Hawaii-2018-SB1193-Amended

SECTION 1. The legislature finds that in the past decade, Hawaii has seen a tremendous growth in the sale of agricultural commodities directly to consumers through farmers' markets, roadside stands, and community supported agriculture ("CSAs"). The department of agriculture lists two hundred thirty farmers' markets statewide operating approximately three hundred fifty-eight markets each week. CSAs have become a popular way for consumers to buy local, seasonal food directly from a farmer.

The report entitled Increased Food Security and Food Self-Sufficiency Strategy, published in October of 2012, lists facilitating farmer participation in farmers' markets and encouraging and promoting CSAs as priority actions. The report notes that replacing just ten per cent of the food Hawaii currently imports would allow approximately $313,000,000 to remain in the State's economy.

The 2015 United States Department of Agriculture National Agricultural Statistics identified 7,000 farms in Hawaii in 2012 and found that 3,042 farms, or forty-three per cent, had sales of less than $5,000; 5,487, or seventy-eight per cent, had sales of less than $25,000; and 6,171 farms, or eighty-eight per cent, had sales of less than $50,000. Many of these small farms sell produce directly to consumers through farmers' markets, roadside stands, and CSAs.

The legislature finds that providing additional support to Hawaii's agriculture industry could help to reduce reliance on agricultural imports and to foster job growth in the State. The legislature believes that reducing the tax burden of farms that produce and sell locally grown agricultural commodities, such as fruits, vegetables, nuts, coffee, and honey, will help to promote the production of locally-grown food.

The purpose of this Act is to establish an income tax credit for agricultural commodities sold directly to consumers, up to a limit of $5,000, for agricultural producers engaged within the State whose gross income from the sale of agricultural commodities totals no more than $50,000 per year.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Agricultural commodities tax credit. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, an income tax credit for the sale of agricultural commodities sold directly to consumers by producers, including direct farm sales, sales at farmers' markets and roadside stands, and community supported agriculture, that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) The amount of the tax credit shall be equal to the gross income received from the sale of agricultural commodities sold directly to consumers by producers up to a maximum of $5,000 for each qualified taxpayer for each year that the credit is available.

(c) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for gross income received by the entity for the taxable year. The gross income upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 704(b) of the Internal Revenue Code.

(d) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;

(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the tax credit made under this section; and

(3) May adopt rules under chapter 91 necessary to effectuate the purposes of this section.

(e) If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted. All claims for the tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(f) As used in this section:

"Agricultural commodity" means fresh fruits and fresh vegetables of every kind and character; nuts; coffee, whether cherry or parchment or green beans; and raw unprocessed honey.

"Producer" means any person engaged within the State in the growing or production for market of any agricultural commodity, or any cooperative association of such persons, whose gross income from the sale of agricultural commodities for the most recently reported fiscal year totals no more than $50,000."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act upon its approval, shall apply to taxable years beginning after December 31, 2016.

THE SENATE	S.B. NO.	1193
TWENTY-NINTH LEGISLATURE, 2017		S.D. 1
STATE OF HAWAII