STAND. COM. REP. NO. 1393
RE: S.B. No. 1221
Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twenty-Fourth State Legislature
Regular Session of 2007
State of Hawaii
Your Committees on Agriculture and Economic Development & Business Concerns, to which was referred S.B. No. 1221, S.D. 2, entitled:
"A BILL FOR AN ACT RELATING TO AGRICULTURAL TAXATION,"
beg leave to report as follows:
The purpose of this bill is to support Hawaii's agricultural industry and provide incentives for the designation of important agricultural lands (IALs) by establishing the Important Agricultural Land Agricultural Business Tax Credit (Tax Credit).
The Hawaii Crop Improvement Association, Hawaii Farm Bureau Federation, Maui County Farm Bureau, Alexander & Baldwin, Inc., Hawaiian Commercial & Sugar Company, and Kauai Coffee Company, Inc., supported this bill. The Agribusiness Development Corporation (ADC) supported the intent of this bill. A concerned individual opposed this measure. The Department of Agriculture (DOA), Department of Taxation (DOTAX), and Tax Foundation of Hawaii submitted comments.
Your Committees recognize that concerns were raised during the public hearing regarding the negative fiscal implications of the Tax Credit on state tax revenue. DOTAX has released estimates on the fiscal impact of the Tax Credit. Your Committees respectfully request your Committee on Finance to consult with DOTAX to determine the methodologies used by DOTAX in calculating the estimated impact of the Tax Credit on state tax revenue collections.
Your Committees have amended this measure by:
(1) Making DOA, instead of ADC, responsible for certain administrative responsibilities for the Tax Credit, including submitting an annual report evaluating the effectiveness of the Tax Credit;
(2) Appropriating funds to DOA, instead of ADC, for costs to administer the Tax Credit;
(3) Narrowing the scope of the Tax Credit by deleting feasibility studies, regulatory processing, and certain legal and accounting services from the definition of "qualified agricultural costs";
(4) Reducing the amount of the Tax Credit from 100 percent to 50 percent of qualified agricultural costs by revising the tiered schedule for claiming the Tax Credit as follows:
(A) 25 percent of the qualified agricultural costs, up to an unspecified maximum, in the year the qualified agricultural costs are incurred;
(B) 15 percent of the qualified agricultural costs, up to an unspecified maximum, in the year following the year in which the qualified agricultural costs are incurred; and
(C) 10 percent of the qualified agricultural costs, up to an unspecified maximum, in the second year following the year in which the qualified agricultural costs are incurred;
(5) Making technical, nonsubstantive amendments for style, clarity, and consistency.
As affirmed by the records of votes of the members of your Committees on Agriculture and Economic Development & Business Concerns that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1221, S.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1221, S.D. 2, H.D. 1, and be referred to the Committee on Finance.
Respectfully submitted on behalf of the members of the Committees on Agriculture and Economic Development & Business Concerns,
KYLE T. YAMASHITA, Chair
CLIFT TSUJI, Chair