Establishes an irrigation repair and maintenance special fund. Establishes a tax credit for matching funds provided by landowners who receive funding from the special fund. Appropriates money for the repair of irrigation systems statewide. (SB2954 HD1)

A BILL FOR AN ACT

SECTION 1. 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 that shall be administered by the board.

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

(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:

(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:

"Agriculture" means agricultural operations that produce agricultural products, including but not limited to flowers, nursery products, vegetables, herbs, melons, seed crops, macadamia nuts, aquaculture, coffee, milk, cattle, eggs, hogs, fruits, sugarcane, pineapples, and silviculture.

"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:

SECTION 2. 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) There shall be allowed to each qualified taxpayer, pursuant to section 167-   (e) and subject to the taxes imposed by this chapter, an income tax credit which shall be deductible from the qualified 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:

In the case of a partnership, S corporation, estate, or trust, the cost of matching funds 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 of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may also require the qualified taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules pursuant to chapter 91 necessary to effectuate the purposes of this section.

(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 of taxation, 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, beginning after December 31, 2005, by each qualified taxpayer. The department of taxation, 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:

(h) The department of taxation 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:

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

SECTION 3. The director of finance is authorized to issue general obligation bonds in the sum of $           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 $           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 4. There is appropriated out of the irrigation repair and maintenance special fund the sum of $           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 5. The director of finance is authorized to issue general obligation bonds in the sum of $11,866,000 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 for repair and maintenance of irrigation systems as follows:

(1) $           for the East Kauai irrigation system;

(2) $           for the Waimanalo irrigation system;

(3) $           for the Molokai irrigation system;

(4) $           for the Waimea irrigation system; and

The sum appropriated shall be expended by the board of agriculture for the purposes of this Act. The appropriation made for the capital improvement irrigation repair and maintenance projects authorized in this section is deemed necessary for federal aid and/or reimbursement.

SECTION 6. 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 7. 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 8. New statutory material is underscored.

SECTION 9. This Act shall take effect upon its approval; provided that: