Hawaii-2024-SB1266-Introduced

SECTION 1. The legislature finds that the State currently imports eighty-five to ninety per cent of its food, fuel, and fiber, and alternatively envisions a thriving and self-sufficient agricultural sector in Hawaii that readily provides for its people an abundance of affordable local foods and lucrative food-related jobs.

The legislature further finds that the State has set the goal to double local food production by 2030 and that one of the more significant barriers to achieving this goal is a lack of access to capital. The legislature also recognizes that there is limited to no incentive for private investors to invest in agriculture in Hawaii. However, according to the department of business, economic development, and tourism, replacing just ten per cent of the food products currently imported into the State would amount to approximately $313,000,000 in new revenues for Hawaii's agricultural sector. Assuming a thirty per cent farm share, $94,000,000 would be realized at the farm-gate, which would generate an economy-wide impact of an additional $188,000,000 in sales, $47,000,000 in profit earnings, $6,000,000 in state tax revenues, and more than two thousand three hundred jobs.

The purpose of this Act is to establish a tax credit that incentivizes private food manufacturers in the State to use Hawaii-grown food ingredients in their products, which in effect, will support the development of agricultural self-sufficiency and food security in Hawaii.

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

"§235- Food manufacturer tax credit. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter an income tax credit 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 qualified expenses of the qualified taxpayer, up to a maximum of $ .

(c) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable shall be for qualified expenses incurred by the entity for the taxable year. The expenses upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule.

(d) The total amount of tax credits allowed under this section shall not exceed $ for all qualified taxpayers in any taxable year; provided that any taxpayer who is not eligible to claim the credit in a taxable year due to the $ cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year.

(e) Every qualified taxpayer, before March 31 of each year in which qualified expenses were incurred by the taxpayer in the previous taxable year, shall submit a written, certified statement to the chairperson of the board of agriculture identifying:

(1) Qualified expenses incurred in the previous taxable year; and

(2) The amount of the tax credit claimed by the taxpayer pursuant to this section, if any, in the previous taxable year.

(f) The board of agriculture shall:

(1) Maintain records of the names and addresses of the qualified taxpayers claiming the credits under this section and the total amount of the qualified expenses upon which the tax credits are based;

(2) Verify the nature and amount of the qualified expenses;

(3) Total all qualified and cumulative expenses that the board certifies; and

(4) Certify the amount of the tax credit for each taxpayer for each taxable year and the cumulative amount of the tax credit.

Upon each determination made under this subsection, the board of agriculture shall issue a certificate to the taxpayer verifying information submitted to the board of agriculture, including amounts of qualified expenses, the credit amount certified for the taxpayer for each taxable year, and the cumulative amount of tax credits certified. The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation. The board of agriculture may assess and collect a fee to offset the costs of certifying tax credit claims under this section.

(g) 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.

(h) 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.

(i) As used in this section:

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

"Qualified expenses" means the costs directly incurred by the taxpayer for the purchase, maintenance, or improvement of food manufacturing equipment and facilities.

"Qualified taxpayer" means food manufacturers that produce value-added products using local crops."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2023.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1266
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII