Hawaii Gov. David Ige plans to veto ethanol tax credit bill

Source: By Duane Shimogawa, Pacific Business News • Posted: Wednesday, July 1, 2015

Hawaii Gov. David Ige said that he intends to veto a bill passed by the State Legislature that would repeal the ethanol facility tax credit and establish a renewable fuels production tax credit.

Senate Bill 349 was among seven other bills on the governor’s intent to veto list, which he unveiled on Monday.

Ige reasoned that he plans to veto the ethanol bill because it would be found unconstitutional.

“This measure is a violation of the U.S. Constitution’s Commerce Clause,” he said. “There is actually a state of Hawaii tax clause, where we tried to limit taxes and production [of ethanol] in Hawaii that was found unconstitutional.”

S.B. 349 establishes a five-year renewable fuels production tax credit, while repealing the ethanol tax credit. It also allows qualifying taxpayers to claim a refundable income tax credit on renewable fuel, capped at $3 million per year.

Additionally, the bill requires the state Department of Business, Economic Development and Tourism to head up the tax credit program.

The governor has until July 14 to veto, sign into law or allow bills to become law without his signature.

The state’s existing tax credit for ethanol facilities, enacted in 2006 to help spur construction of plants, is a refundable investment credit worth 30 cents for each gallon of capacity, up to a maximum $4.5 million per facility, or 15 million gallons, once the fuel is made.

The credit took effect the same year that lawmakers enacted rules requiring most of the gasoline sold in Hawaii to contain 10 percent ethanol. Oil refiners have had to import ethanol along with oil, adding another cost to the price of fuel.

To date, no ethanol facility credits have been issued, as Hawaii has no ethanol plants in production.