Friday, July 03, 2020
Hawai'i Free Press

Current Articles | Archives

Sunday, December 23, 2012
Helping to Drain the State Treasury With Tax Credits
By Lowell L Kalapa @ 5:39 AM :: 3739 Views :: Tax Credits

Helping to Drain the State Treasury With Tax Credits

by Lowell L. Kalapa, Tax Foundation of Hawaii

As the year end nears, accountants are reminding their clients to avoid paying more than they have to by either moving income into the next tax year or making payments that will qualify as a deduction that will then, in turn, reduce their client’s taxable income.

However, this year the tax scramble is not so much for shifting income and deductions from one tax year to the next as much as it is about getting one’s solar energy device installed and operating before the end of the year. This is because for state purposes the rules will change that will basically tighten the cap on how much of a credit a homeowner may claim.

In reading the law, there is a ceiling limit on how much may be claimed by a homeowner. That amount is $5,000 per system. The law does not specify what a system is and, therefore, the definition or interpretation was left to rule making. The problem is that the drafters of the legislation assumed that one residence would have one “system.” Thus, when the department of taxation finally issued clarifying rules after the new credit was adopted, it defined a system as having a single inverter, the mechanism that converts the direct current produced by the sun’s rays into alternating current which is what a household uses.

As a result, a single family residence could have a number of inverters which meant that one house could have a number of “systems,” where each “system’s” tax credit ceiling is the statutory $5,000. Thus, where lawmakers and perhaps department officials envisioned one system per single family residence and therefore a cap of $5,000 of tax credit, as defined, a single-family residence could have more than one “system” and each of those systems would qualify for the $5,000.

Now the department has come forward with revised the rules that define a system based on the amount of power that can be produced. Given that “system” was never defined in the state law and that the interpretation of the term “system” was guidance given by the department in its original analysis of the term, rewriting the

Interpretation seems entirely within the department’s jurisdiction. While advocates of the credit wish to remain at the status quo arguing that it is up to the legislature to change the definition of the system, they must remember that it was the legislature that left the vague term of “system” as part of the law and provided no further guidance. Thus, while advocates may believe that it is up to the legislature to make a change, until that time it is in the department=s hands to interpret what a “system” is.

The department’s change is in reaction to multiple installation of systems on one single family residence, allowing a taxpayer to collect more than the intended cap of $5,000 per residence. The outfall is that the state will lose millions of dollars more than lawmakers had anticipated when they adopted the most recent version of the credit. That loss of revenue will have a direct impact on the amount of money the administration and the legislature will be able to spend during the next fiscal biennium. This shortfall of resources will prompt lawmakers to either raise taxes or cut spending, both highly unpopular choices.

While tax credits of themselves aren’t bad, misuse and misunderstanding of how they can alleviate an extraordinary tax burden has led the department to the point that it needs to tighten the draw strings on the credit. The fact of the matter is that the solar credit, as drafted, is unbridled in that there is no control over how many taxpayers will claim the credit and how much will be claimed.

As a result, soaring losses well beyond what was anticipated means that the tax burden will have to be shifted to other taxpayers who could not avail themselves of the credit. And that tax burden can take the form of increased taxes or reduced spending on other government programs and services. Inasmuch as lawmakers dislike telling their constituents that they can’t have this or that program and swear to support education, the only viable alternative is to raise more revenues either directly with a tax increase or indirectly with user fees and charges. The result is the same, an additional burden will be imposed on the community and the economy at large.

To look at it another way, aren’t you glad you helped to pay for your neighbor’s photovoltaic system while you keep on paying higher electric bills and higher taxes?

- 30 -


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

808 State Update AM940


ACA Signups Hawaii



Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii



Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii


Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube


Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes


Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii


National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii


OHA Lies

Opt Out Today

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii


Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii