RELATING TO INCOME TAX.

SB2326

THE SENATE

S.B. NO.

2326

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to INCOME TAX
.

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

����
SECTION 1.
�
The legislature finds that the State is
ground zero for the climate crisis.
�
In
2021, Hawaii became the first state in the nation to officially declare a
climate emergency by adopting S.C.R. No. 44, S.D. 1, H.D. 1 (2021), which
called for an immediate just transition and emergency mobilization effort to
restore a safe climate.
�
Through the
adoption of this concurrent resolution, statewide commitments were made to
provide financial and regulatory assistance to transform and decarbonize the
economy, including investing in clean energy and other beneficial projects and
infrastructure, such as zero emissions energy installations.

����
The
legislature further finds that distributed solar energy, which refers to solar
energy generated at or near the point of electricity consumption and
interconnected to the distribution system, is the State's largest source of
clean, renewable energy.
�
Distributed
solar energy systems reduce the amount of land needed for energy facilities,
reduce the need for new transmission lines, and can provide local power during
grid‑wide disturbances.
�
The
legislature recognizes that maximizing the use of distributed solar energy,
such as through rooftop solar and solar carports and canopies, will be critical
to meeting the State's clean energy needs and can reduce competition for land
use across the State.
�

����
The
legislature notes that on January 27, 2025, the Governor signed Executive Order
No. 25-01 to promote and expedite the development of renewable energy in the State,
urging the public utilities commission to maximize the use of distributed
clean, renewable energy resources across the state to improve resilience and
energy security.
�
The executive order
explicitly urged the commission to focus on maximizing distributed energy
resources in public safety power shutoff areas, on rooftops, and as canopies
over parking lots and shared spaces on land-constrained Oahu.

����
The
legislature finds that solar canopies, including solar carports, are a smart
way to utilize existing underutilized built spaces such as parking lots at
malls, offices, and businesses, turning them into dual-purpose areas for
parking and power generation.
�
The
legislature notes that parking lots are ideal locations for solar installations
because the lots already occupy enormous surface areas in urban and suburban
environments, receive direct sunlight, and are structurally simple to build
over.
�
While generating clean energy and
helping reduce electric bills for businesses, solar canopies also provide
benefits such as shade for vehicles, reduction in urban heat island effects,
and additional charging locations for electric vehicles.
�

����
The
legislature also finds that changes to federal solar tax credits pursuant to
Public Law 119-21 (139 stat. 72), commonly known as the One Big Beautiful Bill
Act significantly reduce currently available federal tax incentives, which will
dramatically increase the cost of solar energy systems, including solar
canopies.
�
The legislature further finds
that it is in the interest of the State to encourage and enable the development
of renewable energy generation, including the construction of solar canopies on
commercial parking lots, which allow land to be used for renewable energy
generation without interfering with existing uses.
�
Furthermore, promoting the use of solar
canopies could significantly contribute towards reducing greenhouse gas
emissions from the electricity sector and satisfying the State's need for
increased solar energy generation capacity.
�

The legislature additionally recognizes that as existing federal tax
credits are phased out, providing additional state tax incentives for solar
canopy installations will help to fill the gap and make it more feasible for local
businesses to invest in solar canopies by reducing the initial financial burden
and improving the return on investment.

����
Accordingly,
the purpose of this Act is to establish a solar canopy installation tax credit
to incentivize the installation of solar canopies on commercial parking lots, thereby
boosting the local generation of renewable energy.

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

����
"
�235-
�
Solar canopy installation tax credit.

�
(a)
�
There shall be allowed to each taxpayer
subject to the tax imposed under this chapter, a solar canopy installation tax
credit that shall be applied against 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)
�
The solar canopy installation
tax credit shall be equal to thirty per cent of the qualified expenses of the
taxpayer in the taxable year, up to a maximum of $500,000 per taxpayer.

����
(c)
�
In
the case of a partnership, S corporation, estate, trust, or other pass
-
through entity,
t
he
tax credit allowable is for the qualified costs incurred by the entity
for the taxable year.
�
The qualified
expenses
upon which the
tax credit is computed shall be determined at the entity level
.

�
D
istribution and share of the credit shall be
determined
by rule
.

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

����
(e)
�
If the tax credit under this
section exceeds the taxpayer's net income tax liability for the taxable year,
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.

����
(f)
�
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.
�
Failure to comply with
the foregoing provision shall constitute a waiver of the right to claim the
credit.
�

����
(g)
�
For the purposes of this
section:

����
"Solar
canopy" means an outdoor shade-providing structure
that:

����
(1)
�
Is c
omposed of components that
primarily serve a function related to solar energy generation;

����
(2)
�
H
osts

photovoltaic
panels

located
above a parking or driving area, pedestrian walkway, courtyard, or other
utilized surface
; and

����
(3)
�
Is i
nstalled in a manner that
maintains the functionality of the area beneath the structure.

"Solar canopy"
includes a functional carport designed with mounted photovoltaic panels for
solar energy generation.
�
"
S
olar canopy"
does
not include a
structure
composed of
traditional structural
components that serves only a general roofing or structural purpose
,
even if solar photovoltaic
panels are mounted atop the components.

����
"Qualified expenses" means costs that are directly incurred by
the taxpayer to purchase and install a solar canopy placed in service in the
State.
"

����
SECTION
3.
�
New statutory material is
underscored.

����
SECTION
4.
�
This Act, upon its approval, shall
apply to taxable years beginning after December 31, 2026.

INTRODUCED BY:

_____________________________

Report Title:

DOTAX; Income
Tax; Solar Canopy Installation Tax Credit; Renewable Energy Generation; Rules

Description:

Establishes
a Solar Canopy Installation Tax Credit that applies to taxable years beginning
after 12/31/2026.
�
Requires the Director
of Taxation to take certain actions to implement the 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.