THE SENATE
S.B. NO.
338
THIRTY-THIRD LEGISLATURE, 2025
S.D. 1
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 upgrading and modernizing equipment necessary for data storage will improve resilience against physical damage caused by weather-related events and cybersecurity threats and ensure the continued, uninterrupted provision of services to Hawaii businesses, state government and satellite agencies, and residents.
Leveraging modern and up-to-date technology to support critical operation systems is a significant benefit of data center operations, where one of the core missions is to stay at the forefront of technological advancements, enabling reliable data access 99.999 per cent of the time.
In mid-2023, dozens of Hawaii businesses in the health care, airline, and finance fields as well as state agencies were operationally disrupted due to a local data outage, frustrating customers and residents.
Over the last decade, Hawaii has adopted various tax incentives to encourage the development of high-technology businesses in the State. The focus on high technology is commendable and recognized as a policy direction that will yield greater investment from within and outside of the State.
Accordingly, the purpose of this Act is to temporarily reinstate the technology infrastructure renovation tax credit and expand the definition of "technology-enabled infrastructure" to include data servers.
SECTION 2. Section 235-110.51, Hawaii Revised Statutes, is amended as follows:
1. By amending subsections (b) and (c) to read:
"(b) The amount of the credit shall be four per cent of the renovation costs incurred during the taxable year [[Struck through: for each commercial building located]] in Hawaii.
(c) In the case of a partnership, S corporation, estate, trust, or [[Struck through: any developer of a commercial building,]] [Underlined: other entity taxed as a partnership for federal income tax purposes,] the tax credit allowable is for renovation costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined pursuant to section 235‑110.7(a)."
2. By amending subsections (h) and (i) to read:
"(h) The tax credit allowed under this section shall [[Struck through: not]] be available for taxable years beginning after December 31, [[Struck through: 2010.]] [Underlined: 2025, but shall not be available for taxable years beginning after December 31, 2027.]
(i) As used in this section:
[Underlined: "Data server" means a computer system that is designed and configured for the process, storage, retrieval, and management of electronic data and provides database management and access services to client computers on a computer network.]
"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter.
"Renovation costs" means costs incurred after December 31, 2000, to[Underlined: :] plan, design, install, construct, [[Struck through: and]] [Underlined: repair, replace, monitor, test, or] purchase technology-enabled infrastructure [Underlined: machinery and] equipment [[Struck through: to]][Underlined: ; or] provide a commercial building with technology-enabled infrastructure.
"Technology-enabled infrastructure" means:
(1) [Underlined: Either:]
[Underlined: (A)] High speed telecommunications systems that provide [[Struck through: Internet]][Underlined: , in whole or in part, internet] access, direct satellite communications access, and videoconferencing facilities; [Underlined: or]
[Underlined: (B)] [Underlined: Data servers;]
(2) Physical security systems that identify and verify valid entry to secure spaces, detect invalid entry or entry attempts, and monitor activity in these spaces;
(3) Environmental systems to include heating, ventilation, air conditioning, fire detection and suppression, and other life safety systems; and
(4) Backup and emergency electric power systems."
SECTION 3. The department of taxation shall submit a report of its findings and recommendations on the collection of the technology infrastructure renovation tax credit pursuant to this Act, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2029.
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2025.
Report Title:
DOTAX; Technology Infrastructure Renovation Tax Credit; Reinstatement; Technology-Enabled Infrastructure; Data Servers; Report
Description:
For taxable years beginning after 12/31/2025, temporarily reinstates the Technology Infrastructure Renovation Tax Credit and expands the definition of "technology-enabled infrastructure" to include data servers. Requires the Department of Taxation to submit a report to the Legislature. Effective 7/1/2050. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.