HB610

SECTION 1. The purpose of this Act is to establish a farm workforce retention tax credit for farm employers or owners of farm employers.

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

"§235- Farm workforce retention tax credit. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed by this chapter a farm workforce retention tax credit that shall be applied to 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 tax credit amount shall be as follows:

(1) For the taxable year beginning after December 31, 2023: $250 per eligible farm employee employed by the qualified taxpayer;

(2) For the taxable year beginning after December 31, 2024: $500 per eligible farm employee employed by the qualified taxpayer;

(3) For the taxable year beginning after December 31, 2025: $750 per eligible farm employee employed by the qualified taxpayer;

(4) For the taxable year beginning after December 31, 2026: $1,000 per eligible farm employee employed by the qualified taxpayer; and

(5) For the taxable year beginning after December 31, 2027, and ending on December 31, 2028: $1,250 per eligible farm employee employed by the qualified taxpayer.

(c) If a farm employee employed by the qualified taxpayer becomes unable to work due to a documented illness or disability, the qualified taxpayer may combine the hours the farm employee was employed during the taxable year with the hours of another farm employee hired to replace the ill or disabled farm employee in the same taxable year when determining whether the farm employee meets the minimum requirement for number of hours worked per taxable year to meet the definition of "eligible farm employee" for the purposes of this section. The qualified taxpayer shall obtain proof of illness or disability for the ill or disabled farm employee in the form of a written statement from a health care provider licensed, certified, or otherwise permitted by law to diagnose or treat the physical or mental condition that led to the claimed illness or disability. The statement shall include:

(1) The name and a description of the farm employee's illness or disability;

(2) The health care provider's medical opinion that the illness or disability prevented the farm employee from working;

(3) The specific time period during which the farm employee is or was unable to work due to illness or disability, to the best of the health care provider's knowledge; and

(4) The following certification signed by the health care provider: "I hereby certify that, to the best of my knowledge and belief, the above representations are true, correct, and complete."

The qualified taxpayer shall retain documentation of the hours worked and proof of illness or disability for all eligible farm employees and shall make the documentation and proof available to the department upon request. Workers who are part of the H-2A Temporary Agricultural Worker Program that meet the definition of "eligible farm employee" may be included in the computation of this tax credit.

(d) In the case of a partnership, S corporation, estate, trust, the tax credit allowable shall be for each eligible farm employee employed by the qualified taxpayer. The cost upon which the credit is computed shall be determined at the entity level and the distribution and share of the tax credit shall be determined pursuant to section 704(b) of the Internal Revenue Code.

(e) The credit under this section shall be claimed against the net income tax liability for the taxable year. If the tax credit claimed by the qualified taxpayer under this section exceeds the amount of the income tax payments due from the qualified taxpayer, the excess of credit over payments due shall be refunded to the qualified taxpayer; provided that the tax credit properly claimed by a qualified taxpayer who has no income tax liability shall be paid to the qualified 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.

(f) The director of taxation:

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

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

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

(g) For the purposes of this section:

"Eligible farm employee" means an individual who is employed for five hundred hours or more per taxable year by a farm employer in the State. "Eligible farm employee" does not include general executive officers of the farm employer.

"Excess federal gross income" means the amount of federal gross income from all sources for the taxable year in excess of $30,000.

"Farm employer" means a person:

(1) Who is a corporation, including an S corporation, sole proprietorship, limited liability company, or a partnership; and

(2) Whose federal gross income from farming for the taxable year is at least two-thirds of excess federal gross income.

"Farming" means the operation or management of livestock, dairy, poultry, fish, fruit, furbearing animals, vegetable farms, plantations, ranches, ranges, or orchards.

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

"Owner of a farm employer" includes shareholders of a Hawaii S corporation, partners in a partnership, members of a limited liability company, or beneficiaries of an estate or trust.

"Qualified taxpayer" means a farm employer or an owner of a farm employer."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2023.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	610
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII