RELATING TO TAXATION.

SB3283

THE SENATE

S.B. NO.

3283

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to Taxation
.

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

����
SECTION 1.
�
The
legislature finds that the State must diversify its economy by encouraging and
promoting research and development activities, which will help attract and
retain technology companies in the State and provide high-paying jobs necessary
for the State's residents to thrive.

����
The legislature further finds that research
and development offers the State an opportunity to build new engines of growth
that create careers for local graduates and strengthen communities across the
islands.
�
Nobel Prize-winning economic
research in 2018 and 2025 confirms that lasting prosperity comes from investing
in people and ideas.
�
Additionally, innovation-sector
jobs benefit not only scientists and engineers but also tradespeople and
service providers as high wages ripple through the entire economy.

����
The legislature also finds that the State's
research activities tax credit has proven its value.
�
For the past three years, the annual cap has
been reached almost immediately when applications open.
�
The legislature believes that removing the
federal base-amount calculation and increasing the tax credit's cap will allow
more companies to invest in the State and help position the State to compete
with others that have made significant commitments to innovation.

����
Accordingly, the purpose of this Act is to:

����
(1)
�
Amend
the research activity tax credit so that references to the base amount in
section 41 of the federal Internal Revenue Code shall not apply and credit for
all qualified research expenses may be taken without regard to the amount of
expenses for previous years; and

����
(2)
�
Increase the annual aggregate cap for the
research activity tax credit.

����
SECTION
2
.
�
Section 235-110.91, Hawaii Revised Statutes,
is amended as follows:

����
1.
�

By amending subsection (b) to read:

����
"(b)
�

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[
.
]
; provided that references to the base amount in section 41
of the Internal Revenue Code shall not apply and credit for all qualified
research expenses may be taken without regard to the amount of expenses for
previous years.
"

����
2.
�

By amending subsection (f) to read:

����
"(f)
�

If in any taxable year the annual amount of certified credits reaches [
$5,000,000
]

$
in the
aggregate, the department of business, economic development, and tourism shall
immediately discontinue certifying credits and notify the department of
taxation.
�
In no instance shall the
department of business, economic development, and tourism certify a total
amount of credits exceeding [
$5,000,000
]
$

per taxable year.
�
To comply with this
restriction, the department of business, economic development, and tourism
shall certify credits on a first come, first served basis.

����
The department of taxation shall not allow
the aggregate amount of credits claimed to exceed that amount per taxable year."

����
SECTION 3.
�

Statutory material to be repealed is bracketed and stricken.
�
New statutory material is underscored.

����
SECTION 4.
�
This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2026.

INTRODUCED
BY:

_____________________________

Report Title:

Tax
Credit; Research Activities; Increase

Description:

Amends
the research activity tax credit so that references to the base amount in
section 41 of the Internal Revenue Code shall not apply and credit for all
qualified research expenses may be taken without regard to the amount of
expenses for previous years.
�
Increases
the annual aggregate cap for the research activity 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.