STAND

STAND. COM. REP. NO. 1153

Honolulu, Hawaii

, 2005

RE: H.B. No. 1200

H.D. 2

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Water, Land, and Agriculture, to which was referred H.B. No. 1200, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO STATE ENTERPRISE ZONES,"

begs leave to report as follows:

The purpose of this measure is to amend the state enterprise zone program to encourage agricultural activity.

The Department of Agriculture, the Department of Business, Economic Development and Tourism, the Department of Taxation, Enterprise Honolulu, Hawaii Agriculture Research Center, Hawaii Aquaculture Association, Hawaii Crop Improvement Association, Hawaii Farm Bureau Federation, and Maui County Farm Bureau submitted testimony in support of this measure. The Tax Foundation of Hawaii submitted comments on the measure.

Your Committee finds that state enterprise zone programs are a very good business incentive to encourage agriculture activity. However, it is very difficult for agricultural businesses to meet some of the existing requirements for these programs. Thus, this measure provides amendments to the program requirements by:

(1) Allowing agricultural businesses to be eligible for tax incentives in the event of force majeure;

(2) Extending the eligibility for agricultural businesses by the duration, in months, of a force majeure event;

(3) Allowing agricultural businesses to meet annual gross revenue requirement if the businesses are unable to meet annual full-time employee requirements; and

(4) Including leased employees and employees under a joint employer relationship in the definition of "full-time employee."

Your Committee has amended this measure by:

(1) Amending the definition of "agricultural business" to include companies that process agricultural products;

(2) Clarifying the purpose of state enterprise zones to include agriculture as one of the areas that would benefit from the provisions in chapter 209E, Hawaii Revised Statutes, providing regulatory flexibility and tax incentives;

(3) Clarifying that enterprise zone businesses cannot claim the same tax credits or exemptions in other tax incentive programs; and

(4) Making technical, nonsubstantive changes for style, clarity, and consistency.

As affirmed by the record of votes of the members of your Committee on Water, Land, and Agriculture that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1200, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1200, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Water, Land, and Agriculture,

		____________________________ RUSSELL S. KOKUBUN, Chair