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Hawaii's Tax Credit for Research Activities (§235-110.91) is similar to the federal R&D tax credit provided by IRC § 41, but research activities must be conducted in Hawaii.
Hawaii provides a refundable income tax credit for qualified high technology businesses (QHTBs) with Hawaii research activities subject to an annual cap of $5 million. To comply with this restriction, the Department of Business, Economic Development, and Tourism (DBEDT) shall certify credits on a first-come, first-served basis. With references to the base amount under IRC § 41 no longer applying after 2019, credit for all qualified research expenses may be taken without regard to the amount of expenses for previous years. The credit equals the federal credit claimed on Form 6765 multiplied by the ratio of expenses between Hawaii and the federal total.
Every QHTB claiming the R&D credit shall submit a written, certified statement to the department of business, economic development, and tourism identifying:
(1) Qualified expenditures, if any, expended in the previous taxable year; and
(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year.
The DBEDT will issue a certificate to the taxpayer after reviewing the QRE amounts, the credit amount certified for each taxable year, and the cumulative amount of the tax credit during the credit period. This certificate must be filed with the taxpayer's tax return with the Department of Taxation.
The 2020 Hawaii Form N-346A must be filed by i) March 30, 2021, if you are a calendar year filer or (ii) the day before the last day of the third month following the close of the taxable year, if you are a fiscal year filer. At the time Form N-346A is submitted, a “best estimate” is acceptable if the actual amounts or final numbers are not available. Upon completion, the Department will mail Part II to the QHTB at the address reported on the face of Form N-346A. The taxpayer claiming the credit shall attach the completed Part II of Form N-346A to Form N-346.
Requests for refunds must be completed on or before the end of the 12th month following the close of the taxable year for which the credit may be claimed (i.e. within 1 year).
A “Qualified High Technology Business” means a business that conducts more than 50% of its activities in qualified research, which means:
R&D Tax Credit Available:
C-Corporation, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Due with Hawaii Tax Return
Data Required to Compute Credit:
Claim Period Hawaii Qualified R&D Expenses (QREs)
What Information is needed?
Claim Period Federal Qualified R&D Expenses (QREs)
None - excess is refundable
To get an estimate of the potential value of your unclaimed R&D Tax Credits, try out our credit calculator.
Download our R&D Tax Credit Calculator for Android to see how much you can receive from your qualified R&D tax credit expenses.
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