Hawaii Research and Development Tax Credit Summary

Hawaii allows a refundable credit against corporate or personal income tax for expenditures on research activities to qualified high technology businesses (businesses which conduct more than 50% of its activities in qualified research). The credit is generally based on the federal research credit allowed under IRC Sec. 41 and is available for years 2013 through 2019. Below is a summary of Hawaii's R&D Tax Credit:

  • The claim for the Hawaii credit is made by attaching to the applicable income tax return Forms N-346 and N-346A, including a copy of federal Form 6765.
  • The credit is waived if the taxpayer fails to claim it by the end of the 12th month following the close of the tax year when the research expenditures were incurred.
  • Qualified high technology businesses must submit a written, certified statement identifying any qualified expenditures made during the taxable year and the amount of research activities credits claimed for the taxable year to the Director of Taxation before March 31 of the year following the taxable year when the qualified investments or expenditures were made.
  • The taxpayer must file the certificate along with the corporate or personal income tax return.
  • The certificate is subject to fees, unless the credit claimed is less than $25,000.
  • Effective July 1, 2013, qualified high technology businesses that claim the credit must complete and file an annual survey with the Department of Business, Economic Development, and Tourism (DBEDT) by June 30 of each year.
  • Excess R&D Tax Credit is refundable.

Hawaii R&D Tax Credit Case Study

A Honolulu optical communications company had never before claimed the R&D Tax credit. This project involved a 2014 year study. The company qualified for the federal R&D Tax Credits of $98,000 and an additional refundable credit of $73,500 in Hawaii state R&D Tax Credits

FEDERAL
HAWAII
Year
Total QREs
Credit
Total QREs
Credit
2014
$1,000,000
$98,000
$750,000
$73,500