Establishes an agricultural infrastructure improvement tax credit to promote agricultural diversity and increase agricultural self-sufficiency. (SD1)

A BILL FOR AN ACT

SECTION 1. In 1978, voters approved article XI, section 3, of the Constitution of the State of Hawaii, which sets out the framework for state policies relating to the promotion of agriculture and the conservation of productive agricultural lands in the State. This provision dictates that the State promote diversified agriculture and increase agricultural self-sufficiency.

The purpose of this Act is to establish an agricultural infrastructure improvement tax credit to promote diversified agriculture and agricultural self-sufficiency.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section 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, a nonrefundable agricultural infrastructure improvement tax credit for improvements made to agricultural infrastructure. The tax credit 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 tax credit shall be an amount equal to the agricultural infrastructure improvement costs incurred by the taxpayer for the taxable year in which the improvements were made.

For purposes of this section, "net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

(b) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for agricultural infrastructure improvement costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule.

(c) A tax credit under this section that exceeds the taxpayer's income tax 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.

(d) The director of taxation shall prepare the necessary forms to claim a credit under this section and may adopt rules pursuant to chapter 91. The director may require the taxpayer to furnish information to determine the validity of the claim for credit made under this section.

(e) No later than March 31 of each year following the year in which agricultural infrastructure improvement costs were incurred, each taxpayer claiming the tax credit shall submit a written, notarized statement to the director of agriculture and the director of business, economic development, and tourism, identifying the agricultural infrastructure improvement costs incurred in the year being claimed.

(f) The department of agriculture, with the assistance of the department of business, economic development, and tourism, shall maintain records of the names of taxpayers eligible for the credit and the total amount of eligible costs incurred in each taxable year, beginning after December 31, 2009, by each taxpayer. The department of agriculture, with the assistance of the department of business, economic development, and tourism, shall compile all eligible agricultural infrastructure improvement costs, and upon each determination, shall issue a certificate to the taxpayer pursuant to subsection (g) indicating:

(2) The amount of the tax credit that the taxpayer may use

for the tax year in which the costs were incurred; and

(3) The amount of previous tax credits the taxpayer may

carry forward.

(g) The department of agriculture shall certify no more than $2,000,000 in credits in the aggregate, including carryforward amounts, for all taxpayers for each taxable year; provided that:

(1) For claims in statements filed by March 31, pursuant

to subsection (e):

(2) For claims in statements filed after March 31,

pursuant to subsection (e):

(B) If the total amount in the aggregate, including

(h) No taxpayer claiming a credit under this section for any expenses incurred by or investments made for qualifying agricultural infrastructure improvement costs shall claim or receive any other deduction or credit under this chapter.

(i) As used in this section:

"Agricultural infrastructure improvement" means the planning, design, construction, improvement, alteration, or repair of supporting infrastructure used on land encumbered by a permanent conservation easement for agricultural protection, including irrigation systems, roads, and drainage systems.

"Drainage system" means an agricultural system of channels, ditches, pipes, pumps, and accessory facilities established to draw water off of a land area larger than twenty acres.

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

"Roads" means an agricultural system of cane haul roads or ways established to take agricultural products from the fields to processing facilities without using the public highways."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2010, and shall apply to taxable years beginning after December 31, 2009; provided that this Act shall be repealed on July 1, 2010.