HAR §18-235-12. Solar energy devices; income tax credit

(a) Definitions. As used in section 235-12, HRS: HRS §235-7(d) HRS §235-12 INCOME TAX LAW §18-235-12.2 235- 41 (Unofficial Compilation as of 12/31/2025) “Cost of the device” means the amount paid by the taxpayer minus the fair market value of merchandise, gift, or other items of value received, if any, as part of the purchase contract. Cost when used in reference to the acquisition of materials or services refer to the invoice price directly related to the solar energy device and does not include indirect cost such as replacing existing water heaters, plumbing, wiring, etc. Also labor, materials and components which will serve a significant structural function in the dwelling (e.g. extra-thick walls, supports, etc.) shall not be eligible for the credit. (b) Claim for credit. (1) Credit shall be claimed for the year the new solar energy device was purchased and placed in use in this State. However, where separate taxable years are involved where the device is purchased in one year and placed in use in another year, the credit shall be allowed in the year placed in use. (After December 31, 1974, but before December 31, 1981.) (2) The claim for tax credit, not to exceed ten per cent of the total cost of the device, shall be against the income tax liability and any remaining credit may be carried forward and used in subsequent taxable years until exhausted. The claim shall contain the necessary information provided for on the form and shall be attached to the income tax return in the year first placed in use and subsequent taxable years for carrying forward the remaining credit. The forms provided are: N-157 Individual taxpayer; N-157-A Taxpayers who are members of a partnership, estate or trust, or small business corporation; and N-306 Corporation (3) Taxpayer shall maintain proper supporting documents to substantiate the cost of the device for the period the claim remains valid, and upon request shall submit such documents to the department of taxation. Example 1: Taxpayer purchased a new home which included solar energy hot water system for $100,000. Of this total, the land was valued at $50,000 and the house at $50,000. According to estimates provided by the taxpayer, the same home built without the solar energy hot water system would cost $45,000, a difference of $5,000. This amount of $5,000 would be the basis for the ten per cent credit, thus $500 is the maximum amount of credit that may be applied against the tax liability. Example 2: Taxpayer purchased a solar energy hot water system for his home. The total cost of the system was quoted at $3,500. Structural reinforcements to the roof and new electrical wiring necessary for the installation of the solar energy system increased the total cost to $5,000. In spite of the foregoing increase in cost to $5,000, only $3,500 which was the cost of the system qualifies for the tax credit. Thus the 10 percent allowable credit would be $350. [Eff 2/16/82] (Auth: HRS §§231-3(9), 235-12, 235-118) (Imp: HRS §235-112)