of health shall immediately discontinue
certifying credits and notify the department of taxation.

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

����
(f)
�
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)
�
May adopt rules under chapter 91
necessary to effectuate the purposes of this section.

����
(g)
�
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.
�
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.

����
(h)
�
As used in this section:

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

����
"Qualified
cesspool" means a cesspool that is:

����
(1)
�
Certified by the department of
health to be:

���������
(A)
�
Located within a priority level 1 or
2 area according to the university of Hawaii's 2022 Hawaii cesspool hazard
assessment and prioritization tool; or

���������
(B)
�
A residential large capacity
cesspool; or

����
(2)
�
Certified by a county or private
sewer company to be appropriate for connection to its existing sewerage system.

����
"Qualified
expenses" means costs that are necessary and directly incurred by the
taxpayer for upgrading or converting a qualified cesspool to a director of
health-approved wastewater system, or connecting a qualified cesspool to a
sewerage system, and that are certified as such by the department of health.

����
"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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"Wastewater"
has the same meaning as in section 342D-1.
"
���
SECTION
6
.
�
Section 23-92, Hawaii Revised Statutes, is
amended by amending subsection (c) to read as follows:

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

����
(1)
�
Sections 235-12.5 and 241-4.6--Credit
for renewable energy technology system installed and placed in service in the
State.
�
For the purpose of section 23‑91(b)(5),
this credit shall be deemed to have been enacted for an economic benefit; [
and
]

����
(2)
�
Section 235-17--Credit for qualified
production costs incurred for a qualified motion picture, digital media, or
film production[
.
]
; and

����
(3)
�
Section 235-
��
--Credit for cesspool upgrade, conversion,
or connection.
"

����
SECTION

7
.
�
Section 23-94,
Hawaii Revised Statutes, is amended by amending subsection (c) to read as
follows:

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

����
(1)
�
Section 235-4.5(a)--Exclusion of
intangible income earned by a trust sited in this State;

����
(2)
�
Section 235-4.5(b)--Exclusion of
intangible income of a foreign corporation owned by a trust sited in this
State;

����
(3)
�
Section 235-4.5(c)--Credit to a
resident beneficiary of a trust for income taxes paid by the trust to another
state;

����
(4)
�
Sections 235-55 and 235-129--Credit for
income taxes paid by a resident taxpayer to another jurisdiction;

����
(5)
�
Section 235-71(c)--Credit for a
regulated investment company shareholder for the capital gains tax paid by the
company;

����
(6)
�
Section 235-110.6--Credit for fuel
taxes paid by a commercial fisher;

����
(7)
�
Section 235-110.93--Credit for
important agricultural land qualified agricultural cost;

���
[
(8)
�
Section 235-110.94--Credit for
organically produced agricultural products;

����
(9)
]

(8)
�

Section 235-129(b)--Credit to a shareholder of an S corporation
for the shareholder's pro rata share of the tax credit earned by the S
corporation in this State; and

��
[
(10)
]

(9)
�

Section 209E-10--Credit for a qualified business in an enterprise
zone; provided that the review of this credit pursuant to this part shall be
limited in scope to income tax credits."

����
SECTION

8
.
�
Section 23-95,
Hawaii Revised Statutes, is amended by amending subsection (c) to read as
follows:

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

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

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

���
[
(3)
�
Section 235-16.5--Credit for
cesspool upgrade, conversion, or connection;

����
(4)
]

(3)
�

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

���
[
(5)
]

(4)
�

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

���
[
(6)
]

(5)
�

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

���
[
(7)
]

(6)
�

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

PART V

����
SECTION
9.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION
10.
�
This Act shall take effect upon its
approval; provided that:

����
(1)
�
Section 4 shall take effect on July 1,
2025; and

����
(2)
�
Part IV shall apply to taxable years
beginning after December 31, 2024.

INTRODUCED BY:

_____________________________

By Request

Report Title:

Hawaii
State Association of Counties Package; Upgrade, Conversion, or Connection of
Cesspools; Tax Credit; Appropriation

Description:

Accelerates
the dates for the required upgrades, conversions, or connections of priority
level 1 and priority level 2 cesspools to 2035 and 2040, respectively.
�
Appropriates funds to implement the cesspool
compliance pilot grant program.
�
Re-establishes
a cesspool upgrade, conversion, or connection tax credit.

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