S.B. NO.



S.D. 1
















     SECTION 1.  The legislature finds that Hawaii imports eighty-five per cent of its food and is considered highly vulnerable in issues of food security as a State.  Climate change significantly increases this vulnerability with sea level rise and intensified weather patterns in the Pacific, such as droughts, hurricanes, and floods.  In 2016, the governor pledged to double food production in Hawaii by 2030 at the International Union of Conservation of Nature World Conservation Congress, as part of Hawaii's commitments to the world and the State and to begin to address this import inequity.

     The legislature further finds that small farms on ten acres or less in Hawaii produce a significant portion of locally-grown and locally-consumed food on each island.  While the small farm sector of agriculture is growing, yet the 2017 census of agriculture reports the average small-scale farmer in Hawaii makes less than $40,000 per year, with losses of almost $10,000 annually due to the high costs of farming, including land and water.  To accomplish the State's 2030 goal for local food production, there is an urgent need to better support small farmers including through small economic incentives to build a larger market.

     The legislature additionally finds that the department of agriculture has identified staple starches as the greatest food security risk in the State.  Taro is a hypoallergenic complex carbohydrate that plays a critical role in the health of the family, particularly Native Hawaiians.  Yet, the cost of poi remains inaccessible to families most in need of this important staple starch food.  Taro is one of Hawaii's highest yielding staple starch food crops, producing ten thousand and twenty thousand pounds per acre per annum under wet and dry cultivation, respectively; however, taro is severely underproduced in the State.  The 2017 census of agriculture reported two hundred seven farms and four hundred ninety-five acres of taro in wetland and dryland production.  An estimated two hundred to three hundred additional acres are unreported or in subsistence taro cultivation.  Annual reported production averages four million tons; however, taro imports are estimated to soon exceed local production.

     The legislature also finds that loi kalo, or wetland taro systems, are additionally recognized for their potential to mitigate other impacts of climate change by functioning as riparian buffers and sediment retention basins.  Underground foods, such as taro, can often survive hurricane or flood events and be harvested to address immediate food shortages where the capacity to store and cook food can be retained.

     The legislature further finds that the report of the Taro Security and Purity Task Force to the 2010 legislature recommended several supports to make taro farming affordable, including access to land, water, mentoring, and economic incentives.  The counties of Maui and Kauai have enacted ordinances that exempt kuleana lands in active taro production from county taxes.  These ordinances provide limited relief to some taro farms but are not available in all counties and are insufficient for young farmers to offset typically low incomes experienced by taro growers or mitigate the effects of competition from imports.

     The legislature additionally finds that, in 1901, the first legislature of the Territory of Hawaii recognized the role that taro played in feeding the nation by passing Senate Bill No. 87 to encourage the cultivation of taro by exempting taro and the cultivation of taro from all state taxes.  While Senate Bill No. 87 was never signed into law, its intentions were clear in encouraging the production of more taro.

     The legislature also finds that, in recognition of the critical importance of protecting and perpetuating the traditional practice of taro farming as part of Hawaii's cultural identity and its role in local food security, there is a compelling interest in enacting a law in present day that is similar to Senate Bill No. 87 that was passed by the first legislature of the Territory of Hawaii.  Additionally, an acreage and income cap is a more effective threshold than a timeframe for a proposed tax exemption where one of the goals is to increase overall local taro production.

     The purpose of this Act is to create stronger economic incentives for new taro farmers, improve the livelihoods of existing taro farmers, and reduce the cost of poi for local families by exempting taro production from state income taxes.

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

     "235-    Taro cultivation and production; exemption.  (a)  Except as provided in sections 235-61 to 235-67 relating to withholding and collection of tax at source, and section 235-2.4 relating to "unrelated business taxable income", qualified taxpayers engaged in the business of taro cultivation and production of value‑added taro products shall not be taxable up to the first $100,000 of gross income per individual, farm, poi mill, or business.

     As it relates to qualified taxpayers engaged in the business of taro cultivation and production of value-added taro products, the following shall not be taxable under this chapter:

     (1)  Taro plants; taro corm; leaf; and huli for taro farms or portions of farms dedicated to taro plants, taro corm, leaf, and huli;

     (2)  Taro lands planted with taro, including fallow rotation lands specifically for taro production of less than or equal acreage to lands in active taro production by each individual grower; and

     (3)  Preparations of taro, poi, and value-added products produced with taro;

provided that this exclusion shall not apply if at any time during the year the total amount of land for locally grown taro in the State surpasses thirty thousand acres, as determined by the department of agriculture.

     (b)  The department of taxation may consult with the Office of Hawaiian Affairs in the administration of this tax credit exemption.

     (c)  For the purposes of this section:

     "Poi mill" means a building equipped with machinery for grinding taro corm into poi.

     "Qualified taxpayer" means an individual engaged in:

     (1)  The manufacturing for compounding, canning, preserving, packing, milling, processing, refining, or preparing taro for sale, profit, or commercial use, either directly or through the activity of others; and

     (2)  The production for the sale of taro or taro products for the shipment or transportation of taro or taro products, for the use of land for taro farming, or for any other activity directly related to the production of taro.

     "Taro corm" means a rounded underground storage organ present in the taro plant.

     "Taro huli" is the upright stem between the leaf and the corm of the taro and includes a piece of the corm attached where roots emerge."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2020.



Report Title:

Taro; Income Tax; Exemption



Establishes an exemption from state income tax for the first $100,000 of a person's income from the business of taro cultivation or production is excluded from their gross income for Hawaii income tax purposes, provided that the department of agriculture makes its thirty thousand acre threshold determination.  (SD1)




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