STAND. COM. REP. NO. 2615

Honolulu, Hawaii

RE: S.B. No. 2353

Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Agriculture and Environment, to which was referred S.B. No. 2353 entitled:

"A BILL FOR AN ACT RELATING TO FARMS,"

begs leave to report as follows:

The purpose and intent of this measure is to create an exclusion from the income tax for the lesser of a percentage of gross annual income or an amount of gross annual income earned by a farmer from farming activities.

Your Committee received testimony in support of this measure from the Department of Agriculture, Hawaii Food Industry Association, Ulupono Initiative, and Hawai‘i Farm Bureau. Your Committee received comments on this measure from Department of Budget and Finance, Department of Taxation, and Tax Foundation of Hawaii.

Your Committee finds that the State has a significant trade imbalance in its agricultural industry, meaning that it relies on imported agricultural products. Increasing the amount of agriculture in the State, especially small farms engaged in diversified agriculture, would help Hawaii reduce its reliance on agricultural imports. This measure provides a tax exclusion for farmers to incentivize the growth of diversified agriculture in the State. However, your Committee also notes that the tax exclusion provided in this measure applies to all eligible agricultural production and is not limited to food production. Given the State's goal of increased food self-sufficiency, priority for tax exclusion should be given to agricultural food production.

As affirmed by the record of votes of the members of your Committee on Agriculture and Environment that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2353 and recommends that it pass Second Reading and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Agriculture and Environment,

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MIKE GABBARD, Chair