Fillable Form N-324 - Ethanol Facility Tax Credit

FORM N-324

(REV. 2014)

PAGE 2

GENERAL INSTRUCTIONS

“Net income tax liability” means net income

any other law to the contrary, this information

tax liability reduced by all other credits allowed

shall be available for public inspection and

Section 235-110.3, HRS, provides that

under this chapter.

dissemination under chapter 92F, HRS.

each year during the credit period, there shall

INFORMATION REPORTING

“Qualifying

ethanol

production”

means

be allowed to each taxpayer subject to Hawaii

REQUIREMENTS FOR THE

ethanol produced from renewable, organic

income taxes, an ethanol facility tax credit that

feedstocks,

waste

materials,

including

TAXPAYER PRODUCING ETHANOL

shall be applied to the taxpayer’s net income

municipal solid waste. All qualifying production

tax liability, if any, for the taxable year in which

shall be fermented, distilled, gasified, or produced

Prior to construction of any new qualifying

the credit is properly claimed. For each qualified

by physical chemical conversion methods such

ethanol production facility, the taxpayer shall

ethanol production facility, the annual dollar

as reformation and catalytic conversion and

provide written notice of the taxpayer’s in-

amount of the ethanol facility tax credit during

dehydrated at the facility.

tention to begin construction of a qualifying

the eight-year credit period shall be equal to

ethanol production facility. The information

thirty per cent of its nameplate capacity if the

“Qualifying ethanol production facility” or

shall be provided to the Department of Tax-

nameplate capacity is greater than five hundred

“facility” means a facility located in Hawaii which

ation and DBEDT on forms provided by

thousand but less than fifteen million gallons. A

produces motor fuel grade ethanol meeting the

DBEDT, and shall include information on the

taxpayer may claim this credit for each qualifying

minimum specifications by the American Society

taxpayer, facility location, facility production

ethanol facility; provided that:

of Testing and Materials standard D-4806, as

capacity, anticipated production start date,

amended.

(1) The claim for this credit by any taxpayer of a

and the taxpayer’s contact information. Not-

qualifying ethanol production facility shall

In the case of a taxable year in which the

withstanding any other law to the contrary,

not exceed one hundred per cent of the total

cumulative claims for the credit by the taxpayer

this information shall be available for public

of all investments made by the taxpayer in

of a qualifying ethanol production facility exceeds

inspection and dissemination under chapter

the qualifying ethanol production facility dur-

the cumulative investment made in the qualifying

92F, HRS.

ing the credit period;

ethanol production facility by the taxpayer, only

The taxpayer shall provide written notice to

(2) The qualifying ethanol production facility op-

that portion that does not exceed the cumulative

the Director of Taxation and the Director of

erated at a level of production of at least

investment shall be claimed and allowed.

DBEDT within thirty days following the start

seventy-five per cent of its nameplate ca-

of production. The notice shall include the

The tax credit allowable over the credit

pacity on an annualized basis;

production start date and expected ethanol

period is capped at 100 percent of the qualifying

(3) The qualifying ethanol production facility is

fuel production for the next twenty-four

investment. For example, Company X invests

in production on or before January 1, 2017;

months. Notwithstanding any other law to

$7.1 million in a qualifying ethanol production

and

the contrary, this information shall be avail-

facility with an annual nameplate capacity of 7.2

able for public inspection and dissemination

million gallons. The total tax credit allowable each

(4) No taxpayer that claims the credit under this

under chapter 92F, HRS. Attach a copy of

year is 30 per cent of the nameplate capacity

section shall claim any other Hawaii income

this notice to Form N-324 for the first year

dollar amount (0.30 X 7,200,000 gallons) or

tax credit for the same taxable year.

the credit is claimed.

$2,160,000 until the $7.1 million investment

In the case of a partnership, S corporation,

is recovered. Company X may claim a $2.16

Each calendar year during the credit period,

estate, or trust, the tax credit allowable is for

million tax credit each year for three years and a

the taxpayer shall provide information to the

every qualifying ethanol production facility. The

$620,000 tax credit in the fourth year.

Director of DBEDT on the number of gallons

cost upon which the tax credit is computed shall

of ethanol produced and sold during the

If the credit exceeds the taxpayer’s income

be determined at the entity level. Distribution and

previous calendar year, how much was sold

tax liability, the excess of credit over liability

share of credit shall be determined pursuant to

in Hawaii versus overseas, feedstocks used

shall be refunded to the taxpayer; provided that

section 235-110.7(a), HRS.

for ethanol production, the number of em-

no refunds or payments on account of the tax

Definitions

ployees of the facility, and the projected

credit shall be made for amounts less than $1.

number of gallons of ethanol production for

All claims for a credit must be properly filed on or

“Credit period” means a maximum period of

the succeeding year.

before the end of the twelfth month following the

eight years beginning from the first taxable year

CERTIFYING CREDITS BY THE

close of the taxable year for which the credit may

in which the qualifying ethanol production facility

be claimed. Failure to comply with the foregoing

DEPARTMENT OF BUSINESS,

begins production even if actual production is not

provision shall constitute a waiver of the right to

at seventy-five per cent of nameplate capacity.

ECONOMIC DEVELOPMENT, AND

claim the credit.

TOURISM

“Investment” means a nonrefundable capital

If a qualifying ethanol production facility or an

expenditure related to the development and

interest therein is acquired by a taxpayer prior

DBEDT shall:

construction of any qualifying ethanol production

to the expiration of the credit period, the credit

facility, including processing equipment, waste

(1) Maintain records of the total amount of in-

allowable for any period after such acquisition

treatment systems, pipelines, and liquid storage

vestment made by each taxpayer in facility;

shall be equal to the credit that would have been

tanks at the facility or remote locations, including

(2) Verify the amount of the qualifying invest-

allowable to the prior taxpayer had the taxpayer

expansions or modifications. Capital expenditures

ment;

not disposed of the interest. If an interest is

shall be those direct and certain indirect costs

disposed of during any year for which the credit is

(3) Total all qualifying and cumulative invest-

determined in accordance with section 263A

allowable, the credit shall be allowable between

ments that DBEDT certifies;

of the Internal Revenue Code (IRC), relating to

the parties on the basis of the number of days

uniform capitalization costs, but shall not include

(4) Certify the total amount of the tax credit for

during the year the interest was held by each

expenses for compensation paid to officers of the

each taxable year and the cumulative

taxpayer. In no case shall the credit be allowed

taxpayer, pension and other related costs, rent

amount of the tax credit during the credit pe-

after the expiration of the credit period.

for land, the costs of repairing and maintaining

riod.

the equipment or facilities, training of operating

Once the total nameplate capacities of

Upon each determination, DBEDT shall

personnel, utility costs during construction,

qualifying ethanol production facilities built

issue a certificate to the taxpayer verifying the

property taxes, costs relating to negotiation

within the State reaches or exceeds a level of

qualifying investment amounts, the credit amount

of commercial agreements not related to

forty million gallons per year, credits shall not be

certified for each taxable year, and the cumulative

development or construction, or service costs

allowed for new ethanol production facilities. If a

amount of the tax credit during the credit period.

that can be identified specifically with a service

new facility’s production capacity would cause

The taxpayer shall file the certificate with the

department or function or that directly benefit or

the statewide ethanol production capacity to

taxpayer’s tax return with the Department of

are incurred by reason of a service department

exceed forty million gallons per year, only the

Taxation. Notwithstanding DBEDT’s certification

or function. For the purposes of determining a

ethanol production capacity that does not exceed

authority, the Director of Taxation may audit and

capital expenditure for the credit, the provisions

the statewide forty million gallon per year level

adjust certification to conform to the facts.

of section 263A of the IRC shall apply as it read

shall be eligible for the credit.

on March 1, 2004. For purposes of the tax credit,

If in any year, the annual amount of certified

If a qualifying ethanol production facility fails

investment excludes land costs and includes any

credits reaches $12,000,000 in the aggregate,

to achieve an average annual production of

investment for which the taxpayer is at risk, as

DBEDT shall immediately discontinue certifying

at least seventy-five per cent of its nameplate

that term is used in section 465 of the IRC (with

credits and notify the Department of Taxation.

capacity for two consecutive years, the stated

respect to deductions limited to amount at risk).

In no instance shall the total amount of

capacity of that facility may be revised by

certified credits exceed $12,000,000 per year.

“Nameplate capacity” means the qualifying

the Director of the Department of Business,

Notwithstanding any other law to the contrary,

ethanol production facility’s production design

Economic Development, and Tourism (DBEDT)

this information shall be available for public

capacity, in gallons of motor fuel grade ethanol

to reflect actual production for the purposes of

inspection and dissemination under chapter 92F,

per year.

determining statewide production capacity and

HRS.

allowable credits for that facility. Notwithstanding

FORM N-324

Form N-324 - Ethanol Facility Tax Credit - 2014 Page 2

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