Are R&D Tax Credits Available in Hawaii?

Are R&D Tax Credits Available in Hawaii?

Yes. The R&D Tax Credit is a valuable benefit for companies developing new products and services in Hawaii. Hawaii allows a refundable credit against corporate or personal income tax for expenditures on research activities to qualified high technology businesses (businesses that conduct more than 50% of their activities in qualified research). The credit is generally based on the federal research credit allowed under IRC Sec. 41.

Below is a summary of Hawaii's R&D Tax Credit:

• The credit is equal to the amount of federal tax credit from Form 6765 multiplied by the percentage of eligible research expenses attributable to activities conducted in Hawaii.
• The Company must have no more than 500 employees.
• There is a $5 million annual cap on total amount of credits.
• The credit expires and does not apply for tax years beginning after December 31, 2029.
• Taxpayers eligible for the credit must submit an application to The Department of Business, Economic Development, and Tourism (DBEDT) by March 31 following the taxable year in which the research was conducted. The online application opens on March 1st.
• Taxpayers also must complete an online questionnaire containing the details of the qualifying expenditures, revenue and expense data, intellectual property filings, and information about related businesses. This survey must be completed by June 30th. Credits will not be allowed for those who fail to complete the questionnaire by the deadline.
• DBEDT will certify credit claims on a first-come, first-served basis and will stop certifying once the amount claimed has reached a cap of $5 million.
• DBEDT will issue a signed N-346A form upon approval. This form, along with Hawaii Form N-346 and Federal Form 6765, must be included in the applicable Hawaii income tax return.