STAND. COM. REP. NO. 1341

Honolulu, Hawaii

RE:    H.B. No. 1639

       H.D. 2

       S.D. 2

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Madam:

     Your Committee on Economic Development and Taxation, to which was referred H.B. No. 1639, H.D. 2, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO IMPORTANT AGRICULTURAL LANDS,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Exclude rental income derived from agricultural leases on important agricultural lands (IAL) from gross and adjusted gross income, and taxable income for income tax purposes, under certain conditions; and

     (2)  Exempt rental income derived from agricultural leases on important agricultural lands from the general excise tax law, under certain conditions.

     Testimony in support of this measure was received from the Department of Agriculture, Department of Taxation, Hawaii Farm Bureau, Land Use Research Foundation of Hawaii, and Alexander & Baldwin, Inc.  The Tax Foundation of Hawaii submitted comments on this measure.

     S.B. No. 1877, S.D. 2, which is also an IAL tax credit measure, was previously heard and approved by the Senate.  In order to consider all options, your Committee has amended this measure by adding the language from S.B. No. 1877, S.D. 2.  As amended, this measure:

     (1)  In part II, establishes a reimbursable real property income tax credit for one hundred per cent of the actual amount of real property tax paid by taxpayers real property tax assessed on lands designated as important agricultural lands; and

     (2)  In part III, provides farmer and employee housing on lands designated as important agricultural lands.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Taxation that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1639, H.D. 2, S.D. 1, as amended herein, and recommends that it be referred to the Committee on Ways and Means, in the form attached hereto as H.B. No. 1639, H.D. 2, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

____________________________

CAROL FUKUNAGA, Chair