RELATING TO THE HAWAII TECHNOLOGY DEVELOPMENT CORPORATION.

HB1176

HOUSE OF REPRESENTATIVES

H.B. NO.

1176

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to the hawaii technology development corporation
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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Chapter 206M, Hawaii Revised Statutes, is
amended by adding a new section to part I to be appropriately designated and to
read as follows:

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"
�206M-
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Hawaii economic diversification grant
program.
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(a)
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Section 41 (with respect to the credit for
increasing research activities) and section 280C(c) (with respect to certain
expenses for which the credit for increasing research activities are allowable)
of the Internal Revenue Code of 1986, as amended, shall be operative for the
purposes of this section; provided that the federal tax provisions in section
41 of the Internal Revenue Code of 1986, as amended, as that section was
enacted on December 31, 2011, irrespective of any subsequent changes to section
41 of the Internal Revenue Code of 1986, as amended, shall remain in effect for
purposes of determining the grant under this section and apply only to expenses
incurred for qualified research activities after December 31, 2012.

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(b)
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All references to section 41 and 280C(c) of
Internal Revenue Code of 1986, as amended, shall be operative for purposes of
this section; provided that references to the base amount in section 41 of the
Internal Revenue Code of 1986, as amended, shall not apply and credit for all
qualified research expenses may be taken without regard to the amount of
expenses for previous years.

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(c)
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There shall be allowed to each qualified high
technology business a grant for qualified research activities equal to the
credit for research activities provided by section 41 of the Internal Revenue
Code of 1986, as amended, and as modified by this section; provided that in
addition to any other requirements established in this section, in order to
qualify for the grant, the qualified high technology business shall also claim
a federal tax credit for the same qualified research activities under section
41 of the Internal Revenue Code of 1986, as amended, as enacted on December 31,
2011, irrespective of any subsequent amendments to section 41 of the Internal
Revenue Code of 1986, as amended.

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(d)
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Every qualified high technology business,
before March 31 of each year in which qualified research activity was conducted
in the previous taxable year, shall submit a written, certified statement to
the department of business, economic development, and tourism identifying:

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(1)
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Qualified
expenditures, if any, expended in the previous taxable year; and

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(2)
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The amount of
qualified grants claimed pursuant to this section, if any, in the previous
taxable year.

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(e)
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The department of business, economic
development, and tourism shall:

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(1)
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Maintain
records of the names and addresses of the qualified high technology businesses
claiming the grant under this section and the total amount of the qualified
research activity costs upon which the grant is based;

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(2)
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Verify the
nature of the qualifying research activity and amount of the qualifying costs
or expenditures;

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(3)
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Total all
qualifying and cumulative costs or expenditures that the department certifies;
and

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(4)
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Certify the
amount of the grants for each taxable year and cumulative amount of the grants.

Upon each determination made under this
subsection, the department of business, economic development, and tourism shall
issue a certificate to the qualified high technology business verifying
information submitted to the department, including the qualifying costs or
expenditure amounts, grant amount certified for each taxable year, and
cumulative amount of the grant during the grant period.
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The department of business, economic
development, and tourism may assess and collect a fee to offset the costs of
certifying the grant claimed under this section.

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(f)
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If in any taxable year the annual amount of
certified grants reaches $10,000,000 in the aggregate, the department of
business, economic development, and tourism shall immediately discontinue
certifying the grants.
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In no instance
shall the department of business, economic development, and tourism certify a
total amount of grants exceeding $10,000,000.
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To comply with this restriction, the department of business, economic
development, and tourism shall certify grants on a first come, first served
basis.

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(g)
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A qualified high technology business that
claims the grant under this section shall complete and file with the department
of business, economic development, and tourism, through the department's
website, an annual survey on electronic forms prepared and prescribed by the
department.
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The annual survey shall be
filed before June 30 of each calendar year following the calendar year in which
the grant may be claimed under this section.
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The department of business, economic
development, and tourism may adjust the due date of the annual survey by rules
adopted pursuant to chapter 91.

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(h)
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The annual survey shall include the following
information for the time period or periods specified by the department of
business, economic development, and tourism:

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(1)
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Identification
of the following industry sector or sectors in which the qualified high technology
business conducts business:

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(A)
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The
development and design of computer software for ultimate commercial sale,
lease, license or to be otherwise marketed, for economic consideration;

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(B)
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Biotechnology;

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(C)
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Performing
arts products;

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(D)
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Sensor
and optic technologies;

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(E)
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Ocean
sciences;

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(F)
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Astronomy;

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(G)
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Nonfossil
fuel energy-related technology;

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(H)
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Energy;

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(I)
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Aerospace
and defense;

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(J)
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Nanotechnology;

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(K)
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Artificial
intelligence;

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(L)
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Sensors
and communication systems;

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(M)
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Health;

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(N)
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Medical;

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(O)
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Therapeutics;

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(P)
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United
States Food and Drug Administration authorized or approved drugs, therapies,
medical devices, and medical tests; and

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(Q)
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Other
health care technologies;

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(2)
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Total
expenditures and the qualified expenditures, if any, expended in the previous
taxable year;

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(3)
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Revenue and expense
data, including a breakdown of any licensing royalty or other forms of income
generated from intellectual property;

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(4)
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Hawaii
employment and wage data, including the numbers of full-time and part-time
employees retained, new jobs, temporary positions, external services procured
by the business, and payroll taxes;

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(5)
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Filed
intellectual property, including invention disclosures, provisional patents,
and patents issued or granted; and

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(6)
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The number of
new companies spun out or established to commercialize the intellectual
property owned by the qualified high technology business.

The department of business, economic development,
and tourism shall request information in each of these categories sufficient to
measure the effectiveness of the grant under this section.
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The department of business, economic
development, and tourism may request any additional information necessary to
measure the effectiveness of the grant, such as information related to patents.

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In preparing the survey and requesting
any additional information, the department of business, economic development,
and tourism shall ensure that qualified high technology businesses are not
subject to duplicative reporting requirements.

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(i)
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The department of business, economic
development, and tourism shall:

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(1)
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Use information
collected under this section and through its other reporting requirements to
prepare summary descriptive statistics by category.
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The information shall be reported at the
aggregate level to prevent compromising identities of qualified high technology
business investors or other confidential information;

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(2)
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Identify each
qualified high technology business that applies for or is the beneficiary of
grants claimed under this section; and

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(3)
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Report the information
required under this subsection to the legislature by September 1 of each year.

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(j)
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The department of business, economic
development, and tourism, in collaboration with the department of taxation,
shall use the information collected to study the effectiveness of the grant
under this section.
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The department of
business, economic development, and tourism shall submit a report to the
legislature on the following:

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(1)
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The amount of
grants claimed and total taxes paid by qualified high technology businesses;

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(2)
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The number of
qualified high technology businesses in each industry sector;

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(3)
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The numbers and
types of jobs created by qualified high technology businesses;

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(4)
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External
services and materials procured by the businesses;

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(5)
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The compensation
levels of jobs provided by qualified high technology businesses;

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(6)
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Qualified
research activities; and

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(7)
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Any other
factors the department of business, economic development, and tourism deems
relevant.

The department of business, economic development,
and tourism shall submit the report to the legislature by September 1 of each
year.

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(k)
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As used in this section:

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"Qualified high technology
business" means a small business that conducts more than fifty per cent of
its activities in qualified research in the State and is registered to do
business in the State.

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"Qualified research" has
the same meaning as in section 41(d) of the Internal Revenue Code.

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"Qualified research
expenses" has the same meaning as in section 41(b) of the Internal Revenue
Code.
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"Qualified research expense"
does not include research expenses incurred outside of the State.

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"Small business" means
a company with no more than five hundred employees.
"

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SECTION 2.
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There is appropriated out of the general
revenues of the State of Hawaii the sum of
$ or so much
thereof as may be necessary for fiscal year 2025-2026 and the same sum or so
much thereof as may be necessary for fiscal year 2026-2027 for the Hawaii
economic diversification grant program established by section 1 of this Act.

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The sums appropriated shall be
expended by the Hawaii technology development corporation for the purposes of
this Act.

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SECTION 3.
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New statutory material is underscored.

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SECTION 4.
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This Act shall take effect on July 1, 2025.

INTRODUCED BY:

_____________________________

Report Title:

HTDC;
Hawaii Economic Diversification Grant Program; Qualified High Technology
Business; Qualified Research; Appropriation

Description:

Establishes
the Hawaii Economic Diversification Grant Program under the Hawaii Technology
Development Corporation to provide grants to qualified high technology
businesses engaging in qualified research activities.
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Appropriates funds.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.