HB 499: RELATING TO RESILIENCY.

A BILL FOR AN ACT

RELATING TO RESILIENCY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Hawaiʻi's geographic isolation and reliance on centralized supply chains make the State uniquely vulnerable to disruptions caused by natural disasters.  Any damage to the State's harbors during hurricanes, tsunamis, or other emergencies could leave residents with limited access to food and essential supplies for extended periods.

     This risk underscores the need to expand local food production, processing, and storage capacity to ensure the State is prepared for potential disasters.  Strengthening the State's food supply chain will not only enhance resilience but also reduce food insecurity, which affects one in three Hawaiʻi residents, and alleviate the high costs of food that disproportionately impact low-income families.

     The legislature further finds that despite the State's goal of doubling local food production by 2030, small businesses engaged in food and beverage production, distribution, and retailing face significant challenges.  Regulatory hurdles, permitting delays, and an onerous tax environment hinder their ability to scale and meet local demand.  Many businesses relocate operations to the continental United States or overseas to remain viable, leaving Hawaiʻi without the necessary infrastructure to build food resilience.

     The legislature believes that to achieve food security and resilience, the State must provide incentives for improving food and beverage supply chain activities, streamlining permitting processes, and creating an environment where local businesses can expand and succeed.  To ensure access to affordable and nutritious food and to prepare Hawaiʻi for emergencies, it is essential that the State support local producers, processors, distributors, and retailers in building a robust and self-sustaining food system.

     Accordingly, the purpose of this Act is to:

     (1)  Establish a refundable income tax credit for qualified taxpayers that incur qualified expenses in connection with activities that enhance the resiliency of the food and beverage supply chain; and

     (2)  Require the department of business, economic development, and tourism to establish expedited permitting processes for certain food and beverage supply chain projects.

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

     "§235-     Food and beverage supply chain resiliency income tax credit.  (a)  There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, a food and beverage supply chain resiliency income tax credit that shall be deductible from the qualified 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 food and beverage supply chain resiliency income tax credit shall be equal to forty per cent of qualified food and beverage supply chain costs of the qualified taxpayer, up to a maximum of $          , whichever is less.

     (c)  The total amount of tax credits allowed under this section shall not exceed $2,000,000 for all qualified taxpayers in any taxable year; provided that any qualified taxpayer who is not eligible to claim the credit in a taxable year due to the $2,000,000 cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year; provided further that at least twenty-five per cent of the total amount of tax credits allowed in any taxable year shall be reserved for small-scale producers and community-based organizations.

     (d)  Each taxpayer claiming a tax credit under this section shall register with the department of business, economic development, and tourism and submit a written, certified statement to the department that identifies:

     (1)  Qualified food and beverage supply chain costs, if any, incurred in the previous taxable year;

     (2)  The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year; and

     (3)  Proof of compliance with all federal, state, and county laws.

     (e)  The department of business, economic development, and tourism:

     (1)  May, in consultation with the director of taxation, prepare any forms that may be necessary to certify costs to claim a tax credit under this section;

     (2)  Shall maintain records of the names of the taxpayers claiming the tax credit under this section;

     (3)  Shall obtain and total the aggregate amounts of all qualified food and beverage supply chain costs per qualified taxpayer per taxable year;

     (4)  Shall certify the amount of qualified food and beverage supply chain costs eligible to claim a tax credit made under this section;

     (5)  Shall provide a letter to the director of taxation specifying the amount of the tax credit per qualified taxpayer for each taxable year that a tax credit is claimed;

     (6)  Shall establish annual performance metrics, including but not limited to the number of new businesses supported, percentage increase in local food production, and volume of food donations facilitated, to evaluate the impact of the tax credit on food system resiliency; and

     (7)  Shall adopt rules under chapter 91 as necessary to effectuate the purposes of this section.

     (f)  Upon each determination made under subsection (d), the department of business, economic development, and tourism shall issue a certificate to the taxpayer verifying information submitted to the department, including the qualified food and beverage supply chain costs, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period.  The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation.  Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.

     The department of business, economic development, and tourism may assess and collect a fee to offset the costs of certifying tax credit claims under this section.

     (g)  The director of taxation:

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

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

     (3)  May adopt rules under chapter 91 as necessary to effectuate the purposes of this section.

     (h)  If the tax credit claimed by the qualified taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that the tax credit properly claimed by the taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.  All claims for the 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 may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (i)  As used in this section:

     "Food and beverage supply chain" means all entities involved in the production, processing, distribution, storage, retailing, and donation of food and beverage products in the State, including:

     (1)  Farmers and ranchers;

     (2)  Food and beverage hubs and cooperatives;

     (3)  Food and beverage processors and manufacturers;

     (4)  Distributors and logistics companies;

     (5)  Grocery stores, markets, and other food and beverage retailers; and

     (6)  Food banks and organizations that provide food assistance.

     "Qualified food and beverage supply chain costs" means operational costs relevant to food and beverage supply chain activities in the State, including but not limited to:

     (1)  Salaries, wages, and other labor costs for employees directly involved in food and beverage supply chain activities;

     (2)  Expenses for establishing, upgrading, or maintaining infrastructure for food and beverage processing, distribution, storage, or retailing;

     (3)  Costs for purchasing agricultural equipment, vehicles, or renewable energy systems used in food and beverage supply chain operations;

     (4)  Utilities and energy costs necessary for food and beverage supply chain operations; and

     (5)  Costs for developing or implementing food donation and recovery programs to reduce food waste and improve access to food for underserved communities.

     "Qualified taxpayer" means a taxpayer subject to tax under this chapter involved in the production, processing, distribution, storage, retailing, and donation of food and beverage products in the State, including:

     (1)  Farmers and ranchers;

     (2)  Food and beverage hubs and cooperatives;

     (3)  Food and beverage processors and manufacturers;

     (4)  Distributors and logistics companies;

     (5)  Grocery stores, markets, and other food and beverage retailers; and

     (6)  Food banks and organizations that provide food assistance."

     SECTION 3.  (a)  The department of business, economic development, and tourism shall establish expedited permitting processes for:

     (1)  Building food and beverage storage and processing facilities;

     (2)  Expanding retail operations for local food and beverage businesses; and

     (3)  Establishing agricultural production or processing infrastructure.

     (b)  Permits for food and beverage supply chain projects shall be reviewed and approved within one hundred eighty days of submission; provided that the requests for permits are submitted with the approval of licensed contractors.

     SECTION 4.  The department of business, economic development, and tourism, in consultation with the department of taxation, shall adopt rules under chapter 91, Hawaii Revised Statutes, to effectuate the purposes of this Act, including procedures for claiming the food and beverage supply chain resiliency income tax credit and enforcing compliance.

     SECTION 5.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 3000; provided that section 2 shall apply to taxable years beginning after December 31, 2025.

Report Title:

DBEDT; DOTAX; Food and Beverage Supply Chain; Resiliency; Tax Credit; Permits

Description:

Establishes the Food and Beverage Supply Chain Resiliency Income Tax Credit to be administered by the Department of Business, Economic Development, and Tourism and Department of Taxation.  Requires DBEDT to establish expedited permitting processes for food and beverage supply chain activities.  Applicable to taxable years beginning after 12/31/2025.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to resiliency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Hawaiʻi's geographic isolation and reliance on centralized supply chains make the State uniquely vulnerable to disruptions caused by natural disasters.  Any damage to the State's harbors during hurricanes, tsunamis, or other emergencies could leave residents with limited access to food and essential supplies for extended periods.

     This risk underscores the need to expand local food production, processing, and storage capacity to ensure the State is prepared for potential disasters.  Strengthening the State's food supply chain will not only enhance resilience but also reduce food insecurity, which affects one in three Hawaiʻi residents, and alleviate the high costs of food that disproportionately impact low-income families.

     The legislature further finds that despite the State's goal of doubling local food production by 2030, small businesses engaged in food and beverage production, distribution, and retailing face significant challenges.  Regulatory hurdles, permitting delays, and an onerous tax environment hinder their ability to scale and meet local demand.  Many businesses relocate operations to the continental United States or overseas to remain viable, leaving Hawaiʻi without the necessary infrastructure to build food resilience.

     The legislature believes that to achieve food security and resilience, the State must provide incentives for improving food and beverage supply chain activities, streamlining permitting processes, and creating an environment where local businesses can expand and succeed.  To ensure access to affordable and nutritious food and to prepare Hawaiʻi for emergencies, it is essential that the State support local producers, processors, distributors, and retailers in building a robust and self-sustaining food system.

     Accordingly, the purpose of this Act is to:

     (1)  Establish a refundable income tax credit for qualified taxpayers that incur qualified expenses in connection with activities that enhance the resiliency of the food and beverage supply chain; and

     (2)  Require the department of business, economic development, and tourism to establish expedited permitting processes for certain food and beverage supply chain projects.

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

     "§235-    Food and beverage supply chain resiliency income tax credit.  (a)  There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, a food and beverage supply chain resiliency income tax credit that shall be deductible from the qualified 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 food and beverage supply chain resiliency income tax credit shall be equal to forty per cent of qualified food and beverage supply chain costs of the qualified taxpayer, up to a maximum of $          , whichever is less.

     (c)  The total amount of tax credits allowed under this section shall not exceed $2,000,000 for all qualified taxpayers in any taxable year; provided that any qualified taxpayer who is not eligible to claim the credit in a taxable year due to the $2,000,000 cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year.

     (d)  Each taxpayer claiming a tax credit under this section shall register with the department of business, economic development, and tourism and submit a written, certified statement to the department that identifies:

     (1)  Qualified food and beverage supply chain costs, if any, incurred in the previous taxable year;

     (2)  The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year; and

     (3)  Proof of compliance with all federal, state, and county laws.

     (e)  The department of business, economic development, and tourism:

     (1)  May, in consultation with the director of taxation, prepare any forms that may be necessary to certify costs to claim a tax credit under this section;

     (2)  Shall maintain records of the names of the taxpayers claiming the tax credit under this section;

     (3)  Shall obtain and total the aggregate amounts of all qualified food and beverage supply chain costs per qualified taxpayer per taxable year;

     (4)  Shall certify the amount of qualified food and beverage supply chain costs eligible to claim a tax credit made under this section;

     (5)  Shall provide a letter to the director of taxation specifying the amount of the tax credit per qualified taxpayer for each taxable year that a tax credit is claimed; and

     (6)  May adopt rules under chapter 91 as necessary to effectuate the purposes of this section.

     (f)  Upon each determination made under subsection (d), the department of business, economic development, and tourism shall issue a certificate to the taxpayer verifying information submitted to the department, including the qualified food and beverage supply chain costs, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period.  The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation.  Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.

     The department of business economic development and tourism may assess and collect a fee to offset the costs of certifying tax credit claims under this section.

     (g)  The director of taxation:

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

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

     (3)  May adopt rules under chapter 91 as necessary to effectuate the purposes of this section.

     (h)  If the tax credit claimed by the qualified taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that the tax credit properly claimed by the taxpayer who has no income tax liability shall be paid to the taxpayer; provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.  All claims for the 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 may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (i)  As used in this section:

     "Food and beverage supply chain" means all entities involved in the production, processing, distribution, storage, retailing, and donation of food and beverage products in the State, including:

     (1)  Farmers and ranchers;

     (2)  Food and beverage hubs and cooperatives;

     (3)  Food and beverage processors and manufacturers;

     (4)  Distributors and logistics companies;

     (5)  Grocery stores, markets, and other food and beverage retailers; and

     (6)  Food banks and organizations that provide food assistance.

     "Qualified food and beverage supply chain costs" means operational costs relevant to food and beverage supply chain activities in the State, including but not limited to:

     (1)  Salaries, wages, and other labor costs for employees directly involved in food and beverage supply chain activities;

     (2)  Expenses for establishing, upgrading, or maintaining infrastructure for food and beverage processing, distribution, storage, or retailing;

     (3)  Costs for purchasing agricultural equipment, vehicles, or renewable energy systems used in food and beverage supply chain operations;

     (4)  Utilities and energy costs necessary for food and beverage supply chain operations; and

     (5)  Costs for developing or implementing food donation and recovery programs to reduce food waste and improve access to food for underserved communities.

     "Qualified taxpayer" means a taxpayer subject to tax under this chapter who is engaged in activities that strengthen the State's food and beverage supply chain."

     SECTION 3.  (a)  The department of business, economic development, and tourism shall establish expedited permitting processes for:

     (1)  Building food and beverage storage and processing facilities;

     (2)  Expanding retail operations for local food and beverage businesses; and

     (3)  Establishing agricultural production or processing infrastructure.

     (b)  Permits for food and beverage supply chain projects shall be reviewed and approved within one hundred eighty days of submission; provided that the requests for permits are submitted with approval of licensed contractors.

     SECTION 4.  The department of taxation, in consultation with the department of business, economic development, and tourism, shall adopt rules under chapter 91, Hawaii Revised Statutes, to effectuate the purposes of this Act, including procedures for claiming the food and beverage supply chain resiliency income tax credit and enforcing compliance.

     SECTION 5.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2025; provided that section 2 shall apply to taxable years beginning after December 31, 2025.

Report Title:

DBEDT; DOTAX; Food and Beverage Supply Chain; Resiliency; Tax Credit; Permits

Description:

Establishes the Food and Beverage Supply Chain Resiliency Income Tax Credit to be administered by the Department of Business, Economic Development, and Tourism and Department of Taxation.  Requires DBEDT to establish expedited permitting processes for food and beverage supply chain activities.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO.  30

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 499

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Agriculture & Food Systems, to which was referred H.B. No. 499 entitled:

"A BILL FOR AN ACT RELATING TO RESILIENCY,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Establish a refundable income tax credit for qualified taxpayers that incur qualified expenses in connection with activities that enhance the resiliency of the food and beverage supply chain; and

     (2)  Require the Department of Business, Economic Development, and Tourism to establish expedited permitting processes for certain food and beverage supply chain projects.

     Your Committee received testimony in support of this measure from the Hawai‘i Farm Bureau; Hawaii Food Industry Association; Hawaii Aquaculture and Aquaponics Association; Land Use Research Foundation of Hawaii; Hawai‘i Farmers Union United; and Hawai‘i Foodbank.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that the State is vulnerable to disruptions caused by natural disasters, which could leave residents with limited access to food and essential supplies for extended periods.  Despite the State's goal of doubling local food production by 2030, small businesses engaged in food and beverage production, distribution, and retailing face significant challenges.  This measure would provide incentives for improving food and beverage supply chain activities and create an environment where local businesses could expand and succeed.

     Your Committee has amended this measure by:

     (1)  Specifying that at least twenty-five percent of the total amount of tax credits per year shall be reserved for small-scale producers and community-based organizations;

     (2)  Requiring the Department of Business, Economic Development, and Tourism to establish reporting metrics;

     (3)  Clarifying the definition of "qualified taxpayer";

     (4)  Clarifying rulemaking responsibility for the Department of Business, Economic Development, and Tourism, rather than the Department of Taxation;

     (5)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (6)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     Your Committee respectfully requests your Committee on Finance, should it deliberate on this measure, to consider an appropriate maximum amount of tax credits allowed per taxpayer per year, as the measure includes an aggregate $2,000,000 cap for all qualified taxpayers in any taxable year, and the Department of Business, Economic Development, and Tourism's request for one full-time equivalent (1.0 FTE) position to facilitate the tax credit.

     As affirmed by the record of votes of the members of your Committee on Agriculture & Food Systems that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 499, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 499, H.D. 1, and be referred to your Committee on Economic Development & Technology.

Respectfully submitted on behalf of the members of the Committee on Agriculture & Food Systems,