HB2187.DOC

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Non-genetically engineered produce tax credit. (a) There shall be allowed to each qualified producer of non-genetically engineered produce subject to the tax imposed by this chapter, a non-genetically engineered produce tax credit that shall be applied to the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year for which the credit is properly claimed.

For each taxable year, a qualified producer may claim a tax credit in the amount of the lesser of:

(1) per cent of qualified costs incurred by the qualified producer; or

(2) $ .

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

(c) 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 by rule.

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 qualified costs 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 costs for which a credit is claimed under this section.

(d) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.

(e) 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.

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) Every taxpayer that claims a credit under this section shall, no later than March 31 of each year in which qualified costs were expended in the previous year, submit a written statement to the department of agriculture, in the form specified by the department of agriculture, certifying:

(1) The taxpayer's qualified producer status;

(2) The amount of qualified costs claimed by the taxpayer, if any, in the previous taxable year; and

(3) The tax liability under this chapter against which the tax credits are claimed.

(g) The department of agriculture shall verify the eligibility of all taxpayers applying for the tax credit, and upon such eligibility determination, shall issue a certificate to the taxpayer certifying:

(1) The taxpayer's qualified producer status;

(2) The amount of the qualified costs claimed by the taxpayer; and

(3) The credit amount certified for the taxpayer for the taxable year.

(h) The department of agriculture shall also maintain records of:

(1) The total amount of qualified costs for which each taxpayer claims a tax credit under this section for each taxable year;

(2) The total amount of tax credits for which each taxpayer is certified for each taxable year; and

(3) The total amount of all tax credits claimed pursuant to this section by all taxpayers in each taxable year.

Notwithstanding any other law to the contrary, the information required by this subsection shall be available for public inspection and dissemination under chapter 92F.

(i) The taxpayer shall file the certificate provided for under subsection (g) with the taxpayer's tax return with the department of taxation. Notwithstanding the department of agriculture's certification authority under this section, the director of taxation may audit and adjust the certification of each taxpayer claiming a credit under this section to conform to the facts.

(j) The department of agriculture shall certify no more than $ in credits in the aggregate for all taxpayers in the taxable year beginning after December 31, 2013, and ending before January 1, 2015. In no instance shall the department of taxation allow the aggregate amount of tax credits claimed to exceed $ in the taxable year. To comply with this restriction, the department of agriculture shall certify credits on a first come, first served basis.

(k) As used in this section:

"Genetically engineered" means:

(1) Altered at the molecular or cellular level by means that are not possible under natural conditions or processes, including recombinant deoxyribonucleic acid and ribonucleic acid techniques, cell fusion, microencapsulation, macroencapsulation, gene deletion and doubling, introduction of a foreign gene, and changing the positions of genes, other than by a means consisting exclusively of breeding, conjugation, fermentation, hybridization, in vitro fertilization, tissue culture, or mutagenesis; or

(2) Made through sexual or asexual reproduction, or both, involving an organism described in paragraph (1).

"Produce" means fresh fruits and vegetables for human consumption.

"Qualified costs" means any costs for the production of non-genetically engineered produce. These costs shall include, but not be limited to costs incurred for:

(1) The purchase of seed or annual plants;

(2) Water;

(3) Fertilizer, fungicides, insecticides, herbicides, defoliants, and dessicants used exclusively in the production of produce for sale;

(4) The purchase, repair, and maintenance of equipment used exclusively in the production of produce; and

(5) The components of irrigation systems or other tangible property necessary for the production of produce.

"Qualified producer" means any producer of produce that is grown without the knowing and intentional use of genetically engineered seed or organisms."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2013.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2187
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII