Hawaii’s legislature is reviewing a tax credit bill that could hurt the state’s renewable energy tax credit program and, in turn, the solar energy market.
Credit: RevoluSun
In January, Senator Ronald Kouchi (D) introduced. SB 3125a bill designed to reduce the economic weight of taxes on low- and middle-income residents in Hawaii. The state is reportedly addressing a $3 billion budget shortfall resulting from the Trump administration’s federal cuts.
“Affordability for local families remains a top priority for the Senate,” said Senator Donovan Dela Cruz, chairman of the Senate Ways and Means Committee, in a story published by Spectrum News. “Despite the federal cuts impacting our budget, we remain committed to our commitment to the people by preserving and continuing the promised tax relief.”
SB 3125 would set higher tax rates for higher-income residents and aims to repeal or modify tax credit programs related to infrastructure renovation, business technologies and renewable energy.
The relevant subsidy for solar energy concerns the Renewable Energy Technologies Income Tax Credit (RETITC). This 50-year-old state solar tax credit provides a return of 35% of the total cost of a solar project, or the established maximum amount – $5,000 for residential arrays, $350 for multifamily arrays or $500,000 for commercial arrays – on a taxpayer’s annual return.
RETITC has no end date, but if passed, SB 2135 would end the program at the end of 2029. An annual limit would be placed on the amount 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 apply retroactively to solar projects built in 2026 that had not yet been commissioned by March 1.
“The Legislature believes that the State’s environmental commitments and goals necessitate rapid adoption of renewable energy…The Legislature further believes that the income tax credit for renewable energy technologies could be modified to better support low- and moderate-income families by limiting the credit to taxpayers in those income brackets. The Legislature further believes that such changes would promote equitable access to clean energy and help offset federal actions taken to limit tax incentives for renewable energy, thereby protecting hundreds of jobs in the energy sector of the state,” the legislation states.
The Hawaii Solar Energy Association (HSEA) believes that SB 3125 will have the opposite effect. By prorating the tax credit offset, and leaving the total of that subsidy undetermined, lenders will be wary of financing solar projects in Hawaii. HSEA fears that if this bill passes, it will halt new business in the Hawaiian solar market.
“This isn’t a phase-out, it’s a shutdown, and it’s stabbing Hawaiian families in the back as they head out the door,” said Rocky Mold, executive director of HSEA. “People who installed solar months ago, who signed contracts and paid their bills in good faith, are now facing demands they could not have anticipated. That is unconscionable.”
The organization points this out a study published in 2017, titled “The Economic and Fiscal Impacts of Hawaii’s Solar Tax Credit,” which found that for every dollar the state spent on the RETITC, it was paid back within nine to 15 years, and also saw an increase in tax revenue between $1.97 and $2.67 per dollar spent.
The Hawaii State Legislature will vote Friday on whether to enact SB 3125. In response, HSEA will hold a press conference today at 2:00 PM (HST)/7:00 PM (EDT) at the Hawaii State Capitol Rotunda to implore Governor Josh Green and lawmakers to reconsider the bill and its effect on the state’s solar market.
