Act 289 provides a refundable income tax credit for investment in a qualifying ethanol production facility (facility) and applies to taxable years beginning after December 31, 2001. The credit is equal to the lesser of 30 percent of the investment in a facility 1 or a specified dollar amount in a sixteen-step schedule based on a facility's nameplate capacity. 2 The facility must be located in Hawaii and produce motor fuel grade ethanol meeting the minimum specifications of the American Society of Testing and Materials standard D-4806.3
Credit period and limitations
A facility must be producing ethanol on or before January 1, 2012 to qualify for the income tax credit. The credit is available for a maximum period of eight years for a facility with an investment of less than $50 million and ten years for a facility with a total investment equal to or greater than $50 million. The credit period begins in the first taxable year the credit is properly claimed. If a facility is sold, any remaining credit may be transferred. The credit will not be available to new facilities once the total nameplate capacity of facilities built within the State reaches or exceeds 40 million gallons per year.
The stated capacity of a facility and allowable credit for a facility may be revised by the director of taxation if the facility does not achieve an average annual production of at least 75 percent of its nameplate capacity.
Notices and reports
A qualifying producer must provide written notice of the producer's intention to begin construction of a facility to the Department of Taxation (Department) and the Department of Business, Economic Development and Tourism (DBEDT). A qualifying producer also must give notice to the Department and DBEDT within thirty days of the initial qualifying production.
A qualifying producer, during the period which an income tax credit can be claimed, must file an annual report with DBEDT providing information on the facility's ethanol production.
Repeal of general excise tax exemption for sale of alcohol fuels on December 31, 2006
The exemption under Hawaii Revised Statutes (HRS) § 237-27.1 for the sale of alcohol fuels will be repealed on December 31, 2006.
Forms and other tax information are available at the Department's website at: www.state.hi.us/tax.
On Oahu, forms may be ordered by calling the Department's Forms Request
Line at: 808-587-7572. Persons not calling from Oahu may call:
1-800-222-7572 (toll free) to receive forms by mail or 808-678-0522 from
a fax machine to receive forms by fax.
RAY K. KAMIKAWA
Director of Taxation
HRS Sections Explained: HRS Section 235-___, and 237-27.1
1 The investment in a facility, subject to certain limitations, is the cost of construction exclusive of land costs.
2 The nameplate capacity is the stated annual production design capacity of a facility, measured in gallons, based on an operating year of 350 days.
3 The ethanol must be produced from renewable
organic waste. Fermentation, distillation and dehydration must all
occur at the facility.