Beat first 3 ingredients at medium speed with an electric mixer 2 minutes or until light and fluffy. Add egg yolk, and beat until smooth. Stir in coconut extract.
Combine flour and salt; gradually add to butter mixture, beating just until blended. Stir in macadamia nuts and lemon zest.
Chill dough 30 minutes. Shape into 1-inch balls. Place 1 inch apart on a parchment paper-lined baking sheet, and bake, in batches, at 350° for 15 minutes or until lightly browned on bottoms. Transfer to wire racks; let cool 2 minutes.
Place 1 1/2 cups powdered sugar in a bowl, and toss cookies to coat. Let cookies cool completely on wire racks. Toss in powdered sugar again, coating well.
Note: Bake time is per batch.