SB 13: RELATING TO THE AQUACULTURE INVESTMENT TAX CREDIT.

A BILL FOR AN ACT

RELATING TO THE AQUACULTURE INVESTMENT TAX CREDIT.

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

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

     "§235-    Aquaculture investment tax credit.  (a)  There shall be allowed to each taxpayer subject to the taxes imposed by this chapter an aquaculture investment tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the investment was made and the following four years; provided that the credit is properly claimed.  The tax credit shall be as follows:

     (1)  In the year the investment was made,       per cent or $          , whichever is less;

     (2)  In the first year following the year in which the investment was made,       per cent or $          , whichever is less;

     (3)  In the second year following the year in which the investment was made,       per cent or $          , whichever is less;

     (4)  In the third year following the year in which the investment was made,       per cent or $          , whichever is less; and

     (5)  In the fourth year following the year in which the investment was made,       per cent or $          , whichever is less,

of the qualified investment costs incurred by the taxpayer in each qualified aquaculture business.

     (b)  In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified investment costs incurred by the entity for the taxable year.  The qualified investment costs upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined by rule.

     (c)  The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.  

     (d)  Every claim, including amended claims, for a tax credit under this section 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.

     (e)  If at the close of any taxable year in the five-year period in subsection (a):

     (1)  The business no longer qualifies as a qualified aquaculture business;

     (2)  The business or an interest in the business has been sold by the taxpayer that invested in the qualified aquaculture business; or

     (3)  The taxpayer has withdrawn the taxpayer's investment wholly or partially from the qualified aquaculture business,

the credit claimed under this section shall be recaptured.  The recapture shall be equal to       per cent of the amount of the total tax credit claimed under this section in the preceding two taxable years.  The amount of the credit recaptured shall apply only to the investment in the particular qualified aquaculture business that meets the requirements of paragraph (1), (2), or (3).  The recapture provisions of this subsection shall not apply to a tax credit claimed for a qualified aquaculture business that does not fall within the provisions of paragraph (1), (2), or (3).  The amount of the recaptured tax credit determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs under this subsection.

     (f)  Every taxpayer, before March 31 of each year in which an investment in a qualified aquaculture business was made in the previous taxable year, shall submit a written, certified statement to the director of taxation identifying:

     (1)  Qualified investment costs, if any, expended in the previous taxable year; and

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

     (g)  The department shall:

     (1)  Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified investment costs upon which the tax credit is based;

     (2)  Verify the nature and amount of the qualifying investment costs;

     (3)  Total all qualifying and cumulative investment costs that the department certifies; and

     (4)  Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.

     Upon each determination made under this subsection, the department shall issue a certificate to the taxpayer verifying information submitted to the department, including qualifying investment 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.

     The director of taxation may assess and collect a fee to offset the costs of certifying tax credits claims under this section.  All fees collected under this section shall be deposited into the tax administration special fund established under section 235-20.5.

     (h)  No other tax credit or deduction shall be claimed under this chapter for qualifying investments for the taxable year.

     (i)  As used in this section:

     "Net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

     "Qualified aquaculture business" means a business engaged in the propagation, cultivation, or farming of aquatic plants and animals in controlled or selected environments for research, commercial, or stocking purposes, including aquaponics or any growing of plants or animals with aquaculture effluent, in the State.

     "Qualified investment costs" means costs, beyond the research and development phase, associated with capital improvements, including the acquisition and development of land, the design and construction of new facilities, and the making of renovations or additions to existing facilities of a qualified aquaculture business."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2025.

Report Title:

Aquaculture Investment Tax Credit

Description:

For taxable years beginning after 12/31/2025, establishes a 5-year aquaculture investment tax credit for taxpayers that incur qualifying investment costs relating to qualified aquaculture businesses.  Takes effect 7/1/2050.  (SD1)

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 the aquaculture investment tax credit.

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

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

     "§235-    Aquaculture investment tax credit.  (a)  There shall be allowed to each taxpayer subject to the taxes imposed by this chapter an aquaculture investment tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the investment was made and the following four years; provided that the credit is properly claimed.  The tax credit shall be as follows:

     (1)  In the year the investment was made,       per cent;

     (2)  In the first year following the year in which the investment was made,       per cent;

     (3)  In the second year following the investment,       per cent;

     (4)  In the third year following the investment,       per cent; and

     (5)  In the fourth year following the investment,       per cent,

of the investment made by the taxpayer in each qualified aquaculture business, up to a maximum allowed credit in the year the investment was made, $          ; in the first year following the year in which the investment was made, $          ; in the second year following the year in which the investment was made, $          ; in the third year following the year in which the investment was made, $          ; and in the fourth year following the year in which the investment was made, $          .

     (b)  In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified expenses incurred by the entity for the taxable year.  The qualified expenses upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined by rule.

     (c)  The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.  

     (d)  If the tax credit under this section exceeds the taxpayer's income tax liability for any of the five years that the credit is taken, 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.  Every claim, including amended claims, for a tax credit under this section 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.

     (e)  If at the close of any taxable year in the five-year period in subsection (a):

     (1)  The business no longer qualifies as a qualified aquaculture business;

     (2)  The business or an interest in the business has been sold by the taxpayer investing in the qualified aquaculture business; or

     (3)  The taxpayer has withdrawn the taxpayer's investment wholly or partially from the qualified aquaculture business,

the credit claimed under this section shall be recaptured.  The recapture shall be equal to       per cent of the amount of the total tax credit claimed under this section in the preceding two taxable years.  The amount of the credit recaptured shall apply only to the investment in the particular qualified aquaculture business that meets the requirements of paragraph (1), (2), or (3).  The recapture provisions of this subsection shall not apply to a tax credit claimed for a qualified aquaculture business that does not fall within the provisions of paragraph (1), (2), or (3).  The amount of the recaptured tax credit determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs under this subsection.

     (f)  Every taxpayer, before March 31 of each year in which an investment in a qualified aquaculture business was made in the previous taxable year, shall submit a written, certified statement to the director of taxation identifying:

     (1)  Qualified investments, if any, expended in the previous taxable year; and

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

     (g)  The department shall:

     (1)  Maintain records of the names and addresses of the taxpayers claiming the credits under this section and the total amount of the qualified investment costs upon which the tax credit is based;

     (2)  Verify the nature and amount of the qualifying investments;

     (3)  Total all qualifying and cumulative investments that the department certifies; and

     (4)  Certify the amount of the tax credit for each taxable year and cumulative amount of the tax credit.

     Upon each determination made under this subsection, the department shall issue a certificate to the taxpayer verifying information submitted to the department, including qualifying investment amounts, 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.

     The director of taxation may assess and collect a fee to offset the costs of certifying tax credits claims under this section.  All fees collected under this section shall be deposited into the tax administration special fund established under section 235-20.5.

     (h)  As used in this section:

     "Net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

     "Qualified aquaculture business" means a business engaged in the propagation, cultivation, or farming of aquatic plants and animals in controlled or selected environments for research, commercial, or stocking purposes, including aquaponics or any growing of plants or animals with aquaculture effluent, in the State."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2025.

Report Title:

Aquaculture Investment Tax Credit

Description:

For taxable years beginning after 12/31/2025, provides an aquaculture investment tax credit for investments into a qualified aquaculture business.

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. 298

Honolulu, Hawaii

RE:    S.B. No. 13

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Agriculture and Environment, to which was referred S.B. No. 13 entitled:

"A BILL FOR AN ACT RELATING TO THE AQUACULTURE INVESTMENT TAX CREDIT,"

begs leave to report as follows:

     The purpose and intent of this measure is to provide a five‑year nonrefundable aquaculture investment tax credit for investments into a qualified aquaculture business for taxable years beginning after December 31, 2025.

     Your Committee received testimony in support of this measure from the Department of Agriculture, Agribusiness Development Corporation, County of Hawaiʻi Department of Research and Development, Hawaii Food Industry Association, Hawaiʻi Farm Bureau, Maui Chamber of Commerce, Hawaii Aquaculture and Aquaponics Association, Shrimp Improvement Systems Hawaii LLC, Kowa Premium Foods Hawaii Corporation, and one individual.

     Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that aquaculture businesses often face high costs related to research, permitting, and operational infrastructure.  For the State to advance its aquaculture industry, significant investment is necessary.  This measure therefore establishes a targeted tax incentive that will not only encourage private investment, but also promote economic diversification, boost local food security, create jobs and workforce opportunities, and support sustainable practices.

     According to testimony received by your Committee, this measure contains conflicting provisions regarding the time period for the tax credit to be claimed.  Your Committee finds that for effective administration and to mitigate potential abuse of the tax credit, amendments to this measure are necessary to address these concerns.

     Accordingly, your Committee has amended this measure by:

     (1)  Deleting language that would have allowed the excess of the tax credit over liability to be used as a credit against the taxpayer's income tax liability until exhausted;

     (2)  Inserting language to prohibit taxpayers from claiming any other credit or deduction for qualified investment costs for the taxable year;

     (3)  Defining "qualified investment costs" to mean costs, beyond the research and development phase, associated with capital improvements, including the acquisition and development of land, the design and construction of new facilities, and the making of renovations or additions to existing facilities of a qualified aquaculture business;

     (4)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

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

     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. 13, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 13, S.D. 1, and be referred to your Committee on Ways and Means.

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