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HB946
HOUSE OF REPRESENTATIVES
H.B. NO.
946
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII
A BILL FOR AN ACT
relating
to carbon displacement
.
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 imported goods
often carry a high, uncharged carbon cost due to long-distance transport, the
use of fossil fuels, and associated greenhouse gas emissions.
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Locally produced goods, when they replace or
displace imported goods, reduce these carbon emissions by minimizing
transportation distances and fuel usage.
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Current market prices do not fully account for the invisible or
externalized costs of greenhouse gas emissions associated with imported goods.
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The legislature further finds that encouraging
the production and consumption of locally sourced goods can help the State meet
its climate goals, support local businesses, and reduce dependency on external
supply chains.
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The purpose of this Act is to
establish a system under which producers of certain local goods that displace
equivalent imported products may claim a carbon displacement tax credit to
reflect the uncharged carbon cost avoided by not importing those goods.
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SECTION 2.
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Chapter 235, Hawaii Revised Statutes, is
amended by adding a new section to part I to be appropriately designated and to
read as follows:
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"
�235-
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Carbon displacement 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 carbon displacement 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 tax credit is properly claimed.
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(b)
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The amount of the tax credit determined under
this section for the taxable year shall be equal to the amount specified in the
carbon displacement certificate issued to the taxpayer by the department of
business, economic development, and tourism for the taxable year in which the certificate
is issued.
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(c)
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The tax credit allowed under this section
shall be claimed against net income tax liability for the taxable year.
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A tax credit under this section that exceeds
the taxpayer's income tax liability may be used as a credit against the
taxpayer's income tax liability in subsequent years until exhausted.
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(d)
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All claims for tax credits 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 credits
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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To obtain a carbon displacement certificate, a
taxpayer shall submit an application to the department of business, economic
development, and tourism containing:
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(1)
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A detailed
description of the goods locally produced by the taxpayer;
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(2)
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The estimated
quantity of equivalent imported product that the goods locally produced by the
taxpayer will replace in the State during the applicable tax year;
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(3)
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Documentation
of market data, contracts, or sales projections demonstrating the likelihood of
displacing imports; and
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(4)
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Any additional
information required by the department to assess carbon displacement.
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(f)
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The department of business, economic
development, and tourism shall approve the application and issue a carbon
displacement certificate to a taxpayer if the department determines that:
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(1)
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The goods
locally produced by the taxpayer are substantially similar to the imported
goods the application claims to replace;
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(2)
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At least fifty per
cent of the value added by the taxpayer for the
locally produced
goods
occurs within the
State
; and
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(3)
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There is a
reasonable expectation, supported by evidence, that the goods locally produced
by the taxpayer will reduce the volume of imported equivalent goods.
The carbon displacement certificate shall include
the amount of the tax credit the taxpayer may claim and shall be calculated as
specified in subsection (h).
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(g)
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Any taxpayer that is issued a carbon
displacement certificate shall submit an annual report to the department of
business, economic development, and tourism verifying actual sales, quantities,
and market share displaced.
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The
department may adjust credits in subsequent years if actual displacement
deviates significantly from projections.
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(h)
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The
department of business, economic development, and tourism shall establish by
rule a standardized formula to calculate the amount of the tax credit for each
unit of the local product, reflecting:
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(1)
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The average
greenhouse gas emissions factor for importing an equivalent product to Hawaii
from a typical export location;
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(2)
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Adjustments for
different modes of transportation of the product by air or land; and
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(3)
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Adjustments for
any known variations in supply chain emissions.
The formula may be based upon weight, volume, or another
relevant metric.
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The carbon displacement
credit for each unit of local production shall be the greenhouse gas emissions
factor multiplied by the applicable carbon cost rate.
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This carbon cost rate may be updated
periodically to align with current state or federal carbon pricing guidelines.
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(i)
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The department shall adopt rules under chapter
91 to implement this section, including:
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(1)
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The methodology
for verifying displaced imports;
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(2)
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The greenhouse
gas emissions factor per product category; and
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(3)
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The procedure
for credit distribution, tracking, and recapture.
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(j)
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The department of business, economic
development, and tourism may conduct periodic audits of taxpayers receiving
credits to verify compliance.
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Taxpayers found
to have knowingly submitted inaccurate information or falsified records shall
be subject to penalties, including repayment of credits plus interest, and
potential ineligibility for future participation.
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(k)
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The department shall submit
an annual report to the legislature that includes:
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(1)
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The number of
approved taxpayers and total amount of goods subject to the tax credit;
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(2)
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The total
amount of tax credits issued and the estimated reduction in greenhouse gas
emissions; and
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(3)
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Recommendations
for improving program efficiency, adjusting the carbon cost rate, or expanding
the program to additional product categories.
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(l)
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For purposes of this section:
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"Equivalent imported
product" means a product that is similar in function, quality, and primary
use to the locally produced good for which the tax credit is sought.
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"Greenhouse gas emissions
factor" means a standardized measure of carbon dioxide or carbon
dioxide-equivalent emissions associated with transporting goods, as determined
by the department through rulemaking, taking into account distance, mode of
transport, and typical fuel usage."
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SECTION 3.
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If any provision of this Act, or the
application thereof to any person or circumstance, is held invalid, the
invalidity does not affect other provisions or applications of the Act that can
be given effect without the invalid provision or application, and to this end
the provisions of this Act are severable.
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SECTION
4.
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There is appropriated out of the
general revenues of the State of Hawaii the sum of $
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or so much thereof as may be necessary
for fiscal year 2025-2026 and the same sum or so much thereof as may be
necessary for fiscal year 2026-2027 for the department of business, economic
development, and tourism to review applications and issue carbon displacement
certificates.
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The sums
appropriated shall be expended by the
department of business, economic development, and tourism for the purposes of
this Act.
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SECTION
5.
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New statutory material is
underscored.
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SECTION 6.
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This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2024.
INTRODUCED BY:
_____________________________
Report Title:
Tax
Credit; Carbon Displacement; DBEDT
Description:
Establishes
a carbon displacement tax credit for taxpayers of locally produced goods.
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Requires the Department of Business, Economic
Development, and Tourism to certify tax credit amounts.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.