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[[Struck through: .]][Underlined: ; 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.]"[Underlined: ]
2. By amending subsection (f) to read:
"(f) If in any taxable year the annual amount of certified credits reaches [[Struck through: $5,000,000]] [Underlined: $ ] 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 [[Struck through: $5,000,000]] [Underlined: $ ] 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:
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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.