RELATING TO TAXATION OF AVIATION FUEL.

SB810

THE SENATE

S.B. NO.

810

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAXATION OF
AVIATION FUEL
.

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

����
SECTION
1
.
�
The legislature finds that the State's
ambitious and ground-breaking efforts to address climate change have overlooked
aviation fuel and the resulting greenhouse gas emissions.
�
Air transportation accounts for nearly half
of Hawai
ʻ
i's petroleum use, more than any other
sector, according to the state energy office's 2018 statistics.
�
Unsurprisingly, air travel is one of the
largest sources of the State's greenhouse gas emissions.
�
Since Hawai
�
i is
largely accessed through air travel, the carbon emissions accumulated from the
burning of jet fuel needs greater consideration to achieve the State's
commitment to reducing the State's contribution to global greenhouse gas
emissions.

����
The
legislature further finds that t
he Intergovernmental Panel on Climate
Change's 2018 report concluded that Hawai
�
i has less than fifteen
years to address permanent climate change and sea level rise that is associated
with a high level of disruption to the islands of Hawai
�
i.
�
The establishment of a carbon tax on aviation
fuel is a necessary action in climate change mitigation and acquiring the funds
to address the future issues associated with climate change.
�
The establishment of a carbon tax on aviation
fuel shall not be construed to interfere with the air transportation industry
but rather as a means to help the industry serving Hawai
�
i
meet the mandate set for international commercial aviation by the International
Civil Aviation Organization.
�
Under the
Carbon Offsetting and Reduction Scheme for International Aviation, airlines are
mandated to reduce aviation greenhouse gas emissions to fifty per cent below
2005 levels by 2050.

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The legislature also finds that the
establishment of a state carbon tax on aviation fuel will allow for the
development of sustainable aviation fuel capability in Hawai
�
i.
�
This development has the potential to reduce
the State's dependence on foreign sources of fuel, promote economic
development, reduce carbon emissions from the two highest emitting sectors,
improve the overall environmental sustainability in Hawai
�
i,
and demonstrate the State's continued leadership in actions to reduce global
greenhouse gas emissions.

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The legislature notes that the reputation
of Hawai
�
i's airports is abysmal.
�
Travelers regularly rank the State's airports
at the bottom.
�
The J.D. Power 2022 North
America Airport Satisfaction Study reported that Honolulu's airport ranked the
second worst among large airports in its annual survey of air passengers.
�
The Kahului airport was also at the bottom of
the list in the midsize-airport category.
�

The department of transportation may also use revenue collected under a
carbon tax to upgrade and improve the State's airports.

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The
purpose of this Act is to establish a carbon tax on aviation fuel to continue
the State's leadership in global greenhouse gas emission reduction
actions.
�
All tax revenue from the carbon
tax will be collected under chapter 243, Hawaii Revised Statutes, as it
pertains to jet fuel, to be set aside in the airport revenue fund.

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

����
"
�23
5-
�
Tax
credit to mitigate the effect of a carbon emissions tax

on lower income taxpayers.
�
(a)
�

There shall be allowed to each qualified taxpayer subject to the tax
imposed under this chapter, an 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 amount of the tax credit shall be determined as follows:

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(1)
�
For
taxpayers filing as single, the applicable tax credit is determined by which
bracket in the following table a taxpayer's gross income falls within:

���������
Gross Income
���������������������
Credit Amount

���������
$60,000 or less but

���������
more than $50,000
���������������������
$50

���������
$50,000 or less but

���������
more than $40,000
���������������������
$100

���������
$40,000 or less but

���������
more than $30,000
���������������������
$150

���������
$30,000 or less but

���������
more than $20,000
���������������������
$200

���������
$20,000 or less
�����������������������
$250; and

����
(2)
�
For
taxpayers filing as head of household, married but filing separately, or
married filing jointly, the applicable tax credit is determined by which
bracket in the following table a taxpayer's gross income falls within:

���������
Gross Income
��

�����������������
Credit
Amount

���������
$75,000 or less, but

���������
more than $60,000
���������������������
$100

���������
$60,000 or less, but

���������
more than $40,000
���������������������
$200

���������
$40,000 or less, but

���������
more than $30,000
���������������������
$300

���������
$30,000 or less, but

���������
more than $20,000
���������������������
$400

���������
$20,000 or less
�����������������������
$500.

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(c)
�

If the tax credit claimed by the taxpayer under this section exceeds the
amount of the income tax payments due from the taxpayer, the excess of credit
over payments due shall be refunded to the taxpayer; provided that the tax
credit properly claimed by a taxpayer who has no income tax liability shall be
paid to the taxpayer; provided further that no refunds or payments on account
of the tax credit allowed by this section shall be made for amounts less than
$1.

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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 the right to claim the credit.

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

����
(e)
�

All of the provisions relating to assessments and refunds under this
chapter and under section 231-23(c)(1) shall apply to the tax credit under this
section.

����
(f)
�

For the purposes of this section, "qualified taxpayer" means a
resident taxpayer who meets the following criteria:

����
(1)
�
The
taxpayer files an individual income tax return, whether as a single taxpayer, a
head of household, a married individual filing a separate return, or a married
couple filing a joint return; and

����
(2)
�
The
taxpayer has a gross income within the ranges listed in subsection (b)(1) or
(2), as applicable.
"

����
SECTION
3
.
�
Chapter 243, Hawaii Revised Statutes, is
amended by adding a new section to be appropriately designated and to read as
follows:

����
"
�243-
�
Carbon
emissions tax on aviation fuel.
�
(a)
�
In addition to any other taxes provided by
law, there is hereby imposed a state carbon emissions tax of $6.25 per ton of
carbon dioxide equivalent emissions on all aviation fuel sold by a distributor
to any retail dealer or end user of the fuel, other than a refiner.
�
The tax shall be paid by the distributor of
the fuel.
�
The tax shall be $0.0522 per
gallon; provided that the tax shall increase annually
based on the United States Energy Information Administration's
determination of carbon dioxide emissions per energy source
.
�
The department of taxation shall post the
annual rate by December 15 of the year prior.

����
(b)
�
Each distributor
subject to the tax imposed by this section, on or before the last day of each
calendar month, shall file with the director, on forms prescribed, prepared,
and furnished by the director, a return statement of the tax under this section
for which the distributor is liable for the preceding month.
�
The form and payment of the tax shall be
transmitted to the department of taxation in the appropriate district.

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(c)
�
The tax collected
under this section shall be paid over to the director of finance for deposit as
provided in section 248-8.

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(d)
�
Every distributor
shall keep in the State and preserve for five years a record in a form as the
department of taxation shall prescribe showing the total number of gallons of
aviation fuel sold by the distributor during any calendar month.
�
The record shall show any other data and
figures relevant to the enforcement and administration of this chapter as the
department of taxation may require.
"

����
SECTION
4
.
�
Section 261-5, Hawaii Revised Statutes, is
amended by amending subsection (a) to read as follows:

����
"
(a)
�
Except for:

����
(1)
�
All proceeds from the passenger facility
charge and deposited in the passenger facility charge special fund; and

����
(2)
�
All proceeds from the rental motor vehicle
customer facility charge and deposited in the rental motor vehicle customer
facility charge special fund,

all moneys received by the
department from rents, fees, and other charges collected pursuant to this
chapter, as well as all aviation fuel taxes paid pursuant to [
section
]
sections

243‑4(a)(2)[
,
]
and 243- ,
shall be paid into the
airport revenue fund created by section 248-8.

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All
moneys paid into the airport revenue fund shall be appropriated, applied, or
expended by the department for any purpose within the jurisdiction, powers,
duties, and functions of the department related to the statewide system of
airports, including, without limitation, the costs of operation, maintenance,
and repair of the statewide system of airports and reserves therefor, and
acquisitions (including real property and interests therein), constructions,
additions, expansions, improvements, renewals, replacements, reconstruction,
engineering, investigation, and planning for the statewide system of airports,
all or any of which in the judgment of the department are necessary to the
performance of its duties or functions.
�

The department shall generate sufficient revenues from its airport
properties to meet all of the expenditures of the statewide system of airports
and to comply with section 39‑61; provided that as long as sufficient
revenues are generated to meet [
such
]
the
expenditures, the
director of transportation may, [
in
]
at
the director's
discretion, grant a rebate of the aviation fuel taxes paid into the airport
revenue fund during a fiscal year pursuant to sections 243-4(a)(2) and 248-8 to
any person who has paid airport use charges or landing fees during [
such
]

the
fiscal year.
�
[
Such
]
The

rebate may be granted during the next succeeding fiscal year but shall not
exceed one-half cent per gallon per person, and shall be computed on the total
number of gallons for which the tax was paid by [
such
]
the

person, for [
such
]
the
fiscal year.
"

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SECTION 5.
�

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

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SECTION 6.
�

This Act shall take effect upon its approval; provided that section 2
and section 3 of this Act shall apply to taxable years beginning after December
31, 2024.

INTRODUCED BY:

_____________________________

Report Title:

Aviation
Fuel Tax; Carbon Tax; Airport Revenue Fund; Tax Credit

Description:

Imposes a
state carbon emissions tax of $6.25 per ton of carbon dioxide equivalent
emissions on all aviation fuel.
�
Directs
the aviation fuel tax into the airport revenue fund. Implements a tax credit to
mitigate the effects of this tax on lower income taxpayers.
�
Applies to taxable years beginning after
12/31/24.

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