Report Title:

Irrigation Repair and Maintenance Special Fund; Tax Credit

Description:

Establishes the irrigation repair and maintenance special fund. Establishes a tax credit for matching funds provided by landowners who receive funding from the special fund. Appropriates funds for various irrigation systems and for the special fund. (SD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

2179

TWENTY-THIRD LEGISLATURE, 2006

H.D. 2

STATE OF HAWAII

S.D. 1

 

A BILL FOR AN ACT

 

relating to Agriculture.

 

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

SECTION 1. This Act shall be known as the New Directions for Diversified Agriculture Act.

SECTION 2. Chapter 167, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§167-   Irrigation repair and maintenance special fund. (a) There is established in the state treasury the irrigation repair and maintenance special fund which shall be administered by the board.

(b) Moneys in the irrigation repair and maintenance special fund shall be used to fund repair and maintenance of the following irrigation systems:

(1) East Kauai irrigation system;

(2) Kekaha ditch;

(3) Kokee ditch;

(4) Maui Land/Pioneer Mill irrigation system;

(5) Waiahole ditch;

(6) Lower Hamakua irrigation system;

(7) Molokai irrigation system;

(8) Upcountry Maui irrigation system;

(9) Waimanalo irrigation system;

(10) Waimea irrigation system;

(11) East Maui irrigation system;

(12) Kauai coffee irrigation system;

(13) West Maui irrigation system;

(14) Kau irrigation system;

(15) Honomalino irrigation system;

(16) Wahiawa reservoir and ditch system; and

(17) Other privately-owned irrigation systems on former sugarcane and pineapple plantation lands that have been converted to diversified agriculture.

(c) The irrigation repair and maintenance special fund shall be funded by legislative appropriations, including general obligation bond funds and federal funds.

(d) Landowners may apply for funding assistance from the irrigation repair and maintenance special fund; provided that the landowner:

(1) Provides matching funding equal to the amount received from the irrigation repair and maintenance special fund;

(2) Agrees to file a petition for declaratory ruling pursuant to section 205-45 designating a majority of all land served by the water produced by the irrigation system as important agricultural lands as defined under chapter 205 and notifies the board and county of the petition and designation for the purpose of inclusion on maps; and

(3) Agrees to use, or provide for the use of, all lands owned or controlled by the landowner and served by the water produced by the irrigation system for agricultural production.

The board shall develop processes, policies, standards, and criteria for selecting the landowners that are to receive funding and the amount of such funding. The board shall also develop processes, policies, standards, and criteria for determining the amount of funding provided to irrigation systems in subsection (b) owned by the State.

(e) Landowners who apply for and receive funding from the irrigation repair and maintenance special fund, and who provide matching funding under subsection (d)(1), may apply for an income tax credit for their matching funds as specified under section 235-   .

(f) As used in this section:

"Diversified agriculture" means agricultural operations that produce diversified agricultural products, including flowers, nursery products, vegetables, herbs, melons, seed crops, macadamia nuts, aquaculture, coffee, milk, cattle, eggs, hogs, and fruit.

"Irrigation system" means the agricultural system of intakes, diversions, wells, ditches, siphons, pipes, reservoirs, and accessory facilities established to provide water for agricultural production.

"Landowner" means a private entity that:

(1) Owns agricultural land, formerly used as a sugarcane or pineapple plantation, that contains a privately-owned irrigation system that is necessary for the sustained production of diversified agriculture on the land served by the irrigation system; or

(2) Owns, or partially owns, an irrigation system listed in subsection (b)(1) through (17)."

SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Irrigation repair and maintenance special fund tax credit. (a) Pursuant to section 167-   (e), there shall be allowed to each qualified taxpayer, subject to the taxes imposed by this chapter, an income tax credit that shall be deductible from 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 amount of the credit shall be equal to the amount of matching funds provided by the qualified taxpayer in obtaining funding from the irrigation repair and maintenance special fund, as specified in section 167- (d)(1); provided that:

(1) The amount of the credit shall not exceed $           per year in the aggregate for all qualified taxpayers;

(2) The amount of the credit shall not exceed $           in the aggregate for all qualified taxpayers for all taxable years; and

(3) The tax credit shall be available for matching fund costs incurred after December 31, 2005, and before January 1, 2026.

In the case of a partnership, S corporation, estate, or trust, the cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235-110.7(a).

If a deduction is taken under Section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code, no tax credit shall be allowed for that portion of the construction or renovation cost for which the deduction is taken.

The basis of eligible property for depreciation or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed. In the alternative, the qualified taxpayer shall treat the amount of the credit allowable and claimed as a taxable income item for the taxable year in which it is properly recognized under the method of accounting used to compute taxable income.

(b) If the tax credit under this section exceeds the qualified taxpayer's income tax liability, the excess of credit over liability may be used as a credit against the qualified taxpayer's income tax liability in subsequent years until exhausted.

All claims for a tax credit 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.

(c) The director shall prepare any forms that may be necessary to claim a credit under this section. The director of taxation may also require the qualified taxpayer to furnish information to determine the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(d) To qualify for the income tax credit, the qualified taxpayer shall be in compliance with all applicable federal, state, and county statutes, rules, and regulations.

(e) No qualified taxpayer that claims a credit under this section shall claim any other tax credit for the same costs for which a credit is claimed under this section.

(f) No later than March 31 of each year following the year in which the cost of matching funds provided by the qualified taxpayer in obtaining funding from the irrigation repair and maintenance special fund were incurred, each qualified taxpayer claiming the tax credit shall submit a written, notarized statement to the director of taxation identifying the matching fund costs incurred in the year being claimed.

(g) The department, with the assistance of the board of agriculture, shall maintain records of the names of qualified taxpayers eligible for the credit and the total amount of eligible costs incurred in each taxable year by each qualified taxpayer. The department, with the assistance of the board of agriculture, shall compile all eligible matching fund costs and, upon each determination, shall issue a certificate to the taxpayer pursuant to subsection (h) indicating:

(1) The amount of matching fund costs eligible for the tax credit;

(2) The amount of the tax credit that the qualified taxpayer may use for the tax year in which the costs were incurred; and

(3) The amount of previous tax credits the qualified taxpayer may carry forward.

(h) The department shall certify no more than $           in credits in the aggregate, including carryforward amounts, for all qualified taxpayers for each taxable year; provided that if the total amount claimed on all statements in the aggregate, including carryforward amounts, filed by March 31 for the previous tax year amounts to:

(1) $           or less, the department shall certify all claims; and

(2) More than $          , the department shall certify claims for each qualified taxpayer in an amount proportional to the total amount claimed.

The department shall certify no more than $           in credits, including carryforward amounts, in the aggregate for all qualified taxpayers for all taxable years.

(i) As used in this section "qualified taxpayer" means the same as "landowner" under section 167-   (f)."

SECTION 4. The director of finance is authorized to issue general obligation bonds in the sum of $30,000,000, or so much thereof as may be necessary, and the same sum or so much thereof as may be necessary is appropriated for fiscal year 2006-2007, to be deposited into the irrigation repair and maintenance special fund and used for the repair and maintenance of the irrigation systems specified under section 167-   (b), Hawaii Revised Statutes; provided that $50,000,000 in federal matching funds are also deposited into the irrigation repair and maintenance special fund.

The sum appropriated shall be expended by the department of budget and finance for the purposes of this Act.

SECTION 5. There is appropriated out of the irrigation repair and maintenance special fund the sum of $80,000,000, or so much thereof as may be necessary for fiscal year 2006-2007, to be expended for the repair and maintenance of the irrigation systems specified under section 167-   (b), Hawaii Revised Statutes.

The sum appropriated shall be expended by the board of agriculture for the purposes of this Act.

SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $11,886,000, or so much thereof as may be necessary for fiscal year 2006-2007, for repair and maintenance of irrigation systems as follows:

(1) $2,336,000 for the East Kauai irrigation system;

(2) $500,000 for the Waimanalo irrigation system;

(3) $2,500,000 for the Molokai irrigation system;

(4) $4,850,000 for the Waimea irrigation system; and

(5) $1,700,00 for the Lower Hamakua irrigation system.

The sum appropriated shall be expended by the board of agriculture for the purposes of this Act.

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2006-2007, for operational, management, and administrative costs incurred by the board of agriculture in carrying out the provisions of this Act.

The sum appropriated shall be expended by the board of agriculture for the purposes of this Act.

SECTION 8. The appropriation made for the capital improvement irrigation repair and maintenance projects authorized in this Act shall not lapse at the end of the fiscal year for which the appropriation is made; provided that all moneys from the appropriation unencumbered as of June 30, 2008, shall lapse as of that date.

SECTION 9. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2006.