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SB3213
THE SENATE
S.B. NO.
3213
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII
A BILL FOR AN ACT
RELATING
TO TAX CREDIT FOR RESEARCH ACTIVITIES
.
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 Hawaii
must diversify its economy by encouraging and promoting research and
development activities.
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These efforts
will help attract and retain technology companies in the State and provide
high-paying jobs that are necessary for residents to thrive in Hawaii.
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The
legislature further finds that Hawaii has an opportunity to create careers that
allow its young people to build their futures at home.
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When local graduates can find work that
matches their education and ambition, they are more likely to remain in the
State, raise families, start businesses, and strengthen the communities that
raised them.
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Research and development
jobs offer these meaningful careers rooted in imagination and skill.
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The
legislature also finds that while tourism remains vital to Hawaii's economy, the
State can and should build additional engines of growth.
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An economy grounded in research and
innovation creates value from ideas � drawing on the creativity, education, and
talent of its people.
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This approach
increases economic resilience by ensuring that when one sector faces
disruption, as tourism did during the COVID-19 pandemic and following the
Lahaina wildfire, other industries can help sustain families and communities.
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The
legislature additionally finds that economic research supports this approach.
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The 2018 Nobel Prize in Economic Sciences was
awarded for research demonstrating that sustained economic growth comes from
investing in people and ideas.
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The 2025
Nobel Prize in Economic Sciences further showed how innovation drives long-term
growth by creating new technologies, products, and production methods that
replace old ones.
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Economies that support
research and development grow from within, generating prosperity that compounds
over generations.
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The
legislature further finds that Hawaii's research activities tax credit has
proven its value, as demand consistently exceeds available funding.
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For the past three years, the $5,000,000
annual cap has been reached almost immediately upon opening applications,
demonstrating strong interest from companies ready to invest in Hawaii.
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Additionally, removing the federal
base-amount calculation will encourage companies to expand their research
activities year after year without being penalized for prior investments and
eliminates the uncertainty for businesses planning multi-year research
investments in Hawaii.
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The
legislature also finds that strengthening this credit will position Hawaii to
compete more effectively for innovation-driven companies.
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Other states like Florida, Maryland, and
Michigan have made significant commitments to research incentives, with annual
caps ranging from $9,000,000 to $100,000,000.
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Increasing Hawaii's cap and simplifying the credit will send a clear
signal that the State believes in its people and invests in their potential.
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The
purpose of this Act is to strengthen the research activities tax credit and
invest in Hawaii's future by:
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(1)
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Allowing taxpayers to claim credits for all
qualified research expenses without reduction for prior-year spending; and
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(2)
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Increasing the annual statewide cap from
$5,000,000 to $15,000,000 to meet demonstrated demand and support an economy in
which Hawaii's families can thrive.
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SECTION
2
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Section 235-110.91, Hawaii Revised Statutes,
is amended as follows:
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1.
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By amending subsection (b) to read:
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"(b)
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All references to Internal Revenue Code
sections within sections 41 and 280C(c) of the Internal Revenue Code shall be
operative for purposes of this section[
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]
; provided that references
to the base amount in section 41 of the Internal Revenue Code shall not apply,
and a credit for all qualified research expenses may be taken without regard to
the amount of expenses for previous years.
"
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2.
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By amending subsection (f) to read:
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"(f)
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If in any taxable year the annual amount of
certified credits reaches [
$5,000,000
]
$15,000,000
in the
aggregate, the department of business, economic development, and tourism shall
immediately discontinue certifying credits and notify the department of
taxation.
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In no instance shall the
department of business, economic development, and tourism certify a total
amount of credits exceeding [
$5,000,000
]
$15,000,000
per taxable
year.
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To comply with this restriction,
the department of business, economic development, and tourism shall certify
credits on a [
first come, first served
]
first-come, first-served
basis.
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The
department of taxation shall not allow the aggregate amount of credits claimed
to exceed that amount per taxable year."
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SECTION 3.
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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 4.
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This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2025.
INTRODUCED BY:
_____________________________
Report Title:
Tax
Credit; Research Activities
Description:
Restores
the provision that makes references to the Internal Revenue Code's base-amount
requirement inapplicable to the Research Activities Tax Credit, allowing all
qualified research expenses to be claimed without regard to prior-year
expenses.
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Increases the annual cap for
the Research Activities Tax Credit.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.