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SB2816
THE SENATE
S.B. NO.
2816
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII
A BILL FOR AN ACT
relating
to STATE enterprise zones
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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SECTION 1.
�
The legislature finds that the State enterprise
zones program was established in 1986 for the purpose of stimulating business
activity, job growth, and job retention in areas where they are needed the
most.
�
These areas, known as enterprise
zones, are designated by the counties and approved by the governor.
�
Qualified companies who establish themselves
in enterprise zones receive benefits that include state tax credits and tax
waivers, as well as additional incentives provided by the counties.
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The
legislature finds that the John A. Burns school of medicine and the university
of Hawaii cancer center serve as the nexus of Hawaii's emerging health
innovation and biotechnology sector.
�
Incentivizing
private-sector investment through enterprise zone designation will accelerate
clinical research and trials, medical device development, and the commercialization
of new treatments and technologies.
�
Co‑locating
these activities alongside academic medicine, health systems, and technology
incubation resources strengthens industry clustering, attracts investments and
new business development, fosters high-wage job creation for local residents,
and expands access to advanced clinical services for Hawaii patients.
�
Such growth will support the State's long-term
economic diversification strategy by positioning Hawaii as a globally
competitive healthcare technology hub and increasing export-oriented economic
activity.
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The
legislature also finds that the university of Hawaii John A. Burns school of medicine
and university of Hawaii cancer center play a vital role in advancing Hawaii's
science, technology, research, and advanced manufacturing sectors.
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These institutions conduct cutting-edge
research, clinical trials, and medical device and pharmaceutical manufacturing
that contribute globally to the fields of oncology, healthcare, telemedicine,
and biotechnology, and support the State's focus on fostering innovation and
strengthening Hawaii's position in the science‑based industries of the
future.
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The
legislature further finds that supporting economic activity around these
centers will attract investment, create high-skilled jobs, and diversify
Hawaii's economy consistent with the State's economic and workforce
developments goals.
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Accordingly,
the purpose of this Act is to:
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(1)
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Authorize enterprise zone designation
for census tracts on state lands containing an innovation center, including the
university of Hawaii John A. Burns school of medicine and the university of
Hawaii cancer center; and
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(2)
�
Allow businesses not established in an
enterprise zone to qualify for enterprise zone benefits; provided that they
have entered into a binding collaboration or contract with a business that is
established in the census tract that contains the university of Hawaii John A.
Burns school of medicine and the university of Hawaii cancer center.
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SECTION
2.
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Section 209E-2, Hawaii Revised
Statutes, is amended as follows:
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1.
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By adding a new definition to be
appropriately inserted and to read:
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"
"Affiliated
collaborator" means a Hawaii-based business that:
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(1)
�
Is not established within an
enterprise zone but has entered into a written, binding agreement with a
qualified business established in the enterprise zone that includes the university
of Hawaii John A. Burns school of medicine and the university of Hawaii cancer center
to perform an eligible business activity;
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(2)
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Is engaged in an eligible business
activity, as defined in this section; and
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(3)
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Conducts economic activity,
including Hawaii-based payroll, research expenditures, and clinical operations,
in the same county as the qualified business described in paragraph (1).
"
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2.
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By amending the definition of "eligible
business activity" to read:
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""Eligible
business activity" means the:
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(1)
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Manufacture of tangible personal
property, the wholesale sale of tangible personal property as described in
section 237-4, or a service business as defined in this section;
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(2)
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Production of agricultural products
where the business is a producer as defined in section 237-5, or the processing
of agricultural products, all or some of which were grown within an enterprise
zone;
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(3)
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Research, development, sale, or
production of [
all
]
:
���������
(A)
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All
types of [
genetically-engineered
]
medical, agricultural, or maritime biotechnology products[
; or
]
; and
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(B)
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Medical and health care services;
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(4)
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Production of electric power from wind
energy for sale primarily to a public utility company for resale to the public;
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(5)
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Research and development of
aerospace technology; or
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(6)
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Information technology design and
production services;
provided
that medical cannabis dispensary activities pursuant to chapter 329D shall not
be considered an eligible business activity for the purposes of this chapter."
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SECTION
3
.
�
Section 209E-4,
Hawaii Revised Statutes, is amended by amending subsection (b) to read as
follows:
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"(b)
�
The governor, upon the recommendation of the
director, shall approve the designation of up to [
six
]
eight
areas in each county as enterprise zones for a period of twenty years.
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Any such area shall be located in one United
States census tract or two or more contiguous United States census tracts in
accordance with the most recent decennial United States Census.
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The census tract or tracts within which each
enterprise zone is located also shall meet at least one of the following
criteria:
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(1)
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Twenty-five per cent or more of the
population have incomes below eighty per cent of the median family income of
the county; [
or
]
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(2)
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The unemployment rate is 1.5 times the
state average[
.
]
; or
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(3)
�
Contain the university of Hawaii
John A. Burns school of medicine or the university of Hawaii cancer center.
"
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SECTION
4
.
�
Section 209E-9,
Hawaii Revised Statutes, is amended to read as follows:
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"
�209E-9
�
Eligibility; qualified business; sale of property or services.
�
(a)
�
Any business firm may be eligible to be designated a qualified business
for purposes of this chapter if the business:
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(1)
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Begins the operation of a trade or
business in an eligible business activity within an enterprise zone;
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(2)
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During each taxable year has at least
fifty per cent of its enterprise zone establishments' gross receipts
attributable to the active conduct of trade or business within enterprise zones
located within the same county; and
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(3)
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Either:
���������
(A)
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Increases its average annual number of
full-time employees employed at the business' establishment or establishments
within enterprise zones located within the same county by at least ten per cent
by the end of its first tax year of participation, and during each subsequent
taxable year at least maintains that higher level of employment; or
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(B)
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Increases its gross sales of agricultural
crops produced, or agricultural products processed within enterprise zones
located within the same county by two per cent annually.
For business firms engaged in
producing or processing agricultural products, receipts from value-added
products made from crops grown within enterprise zones located within the same
county and sold at retail pursuant to the limits of subsection (e) shall
count toward the gross receipts requirement under paragraph (2).
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(b)
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A business firm may also be eligible to be
designated a qualified business for purposes of this chapter if the business:
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(1)
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Is actively engaged in the conduct of a
trade or business in an eligible business activity in an area immediately prior
to the area being designated an enterprise zone;
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(2)
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Meets the requirements of subsection
(a)(2); and
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(3)
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Either:
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(A)
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Increases its average annual number of
full-time employees employed at the business' establishment or establishments
within enterprise zones located within the same county by at least ten per cent
by the end of the first year of operation, and by at least
fifteen per cent by the end of each of the fourth, fifth, sixth, and seventh
years of operation, and for businesses eligible for tax credits extending past
the seventh year, at least maintains that higher level of employment during
each subsequent taxable year; provided that the percentage increase shall be
based upon the employee count at the beginning of the initial year of operation
within the enterprise zone or zones; or
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(B)
�
Increases its gross sales of
agricultural crops produced, or agricultural products processed within
enterprise zones located within the same county by two per cent annually.
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(c)
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After designation of an enterprise zone, each
qualified business firm in the zone shall submit annually to the department an
approved form supplied by the department that provides the information
necessary for the department to determine if it may certify the applicability
of the tax credits and exemptions provided in this chapter for the business
firm.
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The approved form shall be
submitted by each business to the governing body of the county in which the
enterprise zone is located, then forwarded to the department by the governing
body of the county.
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(d)
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The form referred to in subsection (c) shall
be prima facie evidence of the eligibility of a business for the purposes of
this section.
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(e)
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Tangible personal property shall be sold at
an establishment of a qualified business within an enterprise zone and the
transfer of title to the buyer of the tangible personal property shall take
place in an enterprise zone located within the same county in which the
tangible personal property is sold.
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Services shall be sold at an establishment of a qualified business
engaged in a service business within an enterprise zone.
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(f)
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For any fiscal year that includes September
11, 2001, a business may use its average annual number of full-time employees
as of August 31, 2001--rather than its average annual number at the end of its
fiscal year including September 11, 2001--if necessary to meet the requirements
of subsection (a)(3) and (4) or (b)(3).
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A business may also use its average annual number of full-time employees
at the end of its fiscal year that includes September 11, 2001, as its base
number of full-time employees if necessary to meet the requirements of
subsection (a)(3) and (4) or (b)(3) in future fiscal years.
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(g)
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An affiliated collaborator may be treated as
a qualified business for the limited purpose of receiving state and county
enterprise zone benefits; provided that:
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(1)
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The affiliated collaborator shall
have a written, binding agreement with a qualified business established in the
enterprise zone that includes the university of Hawaii John A. Burns school of medicine
or the university of Hawaii cancer center;
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(2)
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The affiliated collaborator shall
maintain a valid binding agreement for the duration of its eligibility;
provided that the affiliated collaborator's eligibility for enterprise zone
benefits shall terminate upon the expiration, termination, or breach of the
agreement; and
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(3)
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The affiliated collaborator's
eligibility for enterprise zone benefits under this subsection shall not exceed
seven years.
"
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SECTION
5
.
�
Section 209E-10, Hawaii Revised Statutes, is
amended to read as follows:
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"
�209E-10
�
State business tax credit.
�
(a)
�
The department shall certify annually to the department of taxation the
applicability of the tax credit provided in this chapter for a qualified
business against any taxes due the State.
�
Except for the general excise tax, the credit shall be eighty per cent
of the tax due for the first tax year, seventy per cent of the tax due for the
second tax year, sixty per cent of the tax due for the third year, fifty per
cent of the tax due the fourth year, forty per cent of the tax due the fifth
year, thirty per cent of the tax due the sixth year, and twenty per cent of the
tax due the seventh year.
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For qualified businesses engaged in the manufacturing of
tangible personal property or the producing or processing of agricultural
products, the credit shall continue after the seventh year at the rate of
twenty per cent of the tax due for each of the subsequent three tax years.
�
Any tax credit not usable shall not be
applied to future tax years.
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(b)
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When a partnership is eligible for a tax credit under this section, each
partner shall be eligible for the tax credit provided for in this section on
the partner's income tax return in proportion to the amount of income received
by the partner from the partnership.
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Any
qualified business having taxable income from business activity, both within
and without the enterprise zone, shall allocate and apportion its taxable income
attributable to the conduct of business.
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Tax credits provided for in this section shall only apply to taxable
income of a qualified business attributable to the conduct of business within
enterprise zones located within the same county.
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(c)
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In addition to any tax credit authorized under this section, any
qualified business shall be entitled to a tax credit against any taxes due the
State in an amount equal to a percentage of unemployment taxes paid.
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The amount of the credit shall be equal to
eighty per cent of the unemployment taxes paid during the first year, seventy
per cent of the taxes paid during the second year, sixty per cent of the taxes
paid during the third year, fifty per cent of the taxes paid during the fourth
year, forty per cent of the taxes paid during the fifth year, thirty per cent
of the taxes paid during the sixth year, and twenty per cent of the taxes paid
during the seventh year.
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For qualified businesses engaged in the
manufacturing of tangible personal property or the producing or processing of
agricultural products, the credit shall continue after the seventh year in an
amount equal to twenty per cent of the taxes paid during each of the subsequent
three tax years.
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(d)
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Tax credits provided for in subsection (c)
shall only apply to the unemployment tax paid on employees employed at the
qualified business' establishment or establishments within enterprise zones
located within the same county.
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Any tax
credit not usable shall not be applied to future tax years.
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(e)
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An affiliated collaborator certified under this chapter shall be
eligible for enterprise zone benefits only with respect to income, gross
receipts, and payroll that are directly attributed to and derived from each
certified partnership, collaboration, or binding agreement with a qualified
business established in the enterprise zone that includes the university of
Hawaii John A. Burns school of medicine or the university of Hawaii cancer center.
"
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SECTION
6.
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Statutory material to be repealed is
bracketed and stricken.
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New statutory
material is underscored.
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SECTION
7.
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This Act shall take effect upon its
approval.
INTRODUCED BY:
_____________________________
Report Title:
Enterprise
Zones; University of Hawaii John A. Burns School of Medicine; University of
Hawaii Cancer Center; Affiliated Collaborators
Description:
Increases
the number of enterprise zones that may be nominated by each county.
�
Authorizes enterprise zone designation for
census tracts that contain the University of Hawaii John A. Burns School of
Medicine and the University of Hawaii Cancer Center.
�
Allow businesses not established in an
enterprise zone to qualify for enterprise zone benefits; provided that they
have entered into a binding collaboration or contract with a business that is
established in the census tract that contains the University of Hawaii John A.
Burns School of Medicine or the University of Hawaii Cancer Center.
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