House committee advances tax credit to boost local food and speed permitting for food and beverage projects

The House Committee on Agriculture & Food Systems advanced HB 499 on Jan. 29, voting to pass the measure with amendments. The bill would create a food and beverage supply-chain resiliency income tax credit administered by the Department of Business, Economic Development and Tourism (DBEDT) and require DBEDT to establish expedited permitting timelines for qualifying food and beverage projects.

Committee members and testifiers said the measure aims to lower Hawaii's high food costs and strengthen supply chains. Lauren Zorbel of the Hawaii Food Industry Association told the committee: "One in three households are experiencing food insecurity in Hawaii right now," and she pressed for both the tax credit and a 120-day permitting cap for food resiliency projects.

The bill's nut graf: lawmakers said HB 499 targets several bottlenecks that raise food costs in Hawaii — high shipping and energy costs, permitting delays and limited local processing — by offering tax incentives to producers and accelerating permitting for projects that expand local production, processing, storage or distribution.

Testimony and technical comments

Clinton Piper of the Department of Taxation told the committee the department had a recommended amendment to reduce ambiguity and administrative burden in the tax-credit language and advised that nonrefundable credits are generally easier to administer. Jade McMillan of the Tax Foundation of Hawaii flagged that the bill’s definition of a "qualified taxpayer" was too broad and recommended tightening it to clarify which businesses may claim the credit.

DBEDT estimated it currently administers two tax credits with a single staff member and said it would need one additional full-time equivalent (FTE) to administer a new credit. DBEDT asked the committee to note that administering the credit could require added capacity.

Committee amendments and guardrails

Committee discussion led to several amendments: the bill’s definition of "qualified taxpayer" was expanded and clarified to include entities "involved in production, processing, distribution, storage, retailing, and donation of food and beverage products in the state," with examples listing farmers and ranchers; food hubs and cooperatives; processors and manufacturers; distributors and logistics companies; grocery stores and other retailers; and food banks or organizations that provide food assistance. The committee also directed that at least 25% of the total credit cap be reserved for small-scale producers and community-based organizations to address equity concerns.

Members also directed that the committee report note DBEDT’s staffing request (one FTE) and require annual performance metrics for the credit, including number of new businesses supported, percentage increase in local food production and volume of food donations facilitated.

Funding caps and allocation

Committee members discussed a global cap and an individual cap. Department of Taxation staff clarified the bill as originally drafted included a global cap (the total amount the legislature would set aside) and a separate per-taxpayer cap. Committee amendments clarified that the individual cap applies to each taxpayer and that the total cap is a separate global limit. The committee asked that the standing committee report and subsequent drafts address how the cap level would affect equity and access.

Outcome and next steps

The committee voted to pass HB 499 with amendments and to hold appropriations and specific amounts for the standing committee report. The bill will move forward with the amended definitions, reporting requirements and the notation that DBEDT may request one FTE to administer the credit.

Ending

Sponsors and advocates said they view HB 499 as one of several steps to reduce Hawaii’s reliance on imports, accelerate local infrastructure projects and make locally produced food less costly for consumers.