RELATING TO INCOME TAX CREDIT.

SB3046

THE SENATE

S.B. NO.

3046

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to INCOME tax credit
.

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

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SECTION 1.
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The
legislature finds that the State's long-term economic competitiveness depends
on a skilled, adaptable, and locally trained workforce aligned with the needs
of private-sector employers.
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Employers
across multiple industries report that the costs associated with recruiting,
training, and supervising interns and apprentices are a significant barrier to
expanding work-based learning opportunities.

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The legislature further finds that while the
State currently provides indirect workforce support through grants, training
reimbursements, and allocation of funding from federal programs, the State does
not offer a direct, broad-based tax incentive to encourage private-sector
employers to create and sustain internship and apprenticeship placements.
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Unfortunately, while the State has
established workforce-related tax credits and incentive programs administered
by the department of labor and industrial relations, employer participation in
certain existing credit programs has been limited, in part due to narrow
eligibility criteria, administrative complexity, or lack of alignment with
employer-driven workforce needs.

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The legislature also finds that
employer-led, demand-driven workforce initiatives have demonstrated higher
levels of private-sector engagement.
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In
particular, sector partnerships coordinated by The Chamber of Commerce of Hawaii
have successfully engaged a broad cross-section of employers to collaboratively
identify workforce needs, develop training pathways, and support work-based
learning opportunities aligned with industry demand.

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Furthermore, the legislature finds that
expanding private-sector participation in internship and apprenticeship programs
requires a broad-based, accessible incentive that complements existing
workforce programs, leverages proven employer networks, and reduces the cost
barriers faced by businesses, particularly small and medium-sized employers, when
offering paid work-based learning placements.

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Therefore, the purpose of this Act is to
establish a workforce builder tax credit to incentivize private-sector
employers to provide paid internships and apprenticeships, increase employer
participation in work-based learning, programs, and strengthen Hawaii's
workforce pipeline through employer-led, industry-aligned pathways.

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SECTION 2.
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Chapter 235, Hawaii Revised Statutes, is amended by adding a new section
to be appropriately designated and to read as follows:

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"
�235-
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Workforce
builder tax credit.
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(a)
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There
is allowed
to each eligible taxpayer subject to the taxes imposed under
this chapter, a nonrefundable workforce builder income tax credit that shall be
deductible from the taxpayer's net income tax liability, if any, imposed by
this chapter for the taxable year in which the credit is properly claimed.

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(b)
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The amount of the tax credit shall be:

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(1)
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$1,000
for each qualified intern; or

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(2)
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$2,000
for each qualified apprentice.

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(c)
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The department of taxation shall allow the credit under this section
upon certification by the department of labor and industrial relations that the
eligible taxpayer has employed a qualified intern or qualified apprentice
during the taxable year.

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(d)
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The total amount of the tax credits allowed under this section shall not
exceed $5,000,000 in the aggregate for all taxable years combined; provided
that the department of taxation shall disallow any credit claimed once the
aggregate cap has been reached.

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(e)
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If the tax credit under this section exceeds the taxpayer's income tax
liability, the excess of the tax credit over liability may be used as a credit
against the taxpayer's net income tax liability in subsequent years until
exhausted.
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All claims, including amended
claims, for a tax credit under this section shall be filed on or before the end
of the twelfth month following the close of the taxable year for which the
credit may be claimed.
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Failure to comply
with the foregoing provision shall constitute a waiver of the right to claim
the credit.

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(f)
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The director of taxation:

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(1)
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Shall prepare any forms necessary to
claim a tax credit under this section; and

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(2)
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May require proof of the claim for
the tax credit.

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(g)
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The department of labor and industrial relations, in coordination with
the department of taxation, shall adopt rules pursuant to chapter 91 necessary
to carry out the purposes of this section.

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(h)
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For the purposes of this section:

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"Eligible taxpayer" means a
private-sector business entity subject to taxation under this chapter that
employs one or more qualified interns or qualified apprentices in the State.

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"Qualified apprentice" means
an individual who:

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(1)
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Is
a resident of the State; and

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(2)
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Is
employed by an eligible taxpayer and is registered as a participant in a state
or federally recognized apprenticeship program.

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"Qualified intern" means an
individual who:

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(1)
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Is
a resident of the State;

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(2)
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Is
engaged in a paid internship or work-based learning placement with an eligible taxpayer
for not less than three months during the taxable year; and

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(3)
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Is
participating in a structured internship or work-based learning program
connected to an educational institution, workforce training program, or
industry-recognized credential pathway, as determined by the department of
labor and industrial relations.
"

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SECTION 3.
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The department of labor and industrial relations, in coordination with
the department of taxation, shall submit a report of its findings and
recommendations, including any proposed legislation, on the workforce builder
tax credit to the legislature no later than twenty days prior to the convening
of the regular session of
2029.
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This report shall be submitted in accordance
with section 93-16, Hawaii Revised Statutes, and shall include:

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(1)
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The
number of participating employers;

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(2)
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The
number of interns and apprentices supported;

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(3)
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Industry
sectors represented;

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(4)
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The
fiscal impact of the tax credit; and

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(5)
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Any
recommendation for continuation, modification, or expansion of the tax credit.

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SECTION 4.
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There is appropriated out of the general revenues of the State of Hawaii
the sum of $5,000,000 or so much thereof as may be necessary for fiscal year
2026-2027 to administer and fund the workforce builder tax credit.

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The sum appropriated shall be expended by
the department of taxation for the purposes of this Act.

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SECTION 5.
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New statutory material is underscored.

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SECTION 6.
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This Act, upon its approval, shall apply to taxable years beginning
after December 31, 2026.

INTRODUCED BY:

_____________________________

Report Title:

DLIR;
DOTAX; Nonrefundable Income Tax Credit; Workforce Builder Tax Credit; Report;
Appropriation

Description:

Establishes
a nonrefundable Workforce Builder Tax Credit for employers who employ qualified
interns and apprentices, to be applied to taxable years beginning after 12/31/2026.
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Requires a report to the Legislature.
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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.