State of Hawaii Tax Credits

The State of Hawaii's investment tax credits have gone through several rule changes over the past few years regarding how tax credit amounts are calculated. In general, the amount is simply 35% of the installed system cost, up to a maximum of $5000. However, in its most recent administrative rules, the State of Hawaii has defined a "system" as 5 kWstc of installed capacity. So, by rule, any system's capacity greater than 5 kW can be considered to be a second system, and capacity above 10kW would be a third system, etc. The rules allow multiple tax credits, one per 5 kW of actual system capacity. A single partial "system" can qualify for a prorated amount.

SolarNexus can auto-suggest single instances of tax credits, but it does not automatically breakdown the State of Hawaii's tax credit into multiple instances automatically. This is fine if your company only installs systems under 5 kW. However, this is not the case for most companies.

SolarNexus supports the ability to apply multiple customer incentives to a single project, but only one instance of each defined incentive. To support multiple instances of the State of Hawaii's customer tax credits, you can define multiple copies of the state tax credit incentives in your account, and apply one instance of the tax credit incentive in your analysis for each 5 kW of system capacity.

To create an incentive, a user with administrative permissions selects Incentives from the Administration menu. SolarNexus recommends creating the following set of State Investment Tax Credit incentives:

1. Name = State of Hawaii Residential ITC, part 1, Use notes = Use as first instance of tax credit for first 5 kW of system capacity.
2. Name = State of Hawaii Residential ITC, part 2, Use notes = Use as second instance of tax credit for 5-10 kW of system capacity.
3. Name = State of Hawaii Residential ITC, part 3, Use notes = Use as third instance of tax credit for 10-15 kW of system capacity.
4. More if needed for larger systems...

For all three of the tax credit incentives, set the Rate Unit = fixed $, and leave the Rate Amount field empty.  You can also include User Notes which describe to the user of the incentives how to calculate the amounts per the section below.

From the Administration menu go to the Project Settings screen and click Edit. Go to the Default Project Analysis Parameters section. In the Incentives section, un-check the Auto-suggest PV Tax Credits checkbox (unless your company only installs systems under 5 kW). Under Include These Incentives as Defaults, click the Add Incentives link. Add one (or more) of your created State of Hawaii tax credits under the Include These Incentives as Defaults section so that they will automatically appear on the Analysis screen for each project. If you add all of them, users can quickly delete parts 3 or 2 based on actual proposed system size.

When going to the Analysis screen for any solution, the user must review the incentives listed, and make sure that the number of State of Hawaii tax credits matches the number of 5 kW capacity increments that the defined PV system has for that particular solution. User should manually input the expected amount for each instance. The calculation is made by:

1. Dividing the total price by the total system capacity, to get $/watt
2. For all 5 kW increments, the tax credit = $/watt * 5000 * 0.35 OR $5000, whichever is less.
3. For the capacity increment less than 5 kW, the tax credit = $/watt * watts of capacity * 0.35, OR $5000, whichever is less.

For example, a 7.5 kW system that costs $35,000 would have two tax credit incentives. One for the first 5 kW, and another for the remaining 2.5 kW. The incentive amounts would be calculated as follows:

• $35,000 / 7500 = $4.67/watt
• Tax Credit, part 1 = $5000 (4.67 * 5000 * 0.35 = $8172.50,  $8172.50 > $5000, so $5000)
• Tax Credit, part 2 = 4.67 * 2500 * 0.35 = $4086.25

NOTE: A simple spreadsheet can be used to input the total system capacity and price and output the appropriate number of tax credit incentive instances and the proper amounts for user to input for each part into SolarNexus. We have attached a simple spreadsheet for your use below.

NOTE: You should research and confirm any appropriate incentive amounts before including them in a customer proposal.  The information in this article represents our best understanding of the incentive rules in place as of the writing of this article, but SolarNexus cannot be held responsible for the accuracy of incentive calculations you make and include in customer proposals.

• HI_Tax_Credit_Calculator.xlsx (10 KB)