HB619

SECTION 1. The legislature finds that food insecurity has been a problem for many households in the State and was further exacerbated by the coronavirus disease 2019 pandemic. The State experienced a fifty-one per cent increase in the number of households dealing with food insecurity. According to Feeding America, one in ten people in the State face hunger, including one in six children. In 2021, the State had the second highest rate of child food insecurity in the country. The legislature further finds that one in five families in the State rely on food banks and food pantries to supplement their nutritional needs. However, supply chain issues, shipping delays, and inflation, coupled with increased rates of program participation, affected the ability of these programs to provide necessary nutritional support to Hawaii's families.

Many food banks and food pantries rely on donations to continue providing the necessary services to those in need. While these programs do receive some donations of extra produce from grocery stores and other donors, access to fresh healthy foods remains limited for families in need throughout the State, making it difficult for these households to maintain consistent, well-balanced, and nutritious diets. The legislature believes that small farms in the State can help to tackle the issues of hunger and nutritional disparities for many families in Hawaii by donating excess produce to food banks and food pantries. This will not only help families in need, but will also reduce food waste at the agricultural production, processing, or distribution level; create partnerships between small farms and local organizations serving families in need; and increase access to and consumption of healthy, locally produced food products while reducing dependence on imported produce. However, the legislature recognizes that without the support of the government, small farmers may not be able to sustain donating excess produce to food banks and food pantries.

Accordingly, the purpose of this Act is to establish a tax credit for eligible small farms that donate certain food products or prepared foods to food banks and food pantries.

SECTION 2. 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- Qualified small farm food donation tax credit. (a) There shall be allowed to each qualified small farm subject to the taxes imposed by this chapter that donates an eligible food product or prepared food to food banks or food pantries, a small farm food donation 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 tax credit is properly claimed.

(b) The tax credit shall be equal to one hundred per cent of the wholesale value of the eligible food product or prepared food.

(c) The total amount of tax credits claimed per qualified small farm shall not exceed $8,000. The total amount of tax credits allowed under this section in any particular year shall not exceed $150,000 for each county.

(d) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as credit against the taxpayer's income tax liability in subsequent years until the credit is exhausted.

(e) 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.

(f) The department of taxation:

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

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

(3) May adopt rules pursuant to chapter 91 to effectuate this section.

(g) The department of agriculture shall:

(1) Establish standards and criteria to determine the value of the eligible food product or prepared food donated;

(2) Maintain records of the total amount of donations made by each taxpayer claiming the credit;

(3) Verify the amount of donations made;

(4) Total all donations made;

(5) Verify that the receiving food bank or food pantry is equipped to hold and distribute donated eligible food products or prepared food;

(6) Certify the total amount of the tax credit for each taxable year; and

(7) Adopt rules pursuant to chapter 91 to effectuate this section.

Upon each determination, the department of agriculture shall issue a certificate to the taxpayer verifying the donations made and the credit amount certified for each taxable year. For a taxable year, the department of agriculture may certify a credit for a taxpayer who could have claimed the credit in a previous taxable year but chose not to because the maximum annual credit amount under subsection (c) was reached in that taxable year.

(h) The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation. Notwithstanding the department of agriculture's certification authority under this section, the director of taxation may audit and adjust certification to conform to the facts.

(i) If in any taxable year, the annual amount of certified credits reaches $600,000 in the aggregate, the department of agriculture shall immediately discontinue certifying credits and notify the department of taxation. In no instance shall the department of agriculture certify a total amount of credits exceeding $600,000 per taxable year. To comply with this restriction, the department of agriculture shall certify credits on a first come, first served basis.

The department of taxation shall not allow the aggregate amount of credits claimed to exceed $600,000 per taxable year.

(j) For the purposes of this section:

"Eligible food product" means fresh farmed plant products for human consumption, including farmed plant products that are recognized as indigenous to native Hawaiian culture.

"Prepared food" means a value-added eligible food product that consists of no more than two ingredients, with the primary ingredient being a farmed plant product that is recognized as indigenous to native Hawaiian culture. "Prepared food" includes but is not limited to poi and cooked kalo corms, kalo leaves, or breadfruit.

"Qualified small farm" means:

(1) An operation with a gross cash farm income of $250,000 or less; and

(2) A farm business that has a valid employer identification number and general excise tax license and is located in the State."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for the administration of the certification process for the small farm food donation tax credit.

The sums appropriated shall be expended by the department of agriculture for the purposes of this Act.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2023, and shall:

(1) Apply to taxable years beginning after December 31, 2022; and

(2) Be repealed on June 30, 2026.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	619
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII