HB2808

PART I

SECTION 1. In 1978, voters approved article XI, section 3, of the Constitution of the State of Hawaii, which set out the framework for state policies to promote agriculture and the conservation of productive agricultural lands in the State. Article XI, section 3, reads as follows:

"The State shall conserve and protect agricultural lands, promote diversified agriculture, increase agricultural self sufficiency and assure the availability of agriculturally suitable lands. The legislature shall provide standards and criteria to accomplish the foregoing.

Lands identified by the State as important agricultural lands needed to fulfill the purposes above shall not be reclassified by the State or rezoned by its political subdivisions without meeting the standards and criteria established by the legislature and approved by a two-thirds vote of the body responsible for the reclassification or rezoning action."

To address the issue of important agricultural lands, Act 183, Session Laws of Hawaii 2005, was enacted. Act 183 establishes standards, criteria, and mechanisms to identify important agricultural lands and to implement the intent and purpose of article XI, section 3, of the Hawaii state constitution.

Act 183 also recognized that while the supply of lands suitable for agriculture is critical, the long-term viability of agriculture also depends on other factors. These factors include:

(1) Commodity prices;

(2) Availability of water for irrigation;

(3) Agricultural research and outreach;

(4) Application of production technologies;

(5) Marketing; and

(6) Availability and cost of transportation services.

The purpose of this Act is to provide incentives and protections to establish and sustain viable agricultural operations on important agricultural lands.

PART II

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Rental income from agricultural leases on important agricultural lands excluded from gross income. (a) In addition to the exclusions in section 235-7, there shall be excluded from gross income, adjusted gross income, and taxable income, rental income, including lease rents, in an amount not to exceed $ that is received by a taxpayer subject to the taxes imposed by this chapter, that is derived from agricultural leases on lands identified and designated as important agricultural lands pursuant to part III, chapter 205, for the taxable year the rental income was realized; provided that:

(1) The minimum length of the initial lease term shall be:

(A) Twenty years; or

(B) Any other lease term mutually agreeable to the lessor and lessee, if the amount of the lease rent is set by an independent appraisal using the lower of the comparable value or agricultural capitalization appraisal methodologies; and

(2) The lease is in effect and the lessee is continuously and substantially undertaking agribusiness on the leased land, pursuant to chapter 205, as verified by the department of agriculture on a regular basis using a process determined by the department of agriculture;

provided that the exclusion shall not apply if the lease is terminated or the department of agriculture determines that the leased land is not continuously and substantially used for agribusiness.

The taxpayer shall be eligible for the exclusion initially for up to twenty years; provided that the time period may be extended for every year the term of the lease is extended; provided further that the assignment of the original lease to another lessee shall be for the time period remaining on the original lease, unless the terms of the lease are renegotiated.

(b) Each taxpayer who claims the exclusion under this section shall annually provide any necessary information determined by, and to the department of agriculture in a manner prescribed by the department of agriculture to enable an aggregated quantitative and qualitative assessment of the impact of the exclusion.

"Agribusiness" means a business licensed for the production, processing, and sale of products from the cultivation of crops, propagation of fish or game, or raising of livestock."

SECTION 3. Section 237-24.75, Hawaii Revised Statutes, is amended to read as follows:

"§237-24.75 Additional exemptions. In addition to the amounts exempt under section 237-24, this chapter shall not apply to:

(1) Amounts received as a beverage container deposit collected under chapter 342G, part VIII;

(2) Amounts received by the operator of the Hawaii convention center for reimbursement of costs or advances made pursuant to a contract with the Hawaii tourism authority under section 201B‑7[[]; and[]]

[[](3) Amounts received[]] by a professional employment organization from a client company equal to amounts that are disbursed by the professional employment organization for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick leave, health benefits, and similar employment benefits with respect to assigned employees at a client company; provided that this exemption shall not apply to a professional employment organization upon failure of the professional employment organization to collect, account for, and pay over any income tax withholding for assigned employees or any federal or state taxes for which the professional employment organization is responsible. As used in this paragraph, "professional employment organization", "client company", and "assigned employee" shall have the meanings provided in section 373K-1[.]; and

(4) Rental income, including lease rents as provided in section 235- in an amount not to exceed $ ."

SECTION 4. 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 2008-2009 for the department of agriculture to collect and analyze data to make an aggregated quantitative and qualitative assessment of the impact of the exclusion of rental income from important agricultural lands from income and general excise taxation.

The sum appropriated shall be expended by the department of agriculture for the purposes of this part.

SECTION 5. The department of agriculture shall submit to the legislature an annual report, no later than twenty days prior to the convening of each regular session, beginning with the regular session of 2010, regarding the quantitative and qualitative assessment of the impact of the exclusion of rental income from important agricultural lands from income and general excise taxation.

PART III

SECTION 6. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Important agricultural lands tax credit. (a) There shall be allowed to each taxpayer, subject to the taxes imposed by this chapter, an important agricultural lands real property 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.

(b) The amount of the tax credit shall be equal to the amount of county real property taxes paid by the taxpayer during the taxable year in which the real property tax was assessed on lands designated as important agricultural lands pursuant to part III, chapter 205.

In the case of a partnership, S corporation, estate, or trust, the amount upon which the credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule.

(c) The tax credit shall be allowed only for the entity incurring the actual cost of the real property tax. If the real property tax is part of the lease rent and not otherwise specified in the lease agreement, upon request, the lessor shall provide the lessee with the amount of the real property tax included as part of the lease rent.

(d) If the classification of the important agricultural lands subject to the credit is redesignated, the credit shall no longer be available.

(e) If the credit under this section exceeds the taxpayer's tax payments due for the taxable year, the excess of the credits over tax payments due shall be refunded to the taxpayer; provided that the credit properly claimed by the taxpayer who has no income tax liability shall be paid to the taxpayer; and provided further that no refunds or payments on account of the credits allowed by this section shall be made for amounts less than $1.

All claims for a 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.

(f) The director of taxation:

(1) Shall prepare forms that may be necessary to claim a credit under this section;

(2) May require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section; and

(3) May adopt rules pursuant to chapter 91 to effectuate this section.

(g) The tax credit allowed under this section shall be available for taxable years beginning after December 31, 2008, and shall not be available for taxable years beginning after December 31, 2028.

(h) Upon request, taxpayers claiming the credit under this section shall provide prescribed information to the department of agriculture on an annual basis that will enable a quantitative and qualitative assessment of the impact of the tax credit. The assessment shall be made available to the public.

The department of agriculture shall determine on an annual basis if the important agricultural land subject to the credit is in productive agricultural use based on a ten-year farm plan submitted to, and approved by the department of agriculture."

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 2008-2009 for the department of agriculture to collect and analyze data to make an aggregated quantitative and qualitative assessment of the full impact of the important agricultural lands tax credit.

The sum appropriated shall be expended by the department of agriculture for the purposes of this part.

PART IV

SECTION 8. Chapter 205, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:

"§205- Important agricultural land; residential housing. A landowner qualifying under section 205-44 may develop, construct, and maintain residential dwelling units for farmers, employees, and their families on important agricultural land; provided that:

(1) The farmers' dwelling units shall be used exclusively by farmers and their immediate family members who actively and currently farm on important agricultural land upon which the dwelling is situated; provided that the immediate family members of a farmer may live in separate dwelling units situated on the same designated land;

(2) Employee dwelling units shall be used exclusively by employees and their immediate family members who actively and currently work on important agricultural land upon which the dwelling is situated; provided that the immediate family members of the employee shall not live in separate dwelling units and shall live with the employee;

(3) The total land area upon which the farmer and employee dwelling units and all appurtenances are situated shall not occupy more than twenty per cent of the total important agricultural land area controlled by the farmer or the employee's employer;

(4) The farmers' and employee dwelling units meet all applicable building code requirements;

(5) Notwithstanding section 205-4.5(a)(12), the landowner shall not plan or develop a residential subdivision on the important agricultural land; and

(6) The plans for farmers and employee dwelling units shall be supported by agricultural plans that are approved by the department of agriculture."

PART V

SECTION 9. Tax incentives are a critical component of the long-term viability of agriculture on important agricultural lands in the State. The legislature finds that it is in the public's interest to assist agricultural businesses in establishing and sustaining viable agricultural operations on important agricultural lands by providing incentives such as income tax credits.

The purpose of this part is to establish an important agricultural land tax credit to establish and sustain viable agricultural operations on important agricultural lands.

SECTION 10. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Important agricultural land tax credit. (a) There shall be allowed to each taxpayer an income tax credit, which 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 apply as follows:

(1) In the year qualified agricultural costs are incurred, fifty per cent of the qualified agricultural costs up to a maximum of ;

(2) In the first year following the year in which qualified agricultural costs are incurred, twenty per cent of the qualified agricultural costs up to a maximum of ;

(3) In the second year following the year in which qualified agricultural costs are incurred, ten per cent of the qualified agricultural costs up to a maximum of ;

(4) In the third year following the year in which qualified agricultural costs are incurred, ten per cent of the qualified agricultural costs up to a maximum of ; and

(5) In the fourth year following the year in which qualified agricultural costs are incurred, ten per cent of the qualified agricultural costs up to a maximum of .

(b) No other credit may be claimed under this chapter for qualified agricultural costs for which a credit is claimed under this section for the taxable year.

(c) The amount of the qualified agricultural costs eligible to be claimed under this section shall be reduced by the amount of funds received by the taxpayer during the taxable year from the irrigation repair and maintenance special fund under section 167-24.

(d) The cost upon which the tax credit is computed shall be determined at the entity level. In the case of a partnership, S corporation, estate, trust, or other pass through entity, distribution and share of the 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 qualified agricultural cost for which a deduction was 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. No deduction shall be allowed for that portion of otherwise deductible qualified agricultural costs on which a credit is claimed under this section.

(e) If the credit under this section exceeds the taxpayer's net income tax liability for the taxable year, the excess of the credit over liability shall be refunded to the taxpayer; provided that no refunds or payments on account of the credits allowed by this section shall be made for amounts less than $1.

All claims for a tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit is claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(f) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a credit under this section;

(2) May require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section; and

(3) May adopt rules pursuant to chapter 91 to effectuate this section.

(g) Prior to claiming the tax credit under this section, the taxpayer may request a letter from the department of agriculture specifying the qualified agricultural costs in the taxable year the tax credit will be claimed. The taxpayer shall provide information required by the department of agriculture prior to the issuance of the letter.

(h) The department of agriculture, in consultation with the department of taxation, shall annually determine the information necessary to provide a quantitative and qualitative assessment of the outcomes of the tax credit. Every taxpayer, no later than the last day of the taxable year following the close of the taxpayer's taxable year in which qualified costs were incurred, shall submit a written statement to and certified by the department of agriculture. Failure to provide the information shall result in ineligibility and a recapture of any credit already claimed for that taxable year. The amount of the recaptured tax credit shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs.

Notwithstanding any law to the contrary, a statement submitted under this subsection shall be a public document.

(i) The department of agriculture, in consultation with the department of taxation, shall annually submit a report evaluating the effectiveness of the tax credit. The report shall include but not be limited to findings and recommendations to improve the effectiveness of the tax credit to further encourage the development of agricultural businesses.

(j) As used in this section:

"Agricultural business" means any person with a commercial agricultural, silvicultural, or aquacultural facility or operation, including:

(1) The care and production of livestock and livestock products, poultry and poultry products, apiary products, and plant and animal production for nonfood uses;

(2) The planting, cultivating, harvesting, and processing of crops; and

(3) The farming or ranching of any plant or animal species in a controlled salt, brackish, or freshwater environment;

provided that the principal place of the agricultural business is maintained in the State and more than fifty per cent of the land the agricultural business owns or leases, excluding land classified as conservation land, is important agricultural land.

"Important agricultural lands" means lands identified and designated as important agricultural lands pursuant to chapter 205, part III.

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.

"Qualified agricultural costs" means expenditures for:

(1) The plans, design, engineering, construction, renovation, repair, maintenance, and equipment for:

(A) Roads or utilities, primarily for agricultural purposes, for which the majority of the lands serviced by the roads or utilities, excluding lands classified as conservation lands, are important agricultural lands;

(B) Agricultural processing facilities in the State, primarily for agricultural purposes, that process, harvest, treat, wash, handle, or package a majority of crops or livestock from agricultural businesses;

(C) Water wells, reservoirs, dams, water storage facilities, water pipelines, ditches, or irrigation systems in the State, primarily for agricultural purposes, for which the majority of the lands serviced by its water, excluding lands classified as conservation lands, are important agricultural lands; and

(D) Agricultural housing in the State, primarily for agricultural purposes; provided that:

(i) The majority of the housing units are occupied by farmers or employees for agricultural businesses and their immediate family members;

(ii) The housing units are owned by the agricultural business;

(iii) The housing units are in the general vicinity, as determined by the department of agriculture, of agricultural lands owned or leased by the agricultural business; and

(iv) The housing units conform to any other conditions that may be required by the department of agriculture;

(2) Feasibility studies, regulatory processing, and legal and accounting services related to the items under paragraph (1); and

(3) Equipment, primarily for agricultural purposes, used to cultivate, grow, harvest, or process agricultural products by an agricultural business."

SECTION 11. 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 2008-2009 for the department of taxation to administer the important agricultural land agricultural tax credit.

The sum appropriated shall be expended by the department of taxation for the purposes of this Act.

SECTION 12. 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 2008-2009 for the department of agriculture to administer the important agricultural land tax credit and for one full time equivalent planner position for the department of agriculture.

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

PART VI

SECTION 13. Financing is also a critical component of the long-term viability of agriculture on important agricultural lands in the State. The legislature finds that it is in the public interest to assist agricultural producers in meeting their financing needs for projects that are located on important agricultural lands.

The purpose of this part is to further implement Act 183, Session Laws of Hawaii 2005, by authorizing the chairperson of the board of agriculture to guarantee loans relating to agricultural projects located on important agricultural lands.

SECTION 14. Chapter 155, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§155- Loan guaranty; important agricultural lands; agricultural and aquacultural loans. (a) The chairperson of the board of agriculture may guarantee loans made by commercial lenders, authorized to do business in this State, to agricultural producers for the purpose of developing and implementing agricultural projects; provided that the chairperson of the board of agriculture determines that:

(1) The agricultural projects are located on lands designated as important agricultural lands pursuant to part III of chapter 205;

(2) The commercial lender has completed its due diligence in approving the loan, including ensuring adequate collateral; and

(3) After consultation with the director of finance, the State possesses sufficient funds to provide an appropriate reserve for the loan guaranty and which, in the director of finance's judgment, are in excess of the amounts necessary for meeting the immediate requirements of the State and will not impede or hamper the fulfillment of the financial obligations of the State.

The chairperson of the board of agriculture may impose other conditions that the chairperson deems reasonable to implement the loan guaranty.

(b) In addition to the conditions that the chairperson of the board of agriculture may impose under subsection (a), any loan guaranty made pursuant to this section shall meet the following conditions:

(1) For a loan that finances operating costs, the maximum term of the loan shall be ten years;

(2) For a loan that finances capital improvement costs, the maximum term of the loan shall be twenty years;

(3) The interest rate charged on a loan shall be one per cent below the commercial lender's prime rate for as long as the loan guaranty is in effect;

(4) The loan guaranty may be up to eighty-five per cent of the outstanding principal amount of the loan, but shall not include any fees or accrued interest associated with the loan or its collection; and

(5) The principal amount of the loan shall not exceed $2,500,000.

(d) As used in this section:

"Agricultural producer" means a farmer, cooperative association, or landowner who derives at least fifty per cent of its gross income from agricultural or aquacultural activities.

"Agricultural project" means a project relating to agricultural or aquacultural operations or capital improvements."

PART VII

SECTION 15. Act 183 recognized that while land is the basic resource for agriculture and the supply of land suitable for agriculture is an irreplaceable resource, the long-term viability of agriculture also depends on factors that affect the profitability of agriculture, such as:

(1) The availability of water for irrigation;

(2) Commodity prices;

(3) Agricultural research and outreach;

(4) The application of production technologies;

(5) Marketing; and

(6) The availability and cost of transportation services.

The most important of these is the availability of water for irrigation. The legislature finds that to promote the long-term viability of agriculture, the State must establish mechanisms that promote the availability of irrigation water for agricultural activities.

The legislature finds that amendments to the state water code are needed to accomplish this objective. The water code was adopted prior to the enactment of Act 183, establishing the important agricultural lands program. The adoption of the water code also preceded a number of decisions made by the Hawaii supreme court in a series of water law cases interpreting the state water code, several of which are known collectively as the Waiahole Ditch cases.

In these cases, the Hawaii supreme court decided that the "Public Trust Doctrine" applies to water resources and water resource decisions made by the implementing agency. Further, the Hawaii supreme court identified resource protection, domestic uses, preservation of the rights of native tenants and reservations of water for the department of Hawaiian home lands as valid public trust purposes. In these same cases, the court did not specifically recognize agriculture as a public trust, and in fact, viewed the requests for agricultural water as serving private interests. The court stopped short of embracing private commercial use as a protected trust purpose and appeared to relegate agriculture to a lower priority.

Uses under the public trust, however, do not remain fixed for all time but must conform to changing public values and needs. The legislature, as elected representatives of the people of Hawaii, is in the best position to identify such public trust values and needs.

While agricultural activities may be conducted by private entities, the preservation of agriculture as an industry and the preservation of important agricultural lands are interests that the people of Hawaii value highly, and have recognized as a constitutional mandate as discussed above. Essential to conserving and protecting agricultural lands, promoting diversified agriculture, increasing agricultural self-sufficiency, and ensuring the availability of agriculturally suitable lands is the availability of water for agricultural use.

The purpose of this part is to further implement Act 183 by amending the state water code to require that:

(1) The state water plan, including the water resource protection, water use and development, and water projects plans; and

(2) The provisions of the water code regulating the use of waters,

recognize and support the importance of making sufficient water available for agricultural activity on lands identified and designated as important agricultural lands under part III of chapter 205 to preserve agriculture and agricultural lands as mandated by the state constitution.

SECTION 16. Section 174C-2, Hawaii Revised Statutes, is amended to read as follows:

"§174C-2 Declaration of policy. (a) It is recognized that the waters of the State are held for the benefit of the citizens of the State. It is declared that the people of the State are beneficiaries and have a right to have the waters protected for their use.

(b) There is a need for a program of comprehensive water resources planning to address the problems of supply and conservation of water. The Hawaii water plan, with such future amendments, supplements, and additions as may be necessary, is accepted as the guide for developing and implementing this policy.

(c) The state water code shall be liberally interpreted to obtain maximum beneficial use of the waters of the State for purposes such as domestic uses, aquaculture uses, irrigation and other agricultural uses, power development, and commercial and industrial uses. However, adequate provision shall be made for the protection of traditional and customary Hawaiian rights, the protection and procreation of fish and wildlife, the maintenance of proper ecological balance and scenic beauty, and the preservation and enhancement of waters of the State for municipal uses, public recreation, public water supply, agriculture, and navigation. Such objectives are declared to be in the public interest.

(d) The public trust doctrine shall guide the actions of the commission. In the planning and allocation of water resources, to the extent feasible, the commission shall recognize the public trust purposes of resource protection, domestic uses, upholding the exercise of native Hawaiian traditional and customary rights, and the conservation and protection of agricultural activity on important agricultural lands under part III of chapter 205.

[~~(d)~~] (e) The state water code shall be liberally interpreted to protect and improve the quality of waters of the State and to provide that no substance be discharged into such waters without first receiving the necessary treatment or other corrective action. The people of Hawaii have a substantial interest in the prevention, abatement, and control of both new and existing water pollution and in the maintenance of high standards of water quality.

[~~(e)~~] (f) The state water code shall be liberally interpreted and applied in a manner which conforms with intentions and plans of the counties in terms of land use planning."

SECTION 17. Section 174C-31, Hawaii Revised Statutes, is amended by amending subsections (e) and (f) to read as follows:

"(e) The department of agriculture shall prepare a state agricultural water use and development plan for agricultural uses in the State in accordance with chapter 167 and this chapter, and subsequently modify and update the plan as necessary. The state agricultural water use and development plan shall include but not be limited to a master irrigation inventory plan which shall:

(1) Inventory [~~the~~] public and private irrigation water systems;

(2) Identify the extent of rehabilitation needed for each system;

(3) Identify sources of water used by agricultural operations and particularly those on lands identified and designated as important agricultural lands under part III of chapter 205;

(4) Identify current and future water needs for agricultural operations on lands identified and designated as important agricultural lands under part III of chapter 205;

[~~(3)~~] (5) Subsidize the cost of repair and maintenance of the systems;

[~~(4)~~] (6) Establish criteria to prioritize the rehabilitation of the systems;

[~~(5)~~] (7) Develop a five-year program to repair the systems; and

[~~(6)~~] (8) Set up a long-range plan to manage the systems.

The commission shall coordinate the incorporation of the state agricultural water use and development plan into the state water projects plan.

(f) Each county water use and development plan shall include but not be limited to:

(1) Status of water and related land development, including an inventory of existing water uses for domestic, municipal, and industrial users, agriculture[,] and particularly those designated as important agricultural lands under part III of chapter 205, aquaculture, hydropower development, drainage, reuse, reclamation, recharge, and resulting problems and constraints;

(2) Future land uses and related water needs; and

(3) Regional plans for water developments, including recommended and alternative plans, costs, adequacy of plans, and relationship to the water resource protection and water quality plans."

PART VIII

SECTION 18. Chapter 205, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:

"§205- Agricultural processing facilities; permits; priority. (a) Any agency subject to this chapter or title 13 that issues permits shall establish and implement a procedure for the priority processing of permit applications and renewals, at no additional cost to the applicant, for agricultural processing facilities that process crops or livestock from an agribusiness with a majority of the lands held, owned, or used by the agribusiness, identified and designated as important agricultural lands pursuant to this part, excluding lands held, owned, or used by the agribusiness in a conservation district.

Any priority permit processing procedure established pursuant to this section shall not provide or imply that any permit application filed under the priority processing procedure shall be automatically approved.

(b) As used in this subsection, "agribusiness" means a business primarily engaged in the care and production of livestock, livestock products, poultry, poultry products, apiary, horticultural, floricultural products, or the planting, cultivating, and harvesting of crops or trees."

SECTION 19. Chapter 321, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§321- Agricultural processing facilities; permits; priority. (a) Any agency subject to this chapter or title 19 that issues permits shall establish and implement a procedure for the priority processing of permit applications and renewals, at no additional cost to the applicant, for agricultural processing facilities that process crops or livestock from an agribusiness. The majority of the lands held, owned, or used by the agribusiness shall be land designated as important agricultural lands pursuant to this part, excluding lands held, owned, or used by the agribusiness in a conservation district.

PART IX

SECTION 20. Chapter 205, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§205- Satisfaction of state or county affordable housing requirements for land in a rural district. (a) In lieu of partially satisfying a state or county affordable housing assessment in a rural district, a project landowner may satisfy the requirements in section 205-2(c)(7); provided that the project landowner provides per cent more affordable housing units on the land in the rural district than required by the assessment.

(b) No more than per cent of the affordable housing assessment under subsection (a) may be satisfied on the land in the rural district."

SECTION 21. Section 205-2, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Rural districts shall include [~~activities~~]:

(1) Activities or uses as characterized by low density residential lots of not more than one dwelling house per one-half acre, except as provided by county ordinance pursuant to section 46-4(c), in areas where "city-like" concentration of people, structures, streets, and urban level of services are absent[~~, and where small~~];

(2) Small farms [~~are~~] intermixed with low density residential lots except that within a subdivision, as defined in section 484-1, the commission, for good cause and on petition for a special permit, may allow one lot of less than one-half acre, but not less than 18,500 square feet, or an equivalent residential density, within a rural subdivision and permit the construction of one dwelling on such lot[,]; provided that all other dwellings in the subdivision shall have a minimum lot size of one-half acre or 21,780 square feet[~~. Such petition for variance may be processed under the special permit procedure. These districts may include contiguous~~];

(3) Contiguous areas which are not suited to low density residential lots or small farms by reason of topography, soils, and other related characteristics[~~. Rural districts shall also include golf~~];

(4) Golf courses, golf driving ranges, and golf-related facilities[.];

(5) Agribusiness activities including but not limited to horticulture, apiculture, aquaculture, raising and keeping of livestock, and establishment of plant nurseries;

(6) Farm worker housing; and

(7) Affordable housing, without regard to any density requirements and without a special permit; provided that the housing is affordable to households with incomes at or below one hundred forty per cent of the median family income as determined by the United States Department of Housing and Urban Development."

SECTION 22. Section 205-5, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Unless authorized by special permit issued pursuant to this chapter, only the following uses shall be permitted within rural districts:

(1) Low density residential uses[;], with a minimum lot size of one-half acre, and one dwelling house per lot, except as provided for in section 205-2(c);

(2) Agricultural uses;

(3) Golf courses, golf driving ranges, and golf-related facilities; [~~and~~]

(4) Public, quasi-public, and public utility facilities[.];

(5) Agribusiness activities, as provided in section 205‑2(c);

(6) Farm worker housing; and

(7) Affordable housing, as provided in section 205-2(c).

[~~In addition, the minimum lot size for any low density residential use shall be one-half acre and there shall be but one dwelling house per one-half acre, except as provided for in section 205-2.~~]"

SECTION 23. Section 205-45, Hawaii Revised Statutes, is amended to read as follows:

"[[]§205-45[]] Petition by farmer or landowner. (a) A farmer or landowner with lands qualifying under section 205-44 may file a petition for declaratory ruling to designate important agricultural lands with the commission at any time in the designation process.

(b) Any law to the contrary notwithstanding, within the same petition for declaratory ruling as described in subsection (a), the petitioner may seek an automatic reclassification of land in an agricultural district to a rural district; provided that the:

(1) Land is within the same county as the land the petitioner seeks to designate as important agricultural lands; and

(2) Reclassification is consistent with the relevant county general plan.

[~~(b)~~] (c) The petition for declaratory ruling shall be submitted in accordance with subchapter 14 of the commission's rules and shall include:

(1) Tax map keys of the land to be designated as important agricultural lands and, if applicable, the land to be reclassified from agricultural district to rural district, along with verification and authorization from the applicable landowners;

(2) Proof of qualification for designation as important agricultural lands under section 205-44, respecting a regional perspective; and

(3) The current or planned agricultural use of the area to be designated[.] as important agricultural lands.

[~~(c)~~] (d) The commission shall review the petition and the accompanying submissions to evaluate the qualifications of the land for designation as important agricultural lands in accordance with section 205-44. If the commission, after its review and evaluation, finds that the lands qualify for designation as important agricultural lands under this part, the commission shall vote, by a two-thirds majority of the members of the commission, to issue a declaratory order designating the lands as important agricultural lands[.] and, if applicable, reclassifying petitioner’s identified land from agricultural district to rural district.

[~~(d) Designating important agricultural lands by the commission~~] (e) The designation or reclassification of land pursuant to subsection (a) or (b) shall not be considered as an amendment to district boundaries under sections 205-3.1 and 205‑4 or become effective prior to legislative enactment of protection and incentive measures for important agricultural land and agricultural viability, as provided in section 9 of Act 183, Session Laws of Hawaii 2005.

[~~(e)~~] (f) Farmers or landowners with lands qualifying under section 205-44 may file petitions for a declaratory ruling to designate lands as important agricultural lands following the legislative enactment of protection and incentive measures for important agricultural lands and agricultural viability, as provided in section 9 of Act 183, Session Laws of Hawaii 2005.

(g) The commission may adopt rules pursuant to chapter 91 to effectuate this section."

PART X

SECTION 24. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 25. This Act shall take effect on July 1, 2008; provided that sections 2, 3, 6, and 10 of this Act shall apply to taxable years beginning after December 31, 2007.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2808
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII