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INSTRUCTIONS
FORM N-344 STATE OF HAWAII - DEPARTMENT OF TAXATION
(REV. 2023) INSTRUCTIONS FOR FORM N-344
IMPORTANT AGRICULTURAL LAND QUALIFIED
AGRICULTURAL COST TAX CREDIT
GENERAL INSTRUCTIONS TAX CREDIT TO BE DEDUCTED FROM INCOME TAX LIABILITY,
IF ANY; REFUNDS
PURPOSE OF FORM If the credit exceeds the taxpayer’s net income tax liability, the excess of
Use Form N-344 to figure and claim the important agricultural land quali- credit over liability shall be refunded to the taxpayer, however, no refund on
fied agricultural cost tax credit under section 235-110.93, Hawaii Revised account of the credit shall be made for an amount less than $1.
Statutes (HRS). Form N-344 is also used to determine the increase in tax as
a result of the recapture of the credit. DEADLINE FOR CLAIMING THE CREDIT
WHO MAY CLAIM THIS CREDIT The deadline to claim the credit, including amended claims, is 12 months
after the close of your taxable year. You cannot claim or amend the credit
For taxable years beginning after May 31, 2009 and before December after the deadline.
31, 2030, each taxpayer who incurs qualified agricultural costs may claim a
refundable important agricultural land qualified agricultural cost tax credit for HOW THE AMOUNT OF CREDIT ALLOWABLE AND CLAIMED
the taxable year in which the credit is properly claimed. IS ACCOUNTED FOR
FLOW-THROUGH ENTITIES The basis of eligible property for depreciation or accelerated cost recov-
ery system (ACRS) purposes for State income taxes shall be reduced by the
The qualified agricultural costs upon which the tax credit is computed is amount of the tax credit that is allowable and claimed.
determined at the entity level. In the case of a partnership, S corporation,
estate, trust, or other flow-through entity, distribution and share of the credit RECAPTURE OF THE CREDIT
shall be determined pursuant to section 235-110.7(a), HRS. Any credit already claimed for a taxable year will be recaptured if the
WHEN THE CREDIT MAY NOT BE CLAIMED taxpayer does not submit the certified written statement to the Department
of Agriculture by the last day of the taxable year following the close of the
The credit may not be claimed if you are claiming another tax credit or taxpayer’s taxable year in which the credit is claimed. The amount of the
deduction under Hawaii’s Income Tax Law for the same agricultural costs for recaptured tax credit shall be added to the taxpayer’s tax liability for the tax-
the taxable year. able year in which the recapture occurs. For more information, see INFOR-
MATION REPORTING REQUIREMENTS FOR THE TAXPAYER CLAIMING
CREDIT REQUIREMENTS THE CREDIT.
Section 235-110.93, HRS, provides that the amount of the credit is: DEFINITIONS
(1) In the first year in which the credit is claimed, the lesser of the following:
FOR PURPOSES OF THE CREDIT
(A) 25% of the qualified agricultural costs incurred by the taxpayer
after July 1, 2008, or “Agricultural business” means any person with a commercial agricultural,
(B) $625,000; silvicultural, or aquacultural facility or operation, including:
(2) In the second year in which the credit is claimed, the lesser of the (1) The care and production of livestock and livestock products, poultry
following: and poultry products, apiary products, and plant and animal production
for nonfood uses;
(A) 15% of the qualified agricultural costs incurred by the taxpayer
after July 1, 2008, or (2) The planting, cultivating, harvesting, and processing of crops; and
(B) $250,000; and (3) The farming or ranching of any plant or animal species in a controlled
salt, brackish, or freshwater environment;
(3) In the third year in which the credit is claimed, the lesser of the provided that the principal place of the agricultural business is maintained
following: in the State and more than fifty percent of the land the agricultural business
(A) 10% of the qualified agricultural costs incurred by the taxpayer owns or leases, excluding land classified as conservation land, is important
after July 1, 2008, or agricultural land.
(B) $125,000. “Important agricultural lands” means lands identified and designated as
The taxpayer may incur qualified agricultural costs during a taxable year important agricultural lands pursuant to part III of chapter 205, HRS.
in anticipation of claiming the credit in future taxable years during which the “Net income tax liability” means income tax liability reduced by all other
credit is available. The taxpayer may claim the credit in any taxable year after credits allowed under Hawaii’s Income Tax Law.
the taxable year during which the taxpayer incurred the qualified agricultural
costs upon which the credit is claimed. The taxpayer also may claim the credit “Qualified agricultural costs” means expenditures for:
in consecutive or inconsecutive taxable years until exhausted. (1) The plans, design, engineering, construction, renovation, repair,
The amount of the qualified agricultural costs eligible to be claimed shall maintenance, and equipment for:
be reduced by the amount of funds received by the taxpayer during the tax- (A) Roads or utilities, primarily for agricultural purposes, where the
able year from the irrigation repair and maintenance special fund under sec- majority of the lands serviced by the roads or utilities, excluding
tion 167-24, HRS. lands classified as conservation lands, are important agricultural
lands;
If a deduction is taken under Internal Revenue Code (IRC) section 179
(with respect to election to expense depreciable business assets), no tax (B) Agricultural processing facilities in the State, primarily for
credit shall be allowed for that portion of the qualified agricultural costs for agricultural purposes, where the majority of the crops or livestock
which the IRC section 179 deduction was taken. processed, harvested, treated, washed, handled, or packaged
are from agricultural businesses;
To claim this credit, you must complete and attach to your Hawaii income
tax return: (C) Water wells, reservoirs, dams, water storage facilities, water
pipelines, ditches, or irrigation systems in the State, primarily
(1) Form N-344 for agricultural purposes, providing water for lands, the majority
(2) Schedule CR (For tax returns for which Schedule CR is required) of which, excluding lands classified as conservation lands, are
(3) Schedule K-1 (Required only if you are a member of a flow-through important agricultural lands; and
entity claiming a credit for the entity’s eligible qualified agricultural (D) Agricultural housing in the State, exclusively for agricultural
costs) purposes; provided that:
(i) The housing units are occupied solely by farmers or
