STAND. COM. REP. NO. 3342

Honolulu, Hawaii

RE: H.B. No. 2017

H.D. 3

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committees on Agriculture and Environment and Hawaiian Affairs, to which was referred H.B. No. 2017, H.D. 3, entitled:

"A BILL FOR AN ACT RELATING TO AGRICULTURE,"

beg leave to report as follows:

The purpose and intent of this measure is to, beginning January 1, 2027, establish a nonrefundable income tax credit for certain agricultural investment costs incurred for agricultural activities conducted on Hawaiian Home Lands.

Your Committees received testimony in support of this measure from the Department of Hawaiian Home Lands, Office of Hawaiian Affairs, Hawaiʻi Farm Bureau, and one individual.

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

Your Committees find that beneficiaries who are engaging in agricultural production on Hawaiian Home Lands often face substantial upfront costs for land preparation, including irrigation systems, fencing, equipment, orchard establishment, and other critical infrastructure needed to bring land into productive use. Your Committees believe that a targeted tax incentive would help offset those initial expenditures. This measure strengthens the ability of producers on Hawaiian Home Lands to expand operations and increase food production.

Your Committees acknowledge the concerns raised in testimony from the Department of Taxation that the Department does not have subject-matter expertise in agricultural activities nor the ability to determine whether a taxpayer meets the required qualifications to claim this tax credit. Therefore, amendments to this measure are necessary to address this concern.

Accordingly, your Committees have amended this measure by:

(1) Specifying that the Department of Agriculture and Biosecurity, in consultation with the Department of Taxation, shall be responsible for certifying the tax credits;

(2) Specifying that the tax credit shall apply to costs incurred, rather than for taxable years beginning, after December 31, 2026; and

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

As affirmed by the records of votes of the members of your Committees on Agriculture and Environment and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2017, H.D. 3, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2017, H.D. 3, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Agriculture and Environment and Hawaiian Affairs,

________________________________ HERBERT M. RICHARDS, III, Chair

________________________________ MIKE GABBARD, Chair