Establishes that agricultural businesses shall remain eligible for tax incentives under the EZ program in the event of force majeure; extends eligibility under the EZ program by the number of months of the force majeure's duration; allows agricultural businesses to meet annual gross revenue requirements if the businesses are unable to meet annual full-time employee requirements; includes leased employees in the definition of "full-time employee" for the EZ program. (HB1200 HD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that agriculture in Hawaii is a vital component of Hawaii's economy. It provides the State with export products, a diversity of employment opportunities, a stage for tourism, and an opportunity for land and water stewardship. The legislature also finds that to encourage further economic development in rural areas, agriculture must be given the chance to prosper. While thousands of acres of agricultural land lie idle, new and existing agricultural ventures must be encouraged to expand and develop. More incentives must be provided to give agricultural entrepreneurs the opportunity to build long-lasting businesses in Hawaii.

The legislature further finds that the state enterprise zone program is one method that provides business incentives to encourage agricultural activity. However, employment requirements to qualify for this program discourage many agricultural businesses from applying or qualifying. While agricultural businesses are confronted by challenges similar to those faced by other small businesses, agricultural businesses labor under unique circumstances that compound the complexity of building a successful business. Agricultural employment is dependent on local and global markets, seasonal crops, labor availability, and weather conditions. It is very difficult for agricultural businesses to meet the existing employment requirements of the state enterprise zone program. Therefore, the legislature recognizes that action needs to be taken to allow more agricultural businesses the opportunity to participate in the state enterprise zone program.

The purpose of this Act is to address the unique circumstances of agricultural businesses under the enterprise zone program by, among other things:

SECTION 2. Chapter 209E, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"§209E- Agricultural business; extension of tax incentives. The department may extend all tax incentives provided under this chapter to existing qualified agricultural businesses for no more than the number of months of the duration of the force majeure event.

§209E-     Force majeure event; agricultural businesses. If an agricultural business is wholly or partially prevented from maintaining eligibility requirements under section 209E-9, or if the agricultural business is interrupted by reason of or through any force majeure event, then the agricultural business shall not be disqualified under this chapter. The agricultural business shall remain eligible for all tax incentives under this chapter during any period caused by a force majeure event and the seven-year eligibility period shall be extended by the number of months of the duration of the force majeure event. The agricultural business shall be as prompt and diligent as practical in providing the department with notice of a force majeure event, or of any situation that may lead to a force majeure event."

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

1. By adding three new definitions to be appropriately inserted and to read:

""Agricultural business" means any corporation, partnership, or sole proprietorship authorized to do business in the state that is qualified under section 209E-9, subject to the state corporate or individual income tax under chapter 235, and that is engaged in producing agricultural products where the business is a producer as defined in section 237-5.

"Force majeure event" means an event, including but not limited to damaging weather or natural disasters such as epidemic disease, pest outbreak, high wind, thunderstorm, hail storm, tornado, fire, flood, lava flow or other volcanic activity, drought, tidal wave, hurricane, or without limiting or restricting the foregoing in any way, any other similar or dissimilar cause reasonably beyond the control of, and not attributable to neglect by, an agricultural business.

"Leased employee" means an employee under a professional employment organization arrangement who is assigned to a client company on a full-time basis for at least one year."

2. By amending the definition of "full-time employee" to read:

""Full-time employee" means any employee, including leased employees and employees under a joint employer relationship, for whom the employer is legally required to provide employee fringe benefits."

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. 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:

[(c) Notwithstanding subsection (b), census tract #405 within the county of Kauai shall be eligible for designation as an enterprise zone. The eligibility for designation shall remain in effect until January 1, 1997, unless the governor earlier determines that the eligibility is no longer necessary.

(d) Notwithstanding subsection (b) or (c), only lands classified as agricultural in the Waialua district on Oahu, as defined in section 4-1(3)(D), shall be designated an enterprise zone on July 1, 1997, and the designation shall remain in effect until June 30, 2002.]"

SECTION 5. Section 209E-7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§209E-7[]] Government assistance; prohibition. [There shall be no duplication of existing state tax incentives to qualified business firms which locate in an enterprise zone.] If any tax credit or tax exemption is claimed under this chapter, then no taxpayer shall claim a credit or exemption for the same taxes under any other provision of law."

SECTION 6. Section 209E-9, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

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

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

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

SECTION 8. This Act shall take effect on July 1, 2005, and shall apply to taxable years beginning after December 31, 2004.