Aloha!

Welcome to the updated IAL incentives site!  Act 233, SLH 2008, which provides incentives for designation of important agricultural lands, became effective on July 1, 2008, and triggered the commencement of the process to identify, map, and designate important agricultural lands throughout Hawaii.We will use this site as a means to keep you updated on the implementation of Act 233 and to inform you of related events in your community and around the state.

IAL Background:

The identification and designation of Important Agricultural Lands (IAL) was first proposed at the 1978 Constitutional Convention and subsequently approved by voters in the same year.  Enacted as Article XI, Section 3, of the Constitution of the State of Hawaii, the State is required to conserve and protect agricultural lands, promote diversified agriculture, increase agricultural self-sufficiency and assure the availability of agriculturally suitable lands.

Following the passage of Act 183, SLH 2005, the Hawaii Department of Agriculture (HDOA) worked with the Department of Taxation and stakeholders including the Hawaii Farm Bureau Federation (HFBF), Land Use Research Foundation, University of Hawaii College of Tropical Agriculture and Human Resources (UH CTAHR), Hawaii Agricultural Research Center (HARC), Department of Business and Economic Development & Tourism (DBEDT), Office of Planning (OP), and the planning offices of the four counties to identify incentives for agriculture and to prepare a report to the Legislature which included recommendations and the rationale for incentives and a description of the process.

View Act 183, SLH 2005. To view the report to the legislature which was submitted in January 2007, click on the link BELOW.

• Final Report on the Incentives for Important Agricultural Lands

• View a list of lands that have been designated as IAL (updated 9/4/2020)

 

What are the Objectives of Act 183 and Act 233?

1.      To fulfill the constitutional mandate found in Article XI, Section 3 of the constitution of the State of Hawaii;

2.      “…to identify and plan for the maintenance of a strategic agricultural land resource base that can support a diversity of agricultural activities and opportunities…”; and

3.      “…to contribute to the viability of agriculture through the expansion of agricultural income and job opportunities and increase in food security for current and future generations…”. (205-B)(3)(b)

What Needs to Happen Now that the Incentives Have Been Passed?

There are several actions to be taken by different parties that have begun or must begin in order for the objectives to be met in a timely manner. These are described below:

 

Hawaii Department of Agriculture

• Incentive 1:  Farm Dwellings and employee housing. Allows landowners to develop farm dwellings and employee housing for their immediate family members and their employees. Limit of 5% of total IAL or 50 acres, whichever is less. Plans for dwellings and employee housing shall be supported by agricultural plans approved by HDOA. HDOA currently has a process in place to review agricultural development plans submitted for review by county planning and permitting departments. HDOA will have to establish criteria for determining if the housing and agricultural development plans are in consonance and a standard format for the submittal of agricultural development plans. We expect that this determination can be performed under the authority of the Chairperson of the Hawaii Board of Agriculture (who also serves as the director of HDOA) without the need for administrative rules.

• Incentive 2:  Refundable qualified agricultural cost tax credit. May be claimed in taxable years beginning after May 31, 2009. Earliest available taxable year that credit can be claimed would be fiscal year ending May 31, 2010. HDOA is to certify credits up to $7,500,000 annually. Credit can be claimed for costs such as roads or utilities, agricultural processing facilities, water wells, reservoirs, dams, pipelines, agricultural housing, feasibility studies, legal and accounting services, and equipment.
  • Learn how to claim this tax credit and what information is required by HDOA

 

• Incentive 3: Loan guaranty. Chairperson of the Board of Agriculture may provide an 85% loan guaranty to commercial lenders which should result in a lower interest rate for agricultural borrowers on IAL. Interest rate on guaranteed loans will be 1% below lender’s prime rate. IAL loan guaranty will be administered within HDOA’s Agricultural Loan Division.   Division personnel will be working with commercial lenders to make them aware of this new program. The Ag Loan Division is drafting an informational letter that will be sent to all Hawaii lenders. Meetings will be held with lenders to discuss information requirements and internal review procedures will be established.

 

• Incentive 4. State Agricultural Water Use and Development plan. Modifies the scope of the plan to include public and private systems, sources of water and current and future need for water for lands designated as IAL. HDOA’s Agricultural Resources Management (ARM) Division is responsible for development of the plan contingent upon funding for the expanded scope.

 

• Incentive 5. Agricultural Processing facilities, permits, priority. HDOA will be working with the Department of Health (DOH) to develop a referral system and to assist in expediting the permits by making information available to potential permit applicants. DOH is aware of Act 233 and this incentive. They DOH staff has been directed to give priority to these permit applications. HDOA will still need to work out a way to confirm to DOH that the applicant has met the eligibility criteria.

 

• Incentive 6. Public lands. HDOA’s ARM division is planning to incorporate the transferred lands from the Department of Land and Natural Resources (DLNR) either into its Agricultural Park Program or its Non-Agricultural Park Lands Program. ARM recommends that Act 233 be amended to specify that public lands designated as IAL and transferred to HDOA should be subject to the existing administrative rules governing its Agricultural Park or Non-Agricultural Park Lands programs. These rules are more stringent in order to ensure that real farming takes place.

 

• Incentive 7. Land reclassification. HDOA is working on a process to certify land that qualifies for IAL designation in order for landowners to submit a petition to the Land Use Commission (LUC) to reclassify up to 15% of the IAL area into a rural, urban, or conservation district. We believe that this certification can be performed under the authority of the Chairperson without the need for administrative rules. HDOA is also working with LUC as they develop their own administrative rules for the reclassification process.

Policies that HDOA will use to certify land as IAL (Priorities in bold)

(1) Promote the retention of IAL in blocks of contiguous, intact, and functional land units large enough to allow flexibility in agricultural production and management;

(2) Discourage the fragmentation of IAL and the conversion of these lands to nonagricultural uses;

(3) Direct nonagricultural uses and activities from IAL to other areas and ensure that uses on IAL are actually agricultural uses;

(4) Limit physical improvements on IAL to maintain affordability of these lands for agricultural purposes;

(5) Provide a basic level of infrastructure and services on IAL limited to the minimum necessary to support agricultural uses and activities;

(6) Facilitate the long-term dedication of IAL for future agricultural use through the use of incentives;

(7) Facilitate the access of farmers to IAL for long-term viable agricultural use; and

(8) Promote the maintenance of essential agricultural infrastructure systems, including irrigation systems. 

 

Land Use Commission

LUC will have to develop new administrative rules to address Part X of Act 233.

Other State Agencies Working with HDOA

HDOA and the Office of Planning shall review the county report and recommendations for designation of IAL and provide comments to the LUC within forty-five days of the receipt of the report and maps by the LUC.

Upon acceptance by the county for processing, any application for a special permit involving important agricultural lands shall be referred to the HDOA and the OP for review and comment.

Within one year of the adoption of maps of IAL by the LUC for the lands within the jurisdiction of each county, all state agencies shall report to the HDOA on the impact of projects and programs on the designated IAL and sustained agricultural use of these lands. State agencies shall develop implementation programs, as needed, to ensure that their programs are supportive of agriculture and consistent with the intent and purposes of Act 183.

The director of taxation may require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and HDOA shall maintain records of the total amount of qualified agricultural costs for each taxpayer claiming a credit; verify the amount of the qualified agricultural costs claimed; total all qualified agricultural costs claimed; and certify the total amount of the tax credit for each taxable year.

HDOA shall issue a certificate to the taxpayer verifying the qualifying agricultural costs and the credit amount certified for each taxable year.  For a taxable year, the HDOA 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 was reached in that taxable year. If in any taxable year the annual amount of certified credits reaches $7,500,000 in the aggregate, HDOA shall immediately discontinue certifying credits and notify the Department of Taxation.  In no instance shall HDOA   certify a total amount of credits exceeding $7,500,000 per taxable year.  To comply with this restriction, HDOA shall certify credits on a first-come, first-served basis.

Before December 31, 2009, the HDOA and DLNR shall collaborate to identify public lands as defined under section 171‑2 that should be designated IAL as defined in section 205‑42 and shall cause to be prepared maps delineating those lands.     Beginning January 1, 2010, after receipt of the maps of public lands identified as IAL the LUC shall designate the public lands as IAL and adopt the maps of those public lands.

 

Counties

As stated in Chapter 205, Hawaii Revised Statutes, (State) and county incentive programs shall provide preference to important agricultural lands and agricultural businesses on IAL. .. each county shall cooperate in program development to prevent duplication of and to streamline and consolidate access to programs and services for agricultural businesses located on IAL.

Each county shall identify and map potential IAL within its jurisdiction in consultation and cooperation with landowners, HDOA, agricultural-interest groups, including representatives from the HFBF and other agricultural organizations, the United States Department of Agriculture – Natural Resources Conservation Service, OP, and other groups as necessary. There shall be an inclusive process for public involvement in the identification of potential lands and the development of maps of lands to be recommended as IAL, including a series of public meetings throughout the identification and mapping process. The planning departments may also establish one or more citizen advisory committees on IAL to provide further public input, utilize an existing process (such as general plan, development plan, community plan), or employ appropriate existing and adopted general plan, development plan, or community plan maps.

The IAL maps shall be submitted to the county council for decision-making. The county council shall adopt the maps, with or without changes, by resolution. The adopted maps shall be transmitted to the LUC for further action.

Each county shall adopt ordinances that reduce infrastructure standards for IAL   no later than the effective date of the legislative enactment of protection and incentive measures for IAL and agricultural viability.

 

Significant Dates

Effective Date of Act 233-July 1, 2008

Revision of county ordinances to reduce IAL infrastructure requirements – July 1, 2008

Ag. Tax Credit-Taxable years beginning after May 31, 2009

Loan Guaranty-After July 1, 2009

January 1, 2010-Transfer of DLNR lands identified as IAL to HDOA