Provides a tax credit of ten percent of the cost of agriculture infrastructure improvements over $200,000 made by the taxpayer for the taxable year in which the improvements were made. Provides a tax credit of ten percent of the cost of construction of a new water storage facility or the reconstruction or improvement of any existing water storage facility paid by the taxpayer for the taxable year in which the water storage facility was constructed, reconstructed, or improved.

A BILL FOR AN ACT

SECTION 1. The legislature finds that the downsizing of the sugar industry and the transition from plantation agriculture to diversified agriculture provides an opportunity for Hawaii's agricultural industry to expand. Plantation agriculture created valuable infrastructures, such as irrigation systems, roads, and drainage systems. To build these systems today would cost more than agricultural enterprises are willing to invest in start-up costs.

Agricultural expansion requires that these valuable infrastructures be preserved and reconfigured to support new agricultural ventures. Because sugar companies are unable to construct and to maintain these infrastructures, incentives to encourage private investments to preserve and to enhance existing agricultural infrastructures are necessary.

The legislature further finds that farmers and ranchers during periods of drought suffer from loss of crops and livestock. These losses can be minimized by the construction of water storage facilities to alleviate water problems during times of drought.

The purpose of this Act is to provide a tax credit for major investment in the planning, design, construction, reconstruction, improvement, altering, or repair of large agricultural infrastructures and the construction of drought mitigating water storage facilities.

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

"§235- Agricultural infrastructure improvement tax credit. (a) There shall be allowed to each taxpayer, subject to the taxes imposed by this chapter, an agricultural infrastructure improvement tax credit that shall apply to the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The tax credit shall be an amount equal to ten per cent of the cost of agriculture infrastructure improvements over $200,000 made by the taxpayer for the taxable year in which the improvements were made.

(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. For the purpose of this credit, the "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

(c) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims, including any amended claims, for tax credits under this section 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.

`"Drainage systems" means an agricultural system of channels, ditches, pipes, pumps, and accessory facilities established for the purpose of drawing off water from a land area larger than twenty acres.

§235- Drought mitigating water storage facility; credit. (a) There shall be allowed to each taxpayer, subject to the taxes imposed by this chapter, for the construction of a new water storage facility or repair or reconstruction of an existing water storage facility necessary for drought mitigation purposes, a tax credit that shall apply to the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The tax credit shall be an amount equal to ten per cent of the cost of construction of a new water storage facility or the reconstruction or improvement of any existing water storage facility paid by the taxpayer for the taxable year in which the water storage facility was constructed, reconstructed, or improved.

(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. For the purpose of this credit, the "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

(c) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims, included any amended claims, for tax credits under this section 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.

(d) As used in this section, "water storage facility" means a water storage facility with a capacity of more than forty thousand gallons certified pursuant to rules adopted by the department of agriculture as necessary for drought mitigation purposes."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval, and shall be repealed on January 1, 2006; provided that this Act shall apply to taxable years beginning after December 31, 2000, and before January 1, 2006.