The Hawaii legislature is reviewing a tax relief bill that could harm the state's renewable energy tax credit program, thereby affecting the state's solar energy market.  

In January, Senator Ronald Kouchi (Democrat) proposed SB 3125, a bill aimed at reducing the economic burden of taxes on low - and middle-income residents in Hawaii. According to reports, the state is addressing a $3 billion budget deficit caused by the Trump administration's cuts in federal funding.  

The affordability of local families remains the top priority for the Senate, "said Senator Donovan Dela Cruz, chairman of the Senate Ways and Means Committee, in a report published on Spectrum News. Despite the impact of federal funding cuts on our budget, we still uphold our commitment to the people and maintain and continue to promise tax breaks

SB 3125 will establish higher tax rates for high-income residents, aiming to abolish or modify tax credit programs related to infrastructure upgrades, commercial technology, and renewable energy.  

The subsidy related to solar energy being discussed is the Renewable Energy Technology Income Tax Credit (RETITC). This 50 year old state solar tax credit provides a 35% return on the total cost or established upper limit amount ($5000 for residential arrays, $350 for multi family arrays, or $500000 for commercial arrays) of solar projects on taxpayers' annual returns.  

RETITC does not have an end date, but if approved, SB 2135 will cease the program by the end of 2029. It will set an annual cap on the funding amount for the program, starting from 2027 at $40 million; It will also allocate RETITC's compensation amount for each project proportionally. This will also apply retrospectively to solar projects built in 2026 but not yet operational before March 1st.

The legislative body has found that the state's environmental commitments and goals require the rapid adoption of renewable energy... The legislative body has further discovered that the renewable energy technology income tax credit can be adjusted to better support low - and middle-income households by limiting the credit to these income taxpayers. The legislative body has also found that such changes will promote fair access to clean energy and help offset federal actions to limit renewable energy tax incentives, thereby helping to protect hundreds of jobs in the state. Energy industry, "the legislative provision states.  

The Hawaii Solar Energy Association (HSEA) believes that SB 3125 will have the opposite effect. Financiers will be cautious about funding solar projects in Hawaii by proportionally distributing tax credits and compensation, with the total subsidy amount yet to be determined. HSEA is concerned that if the bill is passed, new businesses in the Hawaii solar market will cease.

Rocky Mold, Executive Director of HSEA, said, "This is not a phase out, but a closure that stabbed Hawaiian families in the back as they walked out of their homes." "People who installed solar energy a few months ago, signed contracts sincerely, and paid their bills are now facing demands they could not foresee. This is unreasonable

The organization pointed out that a study published in 2017 titled "The Economic and Fiscal Impact of Hawaii's Solar Tax Credit" found that every dollar spent by the state on RETITC would be repaid within 9 to 15 years, and for every dollar spent, the tax return would increase by $1.97 to $2.67.

The Hawaii state legislature will vote to pass SB 3125 on Friday. In response, HSEA will hold a press conference today at 2pm (HST)/7pm (Eastern Summer Time) in the Roundabout of the Hawaii State Capitol, pleading with Governor Josh Green and lawmakers to reconsider the bill and its impact on the state's solar market.