Bill Text: HI SB780 | 2018 | Regular Session | Introduced

Hawaii Senate Bill 780 (Prior Session Legislation)

Introduced

Bill Title: Relating To Enterprise Zones.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced - Dead) 2018-01-17 - Re-Referred to AEN/ETT/TRE, JDC/WAM. [SB780 Detail]

Download: Hawaii-2018-SB780-Introduced.html

THE SENATE	S.B. NO.	780
TWENTY-NINTH LEGISLATURE, 2017
STATE OF HAWAII

A BILL FOR AN ACT

Relating to Enterprise Zones.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that the current statute pertaining to state enterprise zones sets a limited period for qualified businesses to receive the tax credit incentive. The legislature further finds that the expiration of the period will negatively impact agricultural entities and the governor's goal of doubling food production by 2020.

The legislature finds that the enterprise zones for agricultural producers should be extended every six years until the agricultural "self-sufficiency" standard of the Constitution of the State of Hawaii is fulfilled. The legislature further finds that businesses providing renewable energy infrastructure for agricultural producers should also be eligible for the extended enterprise zone benefits.

The purpose of this Act is to amend chapter 209E, Hawaii Revised Statutes, to:

(1) Expand the definition of an eligible business activity to include the installation of renewable energy infrastructure for agricultural producers;

(2) Extend the tax credit eligibility periods in enterprise zones for agricultural producers and businesses providing renewable energy infrastructure to agricultural producers until the constitutional mandate of self-sufficiency provided in the Constitution of the State of Hawaii has been fulfilled;

(3) Expand the qualification for a qualified business under section 209E-9, Hawaii Revised Statutes, to include those businesses that increase gross volume of agricultural products processed or increase gross volume of renewable energy infrastructure installed for agricultural producers within enterprise zones located within the same county by two per cent annually; and

(4) Specify the kinds of agricultural investments that are eligible for the business tax credit under section 209E-10, Hawaii Revised Statutes.

SECTION 2. Section 209E-1, Hawaii Revised Statutes, is amended to read as follows:

"§209E-1 Purpose. It is declared that the health, safety, and welfare of the people of this State are dependent upon the continual encouragement, development, growth, and expansion of the private sector, and that there are certain areas in the State that need the particular attention of government to help attract private sector investment. Therefore, it is the purpose of this chapter to stimulate business, agricultural, and industrial growth in areas that would result in neighborhood revitalization of those areas by means of regulatory flexibility and tax incentives. The Constitution of the State of Hawaii requires increased agricultural self-sufficiency; however, global trade has challenged the viability of Hawaii's agricultural sector. The purpose of this chapter is also to enable investments to meet the constitutional mandate of agricultural self-sufficiency."

SECTION 3. Section 209E-2, Hawaii Revised Statutes, is amended as follows:

1. By adding a new definition to be appropriately inserted and to read:

""Agricultural producer" shall have the same meaning as in section 155-5.6."

2. By amending the definition of "eligible business activity" to read:

""Eligible business activity" means the:

(1) Manufacture of tangible personal property, the wholesale sale of tangible personal property as described in section 237-4, or a service business as defined in this section;

(2) Production of agricultural products where the business is a producer as defined in section 237-5, or the processing of agricultural products, all or some of which were grown within an enterprise zone;

(3) Research, development, sale, or production of all types of genetically-engineered medical, agricultural, or maritime biotechnology products; [or]

(4) Production of electric power from wind energy for sale primarily to a public utility company for resale to the public; or

(5) Installation of renewable energy infrastructure for agricultural producers by renewable energy production businesses;

provided that medical marijuana dispensary activities pursuant to chapter 329D shall not be considered an eligible business activity for the purposes of this chapter."

SECTION 4. Section 209E-4, Hawaii Revised Statutes, is amended to read as follows:

"§209E-4 Enterprise zone designation. (a) The governing body of any county may apply in writing to the department to have an area declared to be an enterprise zone. The application shall include a description of the location of the area or areas in question, and a general statement identifying proposed local incentives to complement the state and any federal incentives.

(b) The governor, upon the recommendation of the director, shall approve the designation of up to six areas in each county as enterprise zones for a period of twenty years[.], except for agricultural producers and those businesses engaged in providing renewable energy infrastructure for agricultural producers. Any such area shall be located in one United States census tract or two or more contiguous United States census tracts in accordance with the most recent decennial United States Census. The census tract or tracts within which each enterprise zone is located also shall meet at least one of the following criteria:

(1) Twenty-five per cent or more of the population have incomes below eighty per cent of the median family income of the county; or

(2) The unemployment rate is 1.5 times the state average.

(c) For agricultural producers and those businesses engaged in providing renewable energy infrastructure for agricultural producers, the governor, upon the recommendation of the director, shall approve the designation of up to six areas in each county as agricultural enterprise zones until such date that it is determined that the constitutional mandate of increased agricultural self-sufficiency has been achieved. The department of agriculture in consultation with the department of business, economic development, and tourism shall define the standards for agricultural self-sufficiency, as stated in the Constitution of the State of Hawaii."

SECTION 5. Section 209E-9, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) A business firm may also be eligible to be designated a qualified business for purposes of this chapter if the business:

(1) Is actively engaged in the conduct of a trade or business in an eligible business activity in an area immediately prior to the area being designated an enterprise zone;

(2) Meets the requirements of subsection (a)(2); and

(3) Either:

(A) Increases its average annual number of full-time employees employed at the business' establishment or establishments within enterprise zones located within the same county by at least ten per cent by the end of the first year of operation, and by at least fifteen per cent by the end of each of the fourth, fifth, sixth, and seventh years of operation, and for businesses eligible for tax credits extending past the seventh year, at least maintains that higher level of employment during each subsequent taxable year; provided that the percentage increase shall be based upon the employee count at the beginning of the initial year of operation within the enterprise zone or zones; [or]

(B) Increases its gross sales of agricultural crops produced, or agricultural products processed within enterprise zones located within the same county by two per cent annually[.]; or

(C) Increases its gross volume of agricultural products processed or gross volume of renewable energy infrastructure installed for agricultural producers within agricultural enterprise zones located within the same county by two per cent annually."

SECTION 6. Section 209E-10, Hawaii Revised Statutes, is amended to read as follows:

"§209E-10 State business tax credit. (a) The department shall certify annually to the department of taxation the applicability of the tax credit provided in this chapter for a qualified business against any taxes due the State. Except for the general excise tax, the credit shall be eighty per cent of the tax due for the first tax year, seventy per cent of the tax due for the second tax year, sixty per cent of the tax due for the third year, fifty per cent of the tax due the fourth year, forty per cent of the tax due the fifth year, thirty per cent of the tax due the sixth year, and twenty per cent of the tax due the seventh year. For qualified businesses engaged in [~~the manufacturing of tangible personal property or~~] the producing or processing of agricultural products[,] or renewable energy infrastructure for agricultural producers, the credit shall continue after the seventh year at the rate of twenty per cent of the tax due for each of the subsequent [~~three~~] tax years[.], until the State's mandate of increased agricultural self-sufficiency is achieved. Any tax credit not usable [~~shall not~~] may be applied to future tax years.

(b) When a partnership is eligible for a tax credit under this section, each partner shall be eligible for the tax credit provided for in this section on the partner's income tax return in proportion to the amount of income received by the partner from the partnership. Any qualified business having taxable income from business activity, both within and without the enterprise zone, shall allocate and apportion its taxable income attributable to the conduct of business. Tax credits provided for in this section shall only apply to taxable income of a qualified business attributable to the conduct of business within enterprise zones located within the same county.

(c) In addition to any tax credit authorized under this section, any qualified business shall be entitled to a tax credit against any taxes due the State in an amount equal to a percentage of unemployment taxes paid. The amount of the credit shall be equal to eighty per cent of the unemployment taxes paid during the first year, seventy per cent of the taxes paid during the second year, sixty per cent of the taxes paid during the third year, fifty per cent of the taxes paid during the fourth year, forty per cent of the taxes paid during the fifth year, thirty per cent of the taxes paid during the sixth year, and twenty per cent of the taxes paid during the seventh year. For qualified businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products, the credit shall continue after the seventh year in an amount equal to twenty per cent of the taxes paid during each of the subsequent three tax years.

(d) Tax credits provided for in subsection (c) shall only apply to the unemployment tax paid on employees employed at the qualified business' establishment or establishments within enterprise zones located within the same county. Any tax credit not usable shall not be applied to future tax years.

(e) For agricultural producers and those business firms engaged in producing renewable energy infrastructure for agricultural producers, the amount of the business tax credit shall be equal to eighty per cent of the tax credit claimable under this section as long as investments in the following areas are made during the taxable year:

(1) Water infrastructure;

(2) Farm labor housing;

(3) Investments in mechanization;

(4) Food processing and value added production infrastructure, including infrastructure for food safety compliance; and

(5) Renewable energy production capacity.

Qualification for the tax credit shall be evaluated and determined by the department of agriculture."

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval, and shall apply to taxable years beginning after December 31, 2016.

INTRODUCED BY:	_____________________________

Report Title:

Enterprise Zones; Agriculture; Renewable Energy; Tax Credit

Description:

Expands the definition of an eligible business activity to include businesses that provide renewable energy infrastructure to agricultural producers. Extends the tax credit eligibility periods in enterprise zones for agricultural producers and for businesses providing renewable energy infrastructure to agricultural producers until the Hawaii constitutional mandate of "self-sufficiency" is fulfilled. Expands the qualifications of a qualified business to include those businesses that increase gross volume of agricultural products or gross volume of renewable energy infrastructures to agricultural producers within enterprise zones located within the same county by two percent annually. Specifies the kinds of agricultural investments that are eligible for the business tax credit.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.