STAND. COM. REP. NO. 1328

Honolulu, Hawaii

RE: H.B. No. 608

H.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committee on Agriculture and Environment, to which was referred H.B. No. 608, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to establish an organic foods production tax credit applicable to taxable years beginning after December 31, 2023, and sunsetting December 31, 2033.

Your Committee received testimony in support of this measure from the Department of Agriculture; Wakefield and Sons, Inc.; Rancho Aloha Coffee Farm; Hawai‘i Farmers Union United; Tinyville Farm; Hawai‘i Farm Bureau; Hawai‘i Alliance for Progressive Action; Manowaiopae Excellent Adventure Farm; Hawai‘i Reef Ocean Coalition; Kuwale Ridge Farms; Agriculture and Food Security Committee of the Environmental Caucus of the Democratic Party of Hawai‘i; Food+ Policy Internship 2023; and fourteen individuals. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that organic farming practices improve soil fertility and structure, promote biodiversity, and reduce the risks of human, animal, and environmental exposure to toxic materials. Your Committee notes that these beneficial practices often require additional costs and expenses to farmers who in turn expect price premiums that are afforded to them by their organic certification and certified organic label. However, due to the relatively small size of many farms in Hawaii and the lack of a state certification program, local farms are dissuaded from the costly United States Department of Agriculture organic certification process and therefore neglect pursuing organic certification, despite high demand for such produce and products in the State. Instead, certified organic produce and products from larger operations on the mainland dominate local markets and enjoy the price premiums afforded to them by the certified organic label. This measure establishes the organic foods production tax credit to alleviate the cumbersome costs associated with equipment, materials, or supplies necessary for organic certification for organic farmers applying for organic certification.

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 H.B. No. 608, H.D. 2, 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