Solar and Wind Energy Credit (Corporate)

Note: On January 2, 2014, Hawaii Revised Statue §235-12.5 regarding the taxation of renewable systems were adopted and became effective. An accompanying change in the Hawaii Administrative Rules (HAR 235-12.5) clarifies how virtual and aggregated net metered systems are to be taxed. “Other solar energy systems installed and “placed in service” from January 1, 2013 through January 1, 2014 must adhere to §18-235-12.01T to 06T, Temporary Administrative Rules. For more information and tax forms, visit the Hawaii Department of Taxation website.

Originally enacted in 1976, the Hawaii Energy Tax Credits allow individuals or corporations to claim an income tax credit of 20% of the cost of equipment and installation of a wind system and 35% of the cost of equipment and installation of a solar thermal or photovoltaic (PV) system.* 

For solar thermal water heating systems, the maximum allowable credits are as follows:

• Single family residential property is eligible for a credit of 35% of the actual cost or $2,250, whichever is less;
• Multi-family residential property is eligible for a credit of 35% of the actual cost or $350 per unit, whichever is less; and
• Commercial property is eligible for a credit of 35% of the actual cost or $250,000, whichever is less.

For photovoltaic and solar space heating systems, the maximum allowable credits are as follows:

• Single family residential property is eligible for a credit of 35% of the actual cost or $5,000, whichever is less; if all or part of the system is used as a substitute renewable energy technology for the solar water heating requirement for new residential construction, the credit shall be reduced by thirty-five per cent of the actual system cost or $2,250, whichever is less;
• Multi-family residential property is eligible for a credit of 35% of the actual cost or $350 per unit, whichever is less; and
• Commercial property is eligible for a credit of 35% of the actual cost or $500,000, whichever is less.

For wind powered energy systems the maximum allowable credits are as follows:

• Single family residential property is eligible for a credit of 20% of the actual cost or $1,500, whichever is less; if all or part of the system is used as a substitute renewable energy technology for the solar water heating requirement for new residential construction, the credit shall be reduced by twenty per cent of the actual system cost or $1,500, whichever is less;
• Multi-family residential property is eligible for a credit of 20% of the actual cost or $200 per unit, whichever is less; and
• Commercial property is eligible for a credit of 20% of the actual cost or $500,000, whichever is less.

For a system that is business property, it is important to note that the costs that exceed the amount allowable for the maximum energy tax credit may be used for the Capital Goods Excise tax credit. In addition, for taxable years beginning after December 31, 2005, the dollar amount of any utility rebate must be deducted from the cost of the qualifying system and its installation before applying the state tax credit. 

A new provision was added to the tax credits in June 2009, with the passage of SB 464. This legislation, effective July 1, 2009, allows the tax credit to be refundable under certain conditions. For solar energy systems, a taxpayer can reduce the eligible credit amount by 30%. If this reduced amount exceeds the amount of income taxes to be paid by the taxpayer, the excess credit will be refunded to the taxpayer. If the tax credit exceeds a tax payer’s income liability, the excess credit over liability may be used as a credit against the taxpayer’s income liability until exchausted. Taxpayers whose entire income is exempt or whose adjusted gross income is $20,000 or less (or $40,000 or less if filing jointly) may receive the tax credit as a refund.