The Hawaii Legislature is reviewing a tax relief bill that could come at the cost of the state’s renewable energy tax credit program, and in turn, its solar market.
Credit: RevoluSun
In January, Sen. Ronald Kouchi (D) introduced SB 3125, a bill drafted to reduce the economic weight of taxes on low-to-middle-income residents in Hawaii. The state is reportedly addressing a $3 billion budget deficit stemming from the Trump administration’s federal funding cuts.
“Affordability for local families remains a top priority for the Senate,” said Sen. Donovan Dela Cruz, chair of the Senate Committee on Ways and Means, in a story published by Spectrum News. “Despite federal funding cuts affecting our budget, we are standing by our commitment to the people by preserving and continuing the promised tax relief.”
SB 3125 would establish larger tax rates for higher income residents, and aims to repeal or amend tax credit programs related to infrastructure renovation, business technologies and renewable energy.
The solar-related subsidy in question is the Renewable Energy Technologies Income Tax Credit (RETITC). This 50-year-old state solar tax credit provides a 35% return against the total cost of a solar project, or the established capped amount — $5,000 for residential arrays, $350 for multi-family arrays or $500,000 for commercial arrays — on a taxpayer’s annual return.
RETITC doesn’t have an end date, but if passed, SB 2135 would stop the program at the end of 2029. It would place an annual cap on how much would be allocated to the program, starting at $40 million in 2027; it would also prorate how much each project is compensated by RETITC. This would also retroactively apply to solar projects built in 2026 that were not commissioned by March 1.
“The legislature finds that the state’s environmental commitments and goals necessitate the swift adoption of renewable energy … The legislature further finds that the Renewable Energy Technologies Income Tax Credit could be adjusted to better support low- and moderate-income families by limiting the credit to taxpayers in those income brackets. The legislature additionally finds that such changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, helping to protect hundreds of jobs in the state’s energy industry,” the legislation states.
The Hawaii Solar Energy Association (HSEA) believes that SB 3125 will have the opposite effect. By prorating tax credit compensation, and leaving the total of that subsidy undetermined, financiers will be wary of funding solar projects in Hawaii. HSEA fears that if passed this bill will stop new business in Hawaii’s solar market.
“This is not a phaseout, it is a shutdown, and it stabs Hawaii families in the back on the way out the door,” said Rocky Mould, executive director of HSEA. “People who installed solar months ago, who signed contracts and paid their bills in good faith, now face requirements they had no way to anticipate. That is unconscionable.”
The organization points to a study published in 2017, titled “The Economic and Fiscal Impacts of Hawaii’s Solar Tax Credit,” which found that for each dollar the state spent on the RETITC, it was repaid within nine to 15 years, and saw an increase in tax revenue returns between $1.97 and $2.67 per dollar spent, as well.
The Hawaii State Legislature will vote on enacting SB 3125 on Friday. In response, HSEA will hold a press conference at Hawaii’s State Capitol Rotunda today at 2 p.m. (HST)/7 p.m. (EDT) to implore Gov. Josh Green and legislators to reconsider the bill and its effect on the state’s solar market.
