Establishes that agricultural businesses shall remain eligible for tax incentives in the event of force majeure; allows agricultural businesses to meet annual gross revenue requirements if the businesses are unable to meet annual full-time employee requirements.

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 by, among other things:

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

"§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 practicable in providing the department with notice of a force majeure event, or of any situation that may lead to a force majeure event.

For purposes of this section, "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."

SECTION 3. Section 209E-2, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Force majeure event" means an event, including 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 any other event reasonably beyond the control of, and not attributable to neglect by, an agricultural business."

SECTION 4. Section 209E-1, Hawaii Revised Statutes, is amended to read as follows:

"[[]§209E-1[]] Purpose. It is declared that the health, safety, and welfare of the people of this State are dependent upon the continual encouragement, development, growth, and expansion of the private sector, and that there are certain areas in the State that need the particular attention of government to help attract private sector investment. Therefore, it is the purpose of this chapter to stimulate business, agricultural, and industrial growth in areas which would result in neighborhood revitalization of those areas by means of regulatory flexibility and tax incentives."

SECTION 5. Section 209E-9, Hawaii Revised Statutes, is amended to read as follows:

"§209E-9 Eligibility; qualified business; sale of property or services. (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:

(c) After designation as an enterprise zone, each qualified business firm in the zone shall submit annually to the department an approved form supplied by the department that provides the information necessary for the department to determine if the business firm qualifies as a qualified business. The approved form shall be submitted by each business to the governing body of the county in which the enterprise zone is located, then forwarded to the department by the governing body of the county.

(d) The form referred to in subsection (c) shall be prima facie evidence of the eligibility of a business for the purposes of this section.

(e) Tangible personal property shall be sold at an establishment of a qualified business within an enterprise zone and the transfer of title to the buyer of the tangible personal property shall take place in the same enterprise zone in which the tangible personal property is sold. Services shall be sold at an establishment of a qualified business engaged in a service business within an enterprise zone and the services shall be delivered in the same enterprise zone in which sold. Any services rendered outside an enterprise zone shall not be deemed to be the services of a qualified business.

(f) For any fiscal year that includes September 11, 2001, a business may use its average annual number of full-time employees as of August 31, 2001--rather than its average annual number at the end of its fiscal year including September 11, 2001--if necessary to meet the requirements of subsection (a)(3) and (4) or (b)(3). A business may also use its average annual number of full-time employees at the end of its fiscal year that includes September 11, 2001, as its base number of full-time employees if necessary to meet the requirements of subsection (a)(3) and (4) or (b)(3) in future fiscal years.

(g) For purposes of this section, "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."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2005.