House committee approves amended renewable energy tax credit, narrows refundability for third‑party owners

The House Committee on Energy and Environmental Protection voted to pass House Bill 2241 with amendments after extended testimony on administrability and equity.

The bill, which would change the renewable energy technology income tax credit, was discussed at length by representatives of the Hawaii State Energy Office, the Department of Taxation and industry groups. Committee members said the bill as drafted applied an income threshold and a cap lift inconsistently between owner‑owned systems and third‑party financed (leased) systems. The chair instructed staff to clarify the language so the threshold and the cap lift apply to the same subset of claimants.

In committee markup the panel set the individual filer income threshold at $250,000 and a joint filer threshold at $350,000. The committee also adopted an amendment that preserves the cap lift only for systems owned by the taxpayer (owner‑owned systems) and retains the existing cap for third‑party financed systems. The committee said refundability will remain in the bill for owner‑owners but will not extend to third‑party entities claiming the credit; those third parties may claim the credit only against existing tax liability.

Representatives from the Department of Taxation cautioned that a fully refundable credit raises oversight concerns, because issuing refunds for expenditures not yet incurred can risk fraud and makes administration more challenging. DOTAX said an analyst is preparing a budget estimate and will provide numbers if the bill proceeds to the money committee.

Industry witnesses and the Hawaii Solar Energy Association warned that too‑restrictive limits on third‑party financing could reduce access for low‑ and moderate‑income households because leasing models lower the upfront cost of rooftop solar. Committee members balanced that equity concern against the desire to prevent larger commercial or third‑party claimants from capturing refundable payouts not tied to household income.

During the decision meeting the chair also adopted technical clarifications for definitions of "third‑party" and related terms and, following staff recommendation, deferred the bill’s effective date in statute to a placeholder year.

The committee vote recorded Chair Loewen and Vice Chair Peruso voting aye, along with Representatives Chun, Kahaloha, Kush and Matsumoto; Representative Quinlan was excused. The chair’s recommendation to pass HB2241 with amendments was adopted.

Next steps: The committee requested DOTAX provide claimant counts and a budget estimate before the bill would go to the finance committee.