Hawaii Incentives and Laws

Last Updated June 2006

State Incentives

Business Investment Tax Credit

Through December 31, 2010, taxpayers making a high technology business investment are eligible for a tax credit the year the investment is made and for the following four years. A 'qualified high technology business' is one in which more than 50% of the activities are qualified research (75% of which is conducted in Hawaii) and in which more than 75% of the income (i.e. income from products sold from, manufactured or produced in Hawaii or from services performed in Hawaii) is derived from qualified research. 'Qualified research' includes research that is related to non-fossil fuel energy-related technology. The tax credit is equal to a percentage of the investment made, up to the following maximums:

If the tax credit exceeds the taxpayer's income tax liability for any of the five years that the credit is taken, the excess of the tax credit may be used as a credit in subsequent years until exhausted. A taxpayer may continue to claim the credits if the five-year period to claim the credits commences in taxable years beginning before January 1, 2010. (Reference Hawaii Revised Statutes Sections 235-7.3 and 235-110.9)

Point of Contact

Hawaii State Department of Taxation
Phone (800) 222-3229
http://www.state.hi.us/tax/tax.html
 

Ethanol Production Incentive

An ethanol production incentive equal to 30% of nameplate capacity is available for facilities producing between 500,000 and 15 million gallons per year. The facility must produce at least 75% of its nameplate capacity in order to be eligible to receive the tax credit in that year. The tax credit may be taken for up to eight years. The credit shall only be available to the first 40 million gallons of ethanol produced per year. Facilities must be in production before January 1, 2012. (Reference Hawaii Revised Statutes Section 235-110.3)

State Laws and Regulations

Biofuels Procurement Preference

There is a biofuels preference in the state procurement law, as follows: contracts for the purchase of diesel fuel are to be awarded with preference given to bids for biofuels or blends of biofuel and petroleum fuel. When purchasing fuel for use in diesel engines, the preference is $0.05 per gallon of B100; for blends containing both biodiesel and petroleum-based diesel, the preference is applied only to the biodiesel portion of the blend. "Biodiesel" means a vegetable oil-based fuel that meets ASTM standard D6751. "Biofuel" means fuel from non-petroleum plant or animal based sources that can be used for the generation of heat or power. (Reference Hawaii Revised Statutes 103D and Senate Bill 2957, 2006)

Alternative Fuel Program Support

The state is responsible for facilitating the development of alternative fuels (as defined by the Energy Policy Act of 1992 and also liquid or gaseous fuels produced from renewable feedstocks such as organic wastes, or from water using electricity from renewable energy sources) and supporting the attainment of a statewide alternative fuel standard. The alternative fuels standard will be as follows: 10% of highway fuel use to be provided by alternative fuels by 2010, 15% by 2015, and 20% by 2020. For the purposes of the alternative fuels standard, ethanol produced from cellulosic materials is to be considered the equivalent of 2.5 gallons of noncellulosic ethanol. (Reference Hawaii Revised Statutes 196A and Senate Bill 2957, 2006)

Hydrogen Energy Plan and Fund

A Hawaii Renewable Hydrogen Program has been established within the state Department of Business, Economic Development, and Tourism to manage the state's transition to a renewable hydrogen economy. A Hydrogen Investment Capital Special Fund has been created to provide seed capital for, and venture capital investments in, private sector and federal projects for research, development, testing, and implementation of the Hawaii Renewable Hydrogen Program. Highlights of activities the Hawaii Renewable Hydrogen Program is responsible for designing, implementing, and administering include:

1) Strategic partnerships for the research, development, testing, and deployment; engineering and economic evaluations;

2) Demonstration projects, including infrastructure for the production, storage, and refueling of hydrogen vehicles;

3) Economy public education and outreach plan promotion of Hawaii's renewable hydrogen resources to potential partners and investors;

4) A plan, for implementation during 2007 to 2010, to deploy hydrogen technologies and infrastructure, including hydrogen production facilities, refueling stations, and vehicles;

5) A plan, for implementation during 2010 to 2020, to transition the island of Hawaii to a hydrogen-fueled economy and to extend the application of the plan throughout the state; and

6) Evaluation of policy recommendations to: encourage the adoption of hydrogen vehicles; continually fund the hydrogen investment capital special fund; and support investment in hydrogen infrastructure.

(Reference Hawaii Revised Statutes 196B and 211F and Senate Bill 2957, 2006)
 

Neighborhood Electric Vehicle (NEV) Access to Roadways

Neighborhood electric vehicles may not be operated at speed of more than 25 miles per hour (mph) and are only permitted on roads with speed limits not to exceed 35 mph. A neighborhood electric vehicle must have a notice of the operational restrictions pertaining to the vehicle permanently attached to, or painted on, the vehicle in a location that is in clear view of the driver. (Reference Hawaii Revised Statutes Sections 286-2, 286-41, and 291C-134 and Senate Bill 2050, 2006)

Alternative Fuel Tax Reduction

A distributor of any fuel for operation in an internal combustion engine is required to pay a license tax of $0.025 for each gallon of alternative fuel sold or used by the distributor. In addition, a distributor is required to pay a license tax for each gallon of fuel sold or used by the distributor for operating a motor vehicle(s) on state public highways according to the following rates:

For other alternative fuels, the rate is based on the energy content of the fuels as compared to diesel fuel, using a lower heating value of 130,000 British thermal units per gallon as a standard for diesel, so that the tax rate, on an energy content basis, is equal to one-quarter the rate for diesel fuel. (Reference Hawaii Revised Statutes Section 243-4)

Energy-Efficient Vehicle Acquisition Requirements

Once federal and state vehicle purchase mandates have been satisfied, state agencies are required to purchase the most fuel-efficient vehicles that meet the needs of their programs; provided that a life cycle cost-benefit analysis of vehicle purchases includes projected fuel costs.

Beginning January 1, 2006, all state agencies are directed to procure increasing percentages of energy-efficient vehicles as part of their annual vehicle acquisition plans, as follows: 1) In the fiscal year (FY) beginning July 1, 2006, at least 20% of newly purchased light-duty vehicles (LDVs) acquired by each covered fleet must be energy-efficient vehicles; 2) At least 30% in the FY beginning July 1, 2007; 3) At least 40% in the FY beginning July 1, 2008; and 3) For each subsequent FY, the percentage of energy-efficient vehicles must be five percentage points higher than the previous year, until at least 75% of each covered fleet's newly purchased, LDVs are energy-efficient vehicles. Exclusions and exemptions may apply.

For the purposes of this requirement, “covered fleet” has the same meaning as defined by the Energy Policy Act of 1992 (10 CFR Part 490, Subpart C). Additionally, an “energy-efficient vehicle” is defined as a vehicle that is: 1) Capable of using an alternative fuel (as defined by 10 CFR Part 490); 2) Powered primarily through the use of an electric battery or battery pack that stores energy produced by an electric motor through regenerative braking; 3) Propelled by power derived from one or more cells converting chemical energy directly into electricity by combining oxygen with hydrogen fuel; 4) Draws propulsion energy from onboard sources of stored energy generated from an internal combustion or heat engine using combustible fuel and a rechargeable energy storage system; or 5) Is on the list of "Most Energy Efficient Vehicles" in its class or is in the top one-fifth of the most energy-efficient vehicles in its class available in Hawaii as shown by vehicle fuel efficiency lists, rankings, or reports maintained by the U.S. Environmental Protection Agency.

Agencies may offset the purchase requirements for energy-efficient vehicles by successfully demonstrating percentage improvements in overall LDV fleet mileage economy. The offsets must be measured against the fleet average miles per gallon (mpg) of petroleum-based gasoline and diesel fuel using the FY beginning July 1, 2006 as a baseline, on a percentage-by-percentage basis. Additionally, agencies that use biodiesel fuel may offset the vehicle purchase requirements of this section at the rate of one vehicle per each 450 gallons of neat B100 fuel used.

State agencies are also required to do the following: purchase alternative fuels and ethanol blended gasoline when available; evaluate a purchase preference for biodiesel blends; and promote efficient operation of vehicles.

Additionally, beginning with FY 2005-2006 as the baseline, state agencies are required to collect and maintain the following data for the life of each vehicle acquired: vehicle acquisition cost; U.S. Environmental Protection Agency rated fuel economy; vehicle fuel configuration, such as gasoline, diesel, flex-fuel gasoline/E85, and dedicated propane; actual in-use vehicle mileage; actual in-use vehicle fuel consumption; and actual in-use annual average vehicle fuel economy. Each agency that operates a fleet of 30 or more vehicles is also responsible for collecting the following: information on the vehicles in the fleet, including vehicle year, make, model, gross vehicle weight rating, and vehicle fuel configuration; fleet fuel usage, by fuel; fleet mileage; and overall annual average fleet fuel economy and average mpg of gasoline and diesel. (Reference Hawaii Revised Statutes 103D-412 and 196A and House Bill 2175, 2006)

Ethanol Fuel Blend Standard

Beginning April 2, 2006, at least 85 percent of Hawaii’s unleaded gasoline must be fuel blends containing at least 10% ethanol (E10). Gasoline blended with an ethanol-based product, such as ethyl tertiary butyl ether, will be considered to be in conformance with this requirement. Retail fuel distributors must meet this requirement and report to the state Petroleum Commissioner (the Administrator of the Energy, Resources, and Technology Division of the Department of Business, Economic Development, and Tourism) on a monthly basis. (Reference Hawaii Revised Statutes 486J-10 and Hawaii Administrative Rules Title 15, Department of Business, Economic Development and Tourism, Chapter 35)

Point of Contact

Hawaii Department of Business, Economic Development, and Tourism
Phone (808) 587-3814
http://www.hawaii.gov/dbedt/ert/new-fuel/
 

Alternative Fuel Sales Tax Exemption

Fuel blends that contain at least 10% alcohol fuel blended with petroleum fuel, and 100% alcohol fuel, are exempt from the 4% state excise tax on retail sales. (Reference Hawaii Revised Statutes Section 237-27.1)

Utilities/Private Incentives

Propane Vehicle Technical Assistance

The Gas Company, LLC offers technical assistance to operators of liquefied petroleum gas (LPG) vehicles.

Point of Contact

Sharon Shigemoto
Senior Account Executive
The Gas Company, LLC
Phone (808) 594-5534
Fax (808) 594-5528
sshigemoto@hawaiigas.com
http://www.hawaiigas.com
 

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