THE SENATE
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S.B. NO.
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363
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TWENTY-SEVENTH LEGISLATURE, 2013
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STATE OF HAWAII
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A BILL FOR AN ACT
relating to FARMS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that Hawaii
imports far more goods and services than it exports. Thus, Hawaii has a significant
negative trade flow. Hawaii makes up for this negative trade flow by relying
on tourism and military expenditures; however, this reliance on external
sources of revenue may not be sustainable in the long run.
The legislature also finds that the two largest
trade imbalances are in the areas of energy and agriculture. Over the past few
years, Hawaii has been addressing its over-reliance on imported fossil fuel.
Hawaii needs to address the imbalance in agricultural trade and significantly expand
food production in the State.
The legislature further finds that the growth
of small, diversified farming businesses will add to and diversify Hawaii's
economy and help redress the imbalance in agricultural trade. The State should
therefore encourage and support the growth of new, small, and diversified
farming businesses by creating a tax exemption on the first $50,000 of income
for such businesses. A partial tax exemption for such businesses will not significantly
affect existing tax revenue collected by the State, but will strengthen the state
economy and improve the long-term economic well-being of the State as a whole.
SECTION 2. Section 235-7, Hawaii Revised
Statutes, is amended by amending subsection (a) to read as follows:
"(a) There shall be excluded from gross
income, adjusted gross income, and taxable income:
(1) Income not subject to taxation by the State under
the Constitution and laws of the United States;
(2) Rights, benefits, and other income exempted from
taxation by section 88-91, having to do with the state retirement system, and
the rights, benefits, and other income, comparable to the rights, benefits, and
other income exempted by section 88-91, under any other public retirement system;
(3) Any compensation received in the form of a
pension for past services;
(4) Compensation paid to a patient affected with
Hansen's disease employed by the State or the United States in any hospital,
settlement, or place for the treatment of Hansen's disease;
(5) Except as otherwise expressly provided, payments
made by the United States or this State, under an act of Congress or a law of
this State, which by express provision or administrative regulation or
interpretation are exempt from both the normal and surtaxes of the United
States, even though not so exempted by the Internal Revenue Code itself;
(6) Any income expressly exempted or excluded from
the measure of the tax imposed by this chapter by any other law of the State,
it being the intent of this chapter not to repeal or supersede any express
exemption or exclusion;
(7) Income received by each member of the reserve
components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the
United States of America, and the Hawaii national guard as compensation for
performance of duty, equivalent to pay received for forty-eight drills
(equivalent of twelve weekends) and fifteen days of annual duty, at an:
(A) E-1 pay grade after eight years of
service; provided that this subparagraph shall apply to taxable years beginning
after December 31, 2004;
(B) E-2 pay grade after eight years of
service; provided that this subparagraph shall apply to taxable years beginning
after December 31, 2005;
(C) E-3 pay grade after eight years of service;
provided that this subparagraph shall apply to taxable years beginning after
December 31, 2006;
(D) E-4 pay grade after eight years of
service; provided that this subparagraph shall apply to taxable years beginning
after December 31, 2007; and
(E) E-5 pay grade after eight years of
service; provided that this subparagraph shall apply to taxable years beginning
after December 31, 2008;
(8) Income derived from the operation of ships or
aircraft if the income is exempt under the Internal Revenue Code pursuant to
the provisions of an income tax treaty or agreement entered into by and between
the United States and a foreign country; provided that the tax laws of the
local governments of that country reciprocally exempt from the application of
all of their net income taxes, the income derived from the operation of ships
or aircraft that are documented or registered under the laws of the United
States;
(9) The value of legal services provided by a legal
service plan to a taxpayer, the taxpayer's spouse, and the taxpayer's
dependents;
(10) Amounts paid, directly or indirectly, by a legal
service plan to a taxpayer as payment or reimbursement for the provision of
legal services to the taxpayer, the taxpayer's spouse, and the taxpayer's
dependents;
(11) Contributions by an employer to a legal service
plan for compensation (through insurance or otherwise) to the employer's
employees for the costs of legal services incurred by the employer's employees,
their spouses, and their dependents;
(12) Amounts received in the form of a monthly
surcharge by a utility acting on behalf of an affected utility under section
269-16.3; provided that amounts retained by the acting utility for collection
or other costs shall not be included in this exemption;
(13) Amounts received in the form of a cable surcharge
by an electric utility company acting on behalf of a certified cable company
under section 269-134; provided that any amounts retained by that electric
utility company for collection or other costs shall not be included in this
exemption; [and]
(14) One hundred per cent of the gain realized by a
fee simple owner from the sale of a leased fee interest in units within a
condominium project, cooperative project, or planned unit development to the
association of owners under chapter 514A or 514B, or the residential
cooperative corporation of the leasehold units.
For purposes of this paragraph:
"Fee simple owner" shall have
the same meaning as provided under section 516-1; provided that it shall
include legal and equitable owners;
"Legal and equitable owner", and
"leased fee interest" shall have the same meanings as provided under
section 516-1; and
"Condominium project" and
"cooperative project" shall have the same meanings as provided under
section 514C-1[.]; and
(15) The first $50,000 of income received by
a family farm, family farm community, or family farm cooperative.
For purposes of this paragraph:
"Family farm" means a farm
owned or leased by an individual or family receiving more than seventy-five per
cent of its annual gross income from food production sold for consumption
within the State, whether the food is sold directly to consumers or indirectly
through a family farm cooperative.
"Family farm community"
means a parcel of land of between five hundred and five thousand acres that is
subdivided into individual family farms.
"Family farm cooperative"
means an association of family farms within a family farm community created to
process or market agricultural produce."
SECTION 3. Statutory material to be repealed is
bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2012; provided that the amendments made
to section 235-7(a), Hawaii Revised Statutes, by section 2 of this Act shall
not be repealed when
that section is reenacted on January 1, 2018, pursuant to section
5 of Act 220, Session Laws of Hawaii 2012.
INTRODUCED BY:
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_____________________________
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Report Title:
Economic Diversification; Agriculture; Family Farm; Family
Farm Community; Family Farm Cooperative; Tax Exemption
Description:
Creates an income tax exemption on the first $50,000 of
income for family farms, family farm communities, and family farm cooperatives.
The
summary description of legislation appearing on this page is for informational
purposes only and is not legislation or evidence of legislative intent.
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