Reshaping Hawaii’s Innovation Economy: Addressing the Restrictive Qualified High Technology Business Classification in the Research and Development Tax Credit Framework

Executive Summary: The Structural Bottleneck in Hawaii’s Diversification Strategy

The State of Hawaii stands at a decisive economic crossroads, facing the dual challenges of long-term productivity stagnation and an over-reliance on volatile industries such as tourism and military spending.¹ For decades, policymakers have sought to cultivate a robust high-technology sector to provide high-paying jobs and insulate the local economy from external shocks.¹ Central to this strategy is the Tax Credit for Research Activities (TCRA), a fiscal incentive designed to reward innovation conducted within the islands.⁶ However, the current statutory framework is hindered by a restrictive eligibility gatekeeper: the “Qualified High Technology Business” (QHTB) classification.⁶

Under Hawaii Revised Statutes (HRS) § 235-110.91, only businesses that meet the stringent QHTB definition—requiring more than 50% of total business activities to be dedicated to qualified research—can access the state R&D tax credit.⁶ This “all-or-nothing” threshold effectively excludes a vast segment of Small to Medium-Sized Businesses (SMBs) that maintain diversified operations.¹⁰ Many local firms engage in vital research and development while simultaneously operating traditional service, manufacturing, or retail lines to maintain cash flow in Hawaii’s high-cost environment.² By limiting the credit to specialized “pure-play” tech firms, the state inadvertently penalizes the very SMBs that could lead a broader industrial modernization.

This whitepaper analyzes the historical evolution of Hawaii’s R&D tax incentives, quantifies the economic impact of the 50% activity threshold, and proposes two practical legislative solutions to broaden the state’s innovation base. Through a transition toward activity-based fractional eligibility and the implementation of a tiered small business on-ramp, Hawaii can catalyze private investment, mitigate the ongoing “brain drain,” and foster a resilient, multi-sector innovation ecosystem.¹

The Historical Evolution of Hawaii’s High-Tech Fiscal Policy

The trajectory of Hawaii’s technology incentives reveals a persistent struggle to balance generous investment attraction with fiscal responsibility and program integrity. The state’s entry into the high-tech competition began in earnest in the late 1990s, motivated by a desire to overcome the disadvantages of geographic isolation.⁵

The Act 221 Era and the Shift to Entity-Based Logic

The inception of the high-technology business investment tax credit occurred with Act 178 in 1999, which established a 10% non-refundable credit for investments in QHTBs.⁵ At that time, the eligibility requirements were exceptionally strict, requiring 100% of a firm’s activities to be in qualified research.⁵ This was quickly recognized as impractical, leading to Act 297 in 2000, which reduced the threshold to the current 50% activity rule and expanded the list of eligible industries to include biotechnology and performing arts.⁵

In 2001, the passage of Act 221 fundamentally transformed the landscape, offering a 100% recoupment of investments over five years and removing many of the research-intensity requirements for investors.⁸ While this era saw significant capital flow into the state, it also attracted criticism for being a “tax planning tool” for wealthy investors rather than an engine of genuine technological substance.¹⁶ Reports indicated that the state spent hundreds of millions of dollars, with some estimates suggesting a cost of $535,000 per job created.¹⁶ This led to the eventual sunset of the investment credit in 2010 and a subsequent rethinking of how the state should incentivize innovation.⁶

The Modern TCRA: Act 270 to Act 139

The current version of the Tax Credit for Research Activities (TCRA) was reestablished by Act 270 in 2013.⁶ Unlike the earlier investment credits, the TCRA is an expense-based credit, mirroring the federal Internal Revenue Code (IRC) Section 41.⁶ The program has undergone several revisions, most notably through Act 261 in 2019 and the recent Act 139 in 2024.¹⁰

Table 1: Legislative Milestones in Hawaii R&D Policy

The restoration of the “incremental” base by Act 139 means that the credit is once again calculated based on the increase in R&D spending over a historical base period, rather than the total amount spent.⁷ While this alignment with federal law ensures fiscal sustainability, the retention of the QHTB gatekeeper (the 50% rule) continues to limit the program’s reach to a narrow subset of the economy.¹⁰

Analyzing the 50 Percent Threshold: The Barrier to Diversified Innovation

The central policy issue is that the QHTB classification is a binary “gatekeeper” rather than a measure of innovation intensity.⁶ To qualify for the TCRA, a business must satisfy the definition in HRS § 235-7.3(c), which requires that more than 50% of its “activities” be qualified research.⁶ This threshold creates significant hurdles for Hawaii’s SMBs, which often operate in a state of “hybrid” existence.

The Penalty for Industrial Diversification

Diversification is a core survival strategy for Hawaii’s small businesses. A local manufacturing firm may decide to invest $250,000 annually into developing a novel, energy-efficient cooling system for tropical climates—a project that clearly meets the federal “Four-Part Test” for R&D.¹⁹ However, if that same firm earns $2 million in revenue from standard HVAC maintenance and equipment sales, and employs 15 technicians for routine service versus 3 engineers for R&D, it will likely fail the “activities” test.¹⁰

The result is a perverse incentive: the firm must either forego the state R&D credit (losing 20% of its Hawaii-based R&D costs) or artificially spin off its research arm into a separate QHTB entity.⁷ The latter adds significant administrative overhead, legal fees, and compliance costs, which often outweigh the value of the credit for an SMB.¹³ Furthermore, many of Hawaii’s most promising innovation sectors—ocean sciences, renewable energy, and biotechnology—require significant “traditional” operations (such as vessel maintenance, power plant management, or clinical service delivery) to sustain the research phase.¹¹

Quantitative Impact: The “Missing Middle”

Data from the 2024 DBEDT survey of QHTBs illustrates the narrow scope of the current program.¹⁰ In the 2024 tax year, only 23 businesses applied for the TCRA, and 18 were certified.¹⁰ While these 18 firms are high-performers, they represent an infinitesimal fraction of Hawaii’s business community.

Table 2: QHTB Performance Analysis

The bimodal distribution of revenue among these firms—where companies were either highly reliant on intellectual property (IP) sales or not at all—suggests that the 50% rule creates a “gap” in the middle of the industrial ecosystem.¹⁰ Firms that are successfully transitioning from traditional models to tech-driven models are likely falling into the “unqualified” zone because their traditional revenue still outpaces their nascent research revenue.²

The Regional Development Trap and Stagnation

Research by the University of Hawaii Economic Research Organization (UHERO) points to a “decades-long regional development trap” in Hawaii.³ Real income per person in the state has barely grown since the early 1990s and has diverged significantly from the national average.³ This stagnation is linked to low productivity growth, which in turn is a result of low R&D intensity outside of the military and university sectors.¹⁴

The QHTB restriction reinforces this trap by preventing the “cross-pollination” of technology into traditional industries.¹⁴ When R&D incentives are restricted to a specialized enclave of 18 companies, the broader economy—retail, construction, agriculture—remains stagnant.³ In contrast, states like Massachusetts and California allow the R&D credit to permeate all sectors, encouraging a manufacturer or an architect to innovate within their existing corporate structure.²³

Comparative State Policy Analysis: Beyond the All-or-Nothing Model

To resolve the restrictive nature of the QHTB classification, Hawaii can look to other states that have successfully implemented R&D incentives for a diversified business base. Most states have abandoned entity-based certification in favor of activity-based credits.²³

The Massachusetts Approach: Broad Industry Inclusion

Massachusetts provides a “Research Credit” that is available to any corporation subject to the corporate excise tax, provided they engage in qualified research within the state.³⁷

• No Entity Restriction: There is no “High Tech Business” certification; if a bakery develops a new dough formulation through a process of experimentation, that specific project qualifies.²²
• Credit Mechanics: The credit equals 10% of the excess of QREs over a base amount.³⁸
• Liability Offset: The credit can offset 100% of the first $25,000 in excise liability plus 75% of the remainder.³³
• SMB Refundability: While the general credit is non-refundable, Massachusetts offers specific refundable versions for smaller biotech and life science firms, recognizing their unique cash-flow needs.³³

The California SB 711 Reform: The ASC On-Ramp

California’s Senate Bill 711 (2025) modernized the state’s R&D tax code by adopting the federal Alternative Simplified Credit (ASC) method.⁴⁰ This is particularly beneficial for SMBs that do not have the complex records required for the “regular” credit calculation.³⁴

• ASC Implementation: The credit is 3% of current QREs that exceed 50% of the average of the prior three years.⁴⁰
• Simplification: By aligning with federal logic, California reduced the “compliance tax” on SMBs, making the credit accessible to firms without massive accounting departments.³⁴

New York’s Tiered Life Sciences Model

New York’s Life Sciences R&D Tax Credit offers a blueprint for how a state can prioritize small businesses while still providing a broad-based incentive.⁴⁴

• Size-Based Tiering: Firms with fewer than 10 employees receive a 20% credit; firms with 10 or more receive 15%.⁴⁵
• Direct Refundability: The credit is fully refundable for new life sciences businesses, ensuring that pre-revenue startups receive a cash infusion immediately.⁴⁵

Table 3: State-by-State Incentive Comparison

Proposed Solution 1: Transition to an Activity-Based “Fractional Eligibility” Model

The first and most impactful solution for the Hawaii State Legislature is to decouple the Research Activities Tax Credit from the restrictive QHTB definition and move toward an activity-based model.

Mechanism of Implementation

The state should amend HRS § 235-110.91 to allow any business registered to do business in Hawaii with fewer than 500 employees to claim the credit for the portion of their expenses dedicated to qualified research.¹¹ This removes the 50% activity gatekeeper.⁶

Under this model, eligibility is determined by the “Four-Part Test” rather than the corporate charter ¹⁹:

1. Permitted Purpose: The activity must relate to a new or improved business component’s function, performance, or quality.²²
2. Elimination of Uncertainty: The researcher must be trying to discover information to eliminate technical uncertainty.²⁰
3. Process of Experimentation: A systematic process (trial and error, modeling) must be used to evaluate alternatives.¹⁹
4. Technological in Nature: The research must fundamentally rely on hard sciences (engineering, physics, biology, computer science).²⁰

Mathematical Benefit for Diversified SMBs

By using a fractional eligibility model, a diversified SMB is not penalized for its success in traditional areas. For example, if a “Marine Engineering and Oceanographic Technology” firm in Honolulu—a key sector for Hawaii—generates 70% of its revenue from standard harbor dredging and 30% from developing a first-in-class autonomous wave-glider, it currently fails the QHTB test.⁶

Under the proposed reform, that firm could claim a credit on the 30% of its expenses dedicated to the wave-glider. If it spends $1,000,000 in total and $300,000 on the wave-glider (QREs), and the federal credit on those QREs is $60,000, its Hawaii credit would be proportional. This approach ensures the state is only paying for the actual innovation occurring in the islands, without excluding the firm simply because it has a successful dredging business.⁶

Proposed Solution 2: A Tiered Certification and “Innovation On-Ramp”

If the legislature wishes to maintain the QHTB concept as a “brand” for Hawaii’s tech sector, it should implement a tiered threshold system to accommodate startups and transitioning SMBs.³⁶

The Three-Tier Eligibility Matrix

The 50% threshold should be replaced with a sliding scale that considers the age and size of the business, creating an “on-ramp” for innovation.

Table 4: Tiered Certification Structure

The “Path to Innovation” Certification

To prevent companies from stagnating in Tier I or II, the state could require firms to submit a “Path to Innovation” plan to DBEDT as part of their annual Form N-346A certification.⁶ This plan would outline how the company intends to increase its research intensity over time. This tiered model allows a company to start small—perhaps an agricultural firm testing novel microbial inoculants—and grow into a primary biotech entity without losing its fiscal support during the critical early years.¹¹

Implementation Strategy: Preventing Fraud, Waste, and Abuse

Expanding access to the R&D credit requires robust administrative safeguards to ensure that taxpayer funds are used for genuine innovation rather than routine business activities or fraudulent “tax planning”.²⁴

Enhanced DBEDT Certification and Review

The current certification process by the Department of Business, Economic Development and Tourism (DBEDT) is a strong foundation.⁷ To prevent waste, the government should implement the following:

• Technical Subject Matter Expertise: DBEDT should partner with the University of Hawaii or the Hawaii Technology Development Corporation (HTDC) to review the “technical descriptions” provided in the Part B questionnaire.²⁵ This ensures that activities claimed—such as “website development”—actually involve resolving technological uncertainty rather than just routine coding.²²
• Mandatory Contemporaneous Documentation: The state should codify the requirement that businesses maintain records such as project logs, technical drawings, and payroll-to-project allocations.²⁰ This documentation must be “sufficiently usable” to substantiate the claim during a potential Department of Taxation (DOTAX) audit.⁴⁹
• Clawback Provisions: For firms in the “Tiered” system or the “Fractional” model, the state should reserve the right to recapture (claw back) credits if it is discovered that the research was “funded” by an external third party where the business did not retain the economic risk.⁸

Regulating the “Consultant Effect”

A major source of waste in R&D programs nationally is the rise of aggressive consultants who charge “contingency fees” to inflate claims.²⁴

• Contingency Fee Disclosure: Hawaii should require any firm claiming the TCRA to disclose the fee structure of their tax preparer.
• Circular 230 Alignment: Following federal standards, Hawaii should discourage or prohibit contingency fees for original tax returns, as this incentivizes the inclusion of ineligible wages and routine activities into the R&D pool.²⁴

The Annual Survey and Transparency

The existing requirement for an annual survey by June 30 is a critical transparency tool.⁶ Failure to file the survey should continue to result in a mandatory waiver of the credit.²⁰ Furthermore, the government should use the survey data to monitor for “wage stacking”—ensuring that the same R&D labor is not also being used to claim federal Small Business Innovation Research (SBIR) grants or other state-level hiring incentives.⁵³

Fiscal Impact and Cost-Benefit Analysis: Framing the Investment

Critics of expanding the TCRA often point to the potential “drain” on the General Fund. However, a comprehensive cost-benefit analysis must look at the R&D credit not as an expense, but as a catalyst with a significant economic multiplier.⁵⁸

The Direct Multiplier of R&D Spending

Economic research by UHERO indicates that government spending in Hawaii has a multiplier effect of approximately 1.5—meaning every dollar spent generates $1.50 in statewide economic output.⁵⁸ For R&D, the effect is often higher due to “knowledge spillovers” and the creation of secondary high-skilled service jobs.⁵⁹

• Case Study: NELHA Impact: For every $1 the state invests in the Natural Energy Laboratory Hawaii Authority (which houses many R&D firms), the return is $42.80 in total economic output.⁵⁹
• Wage Premiums: Research employees in Hawaii’s high-tech sector earn a weighted average wage of $117,972—far above the state average.¹⁰ These high wages translate directly into higher personal income tax collections and increased GET revenue from local consumption.⁵⁹

Projecting the “Revenue-Neutral” Horizon

The initial cost of expanding the credit—by raising the $5 million cap and removing the 50% rule—is an upfront investment that pays for itself through three mechanisms:

1. Direct Tax Capture: High-wage R&D roles generate significant income tax. If an SMB hires 5 new engineers at $120,000 each because of the R&D credit, the state captures approximately $42,000 annually in new income tax alone (at an effective ~7% rate), not including GET.¹⁰
2. Commercialization Lag: While R&D is a cost today, the resulting intellectual property leads to manufacturing and sales tomorrow.¹ The 18 QHTBs in 2024 already generated $233.4 million in revenue, much of it from IP-based local sales.¹⁰
3. Brain Drain Mitigation: Retaining 100 local graduates who would otherwise move to Seattle or Austin saves the state the hundreds of thousands of dollars in “invested human capital” that is currently being exported for free.¹²

Table 5: Estimated 5-Year Fiscal Outlook

Assumptions: $15M cap fully utilized; 1:8 credit-to-private-spend ratio; 6.25% effective state tax capture on catalyzed activity.¹⁰

The Importance of Policy Change: Strategic Resilience and Human Capital

The restrictive QHTB classification is not merely a tax issue; it is a structural barrier to Hawaii’s long-term economic survival. The state’s current trajectory, marked by “stagnation in productivity and per capita growth,” requires an urgent shift toward an “innovation economy” that values human capital.³

Confronting the Brain Drain

Thousands of Hawaii residents leave for the continental U.S. every year, citing a lack of high-paying jobs as a primary driver.² “Brain drain” is particularly acute among “young, educated workers” who find that their skills in engineering, software, or biotech are not rewarded in a tourism-dominated landscape.¹²

When an SMB is disqualified from the R&D tax credit because it maintains traditional business lines, it is less likely to offer the high wages (averaging $117,972 for R&D roles) that could keep these residents home.² Expanding the credit to diversified SMBs allows these firms to compete with mainland employers for local talent, preserving the state’s most valuable resource: its people.¹

Diversification as Disaster Preparedness

The volatility of tourism—the state’s largest private industry—was laid bare by the 2018 eruption, the COVID-19 pandemic, and the 2023 Maui wildfires.² In each instance, the state’s economy suffered disproportionately because it lacks “additional engines of growth”.¹

A diversified economy where SMBs in all sectors are incentivized to innovate is inherently more resilient.¹ When tourism faces disruption, a robust tech and R&D sector—supported by thousands of “hybrid” SMBs rather than just 18 pure-play QHTBs—can sustain the tax base and provide employment.¹

Global Competitiveness and the Remote Work Revolution

The 2020s have fundamentally changed the geography of work.⁵ Remote work and virtual business operations mean that Hawaii is no longer limited by its physical isolation—but it must compete on policy.⁴ Other states like Florida and Michigan have made significant commitments to research incentives with caps reaching $100 million.¹ If Hawaii maintains a restrictive, entity-based gatekeeper while other states offer broad activity-based credits, innovative firms (even those founded by kama’āina) will continue to relocate to the mainland once they reach a commercial stage.⁵

Negative Consequences of Inaction

Failure to reform the QHTB classification will likely lead to several detrimental outcomes for the state.

• Deepening of the “Regional Development Trap”: Hawaii’s incomes will continue to diverge from the national average, making the state increasingly unaffordable for multi-generational local families.³
• Increased Migration of the Middle Class: SMB owners, unable to sustain the high costs of business without meaningful innovation incentives, will follow the path of the 30,000 residents who have left since 2010.¹²
• Fiscal Fragility: The state will remain beholden to the whims of the tourism market and federal military budgets, with no indigenous high-productivity growth to buffer against the next crisis.²
• Enclave Innovation: The tech sector will remain a small, isolated enclave of a few dozen companies, failing to provide the “spillover” benefits that occur when technology is integrated into the broader manufacturing and service sectors.¹⁰

Conclusion: A Mandate for Modernization

The restrictive “Qualified High Technology Business” classification was born of a desire to create a pure-tech sector, but its modern effect is to stifle the innovation potential of Hawaii’s broader SMB ecosystem. By clinging to an all-or-nothing threshold, the state is effectively penalizing diversified firms that are attempting to modernize traditional industries.

The transition to an activity-based fractional eligibility model—supported by a tiered certification process and robust fraud prevention—represents a low-risk, high-reward strategy for economic diversification. By incentivizing innovation wherever it occurs, Hawaii can stop the export of its best minds, increase its industrial resilience, and ensure that the “Price of Paradise” is supported by an economy grounded in productivity and ideas. The legislature must act to ensure the TCRA becomes an engine for all Hawaii businesses, not just a selected few.

Works Cited

1. Bill Text: HI HB2546 | 2026 | Regular Session | Amended – LegiScan, accessed on March 21, 2026, https://legiscan.com/HI/text/HB2546/id/3388007
2. SFGate: As visitors to Hawaii decline, risks abound, accessed on March 21, 2026, https://www.cochawaii.org/sfgate-as-visitors-to-hawaii-decline-risks-abound/
3. Hawaiʻi’s economy resembles ‘left-behind’ regions in UHERO analysis, accessed on March 21, 2026, https://www.hawaii.edu/news/2026/02/19/economy-left-behind-region/
4. Report on Diversifying the Hawaii Economy, accessed on March 21, 2026, https://files.hawaii.gov/dbedt/annuals/archive/2022/2022-bdsd-hcr137.pdf
5. Small State, Giant Tax Credit: Hawaii’s Leap into High Technology Development, accessed on March 21, 2026, https://uhero.hawaii.edu/wp-content/uploads/2019/08/UHERO_WP2009-03.pdf
6. Hawaii R&D Tax Credit | AndreTaxCo, PLLC, accessed on March 21, 2026, https://www.andretaxco.com/hawaii-rdcredit
7. Hawaii R&D Tax Credits – Strike Tax Advisory, accessed on March 21, 2026, https://www.striketax.com/state-rd-credits/hawaii-r-d-tax-credits
8. TIR 2003-1, Application of Section 235-110.9, Hawaii Revised Statutes (HRS), relating to the High Technology Business Investment, accessed on March 21, 2026, https://files.hawaii.gov/tax/legal/tir/1990_09/tir03_01.pdf
9. TAX CREDIT FOR RESEARCH ACTIVITIES – Hawaii.gov, accessed on March 21, 2026, https://files.hawaii.gov/tax/forms/current/n346_i.pdf
10. Report on Hawaiʻi Tax Credit for Research Activities for the 2024 Tax Year – Hawaii.gov, accessed on March 21, 2026, https://files.hawaii.gov/dbedt/economic/data_reports/HawaiiResearchTaxCredit_TaxYear2024.pdf
11. Honolulu R&D Tax Credit for Local Businesses – Swanson Reed, accessed on March 21, 2026, https://www.swansonreed.com/research-tax-credit/hawaii/case-studies/honolulu/
12. “Brain Drain” – An Exodus of Kānaka Moving to the Continent – Ka Wai Ola, accessed on March 21, 2026, https://kawaiola.news/hookahuawaiwai/brain-drain-an-exodus-of-kanaka-moving-to-the-continent/
13. Investigating and Tackling Barriers and Needs for Small Business Success in Honolulu | UHERO Hawaii, accessed on March 21, 2026, https://uhero.hawaii.edu/wp-content/uploads/2025/01/InvestigatingAndTacklingBarriersAndNeedsForSmallBusinessSuccessInHonolulu.pdf
14. Hawai’i – Finding the Future – Department of Business, Economic Development & Tourism, accessed on March 21, 2026, https://dbedt.hawaii.gov/economic/files/2025/06/Hawai%E2%80%98i-%E2%80%93-Finding-the-Future.pdf
15. Reversing Hawaii’s Brain Drain, accessed on March 21, 2026, https://www.hawaiibusiness.com/reversing-brain-drain/
16. Hawaii Expected to Limit Tax Credits for Technology Investments | SSTI, accessed on March 21, 2026, https://ssti.org/blog/hawaii-expected-limit-tax-credits-technology-investments
17. tax review commission – Hawaii.gov, accessed on March 21, 2026, https://files.hawaii.gov/tax/stats/trc/mins2007/archive/2006trc10-06_min.pdf
18. Business Investment Tax Credit – Alternative Fuels Data Center – Department of Energy, accessed on March 21, 2026, https://afdc.energy.gov/laws/5445
19. Are R&D Tax Credits Available in Hawaii? | See if You Qualify – KBKG, accessed on March 21, 2026, https://www.kbkg.com/research-tax-credit/hawaii-rd-tax-credit
20. Hawaii R&D Tax Credit Application Process Explained – Swanson Reed, accessed on March 21, 2026, https://www.swansonreed.com/research-tax-credit/hawaii/
21. Report on Hawaii Tax Credit for Research Activities for Tax Year 2023, accessed on March 21, 2026, https://files.hawaii.gov/dbedt/economic/data_reports/HawaiiResearchTaxCredit_TaxYear2023.pdf
22. Small Business R&D Tax Credit: Eligibility, Expenses & How It Works – Ramp, accessed on March 21, 2026, https://ramp.com/blog/small-business-r-d-tax-credits
23. Research and Development (R&D) Tax Credit | How To Qualify – Capstan Tax Strategies, accessed on March 21, 2026, https://capstantax.com/research-development-tax-credit/
24. Common R&D tax credit scams to avoid, accessed on March 21, 2026, https://www.swansonreed.com/research-tax-credit/federal/faqs/common-rd-tax-credit-scams-to-avoid/
25. Group 4: Access to Capital / Entrepreneurship / Growth Prospect – Findings and Recommendations – Department of Business, Economic Development & Tourism, accessed on March 21, 2026, https://dbedt.hawaii.gov/economic/files/2025/04/Group-4_-Access-to-Capital-_-Entrepreneurship-_-Growth-Prospect-Findings-and-Recommendations.pdf
26. Economic Impact of the Natural Energy Laboratory Hawaii Authority Tenants on the State of Hawaii in 2022, accessed on March 21, 2026, https://uhero.hawaii.edu/wp-content/uploads/2024/01/NELHA2022.pdf
27. The Hawaii Guide to State Tax Incentives – Gusto, accessed on March 21, 2026, https://gusto.com/resources/states/hawaii/hi-tax-incentives
28. As visitors to Hawaii decline, risks abound – SFGATE, accessed on March 21, 2026, https://www.sfgate.com/hawaii/article/hawaii-tourism-economy-diversification-21957224.php
29. Beyond the price of paradise: Is Hawai’i being left behind? – UHERO Hawaii, accessed on March 21, 2026, https://uhero.hawaii.edu/beyond-the-price-of-paradise-is-hawaii-being-left-behind/
30. Research – UHERO Hawaii, accessed on March 21, 2026, https://uhero.hawaii.edu/research/
31. DBEDT Keeps Hawaii Economic Growth Rate at 2.0 Percent for 2025, accessed on March 21, 2026, https://dbedt.hawaii.gov/blog/24-57/
32. Outlook for the Economy | Research & Economic Analysis, accessed on March 21, 2026, https://dbedt.hawaii.gov/economic/qser/outlook-economy/
33. Massachusetts R&D Tax Credits – Strike Tax Advisory, accessed on March 21, 2026, https://www.striketax.com/state-rd-credits/massachusetts-r-d-tax-credits
34. California SB 711: Key Changes to the State R&D Credit – Sensiba, accessed on March 21, 2026, https://sensiba.com/resources/alerts/california-sb-711-key-changes-to-the-state-rd-credit/
35. State R&D tax credits in the US: What your business needs to know – Remote, accessed on March 21, 2026, https://remote.com/blog/taxes/state-research-development-tax-credit
36. Appendix F: R&D tax incentives by state – JLARC, accessed on March 21, 2026, https://jlarc.virginia.gov/pdfs/oversight/ED_initiatives/SciTech%20Appendix%20F.pdf
37. Massachusetts Research Tax Credit | Mass.gov, accessed on March 21, 2026, https://www.mass.gov/info-details/massachusetts-research-tax-credit
38. Massachusetts R&D Tax Credit Benefits for Corporations, accessed on March 21, 2026, https://www.swansonreed.com/research-tax-credit/massachusetts/
39. The Massachusetts R&D tax credit: How can your business benefit? – Remote, accessed on March 21, 2026, https://remote.com/blog/taxes/research-development-tax-credit-massachusetts
40. California research | FTB.ca.gov, accessed on March 21, 2026, https://www.ftb.ca.gov/file/business/credits/california-research.html
41. New Legislation, New Opportunity for CA Taxpayers to Claim State-Specific R&D Credit, accessed on March 21, 2026, https://capstantax.com/new-legislation-new-opportunity-for-ca-taxpayers-to-claim-state-specific-rd-credit/
42. California formalizes federal conformity rules and updates R&D tax credit – CohnReznick, accessed on March 21, 2026, https://www.cohnreznick.com/insights/california-updates-conformity-rules-and-rd-credit
43. 2025 Instructions for Form FTB 3523 Research Credit – Franchise Tax Board – CA.gov, accessed on March 21, 2026, https://www.ftb.ca.gov/forms/2025/2025-3523-instructions.html
44. New York R&D Tax Credit Services – James Moore, accessed on March 21, 2026, https://www.jmco.com/tax/r-and-d-tax-credit-services/new-york/
45. New York R&D Tax Credits – Strike Tax Advisory, accessed on March 21, 2026, https://www.striketax.com/state-rd-credits/new-york-r-d-tax-credits
46. New York R&D Tax Credit Guide – Source Advisors, accessed on March 21, 2026, https://sourceadvisors.com/map/rd-tax-credit/new-york/
47. Qualifying for State R&D Tax Credits in New York, accessed on March 21, 2026, https://www.boast.ai/en-ca/blog/rd/new-york-rd-tax-credits
48. Hawaii Revised Statutes § 235-110.91 (2025) – Tax credit for research activities. – Justia, accessed on March 21, 2026, https://law.justia.com/codes/hawaii/title-14/chapter-235/section-235-110-91/
49. R&D tax credits guide for CPAs – ADP, accessed on March 21, 2026, https://www.adp.com/resources/articles-and-insights/articles/r/r-and-d-tax-credit-guide-for-cpas.aspx
50. Optimising R&D tax credits in Mexico and the United States | RSM Global, accessed on March 21, 2026, https://www.rsm.global/insights/optimising-rd-tax-credits-mexico-and-united-states
51. accessed on March 21, 2026, https://www.taxtaker.com/blog/the-2025-guide-to-state-r-d-tax-credits#:~:text=Qualified%20small%20businesses%20(those%20with,for%20expenses%20over%20%24200%20million.
52. Tax Credit for Research Activities (TCRA) & Hawaii Film Tax Credit, accessed on March 21, 2026, https://dbedt.hawaii.gov/taxcredits/
53. Audit-Proofing Your Tax Credit Claims: Best Practices and Red Flags for 2026 – HRlogics, accessed on March 21, 2026, https://hrlogics.com/blog/audit-proofing-your-tax-credit-claims-best-practices-and-red-flags-for-2026
54. annual report 2025 – Hawaii.gov, accessed on March 21, 2026, https://files.hawaii.gov/dbedt/annuals/2025/2025-dbedt.pdf
55. Preparing for an R&D Tax Credit Audit – Sensiba, accessed on March 21, 2026, https://sensiba.com/resources/insights/preparing-for-an-rd-tax-credit-audit/
56. How Funding Sources Affect R&D Tax Credit Eligibility – KBKG, accessed on March 21, 2026, https://www.kbkg.com/research-and-development/how-funding-sources-affect-rd-tax-credit-eligibility
57. Research Credit Claims Audit Techniques Guide (RCCATG): Credit for increasing research activities Section 41* | Internal Revenue Service, accessed on March 21, 2026, https://www.irs.gov/businesses/research-credit-claims-audit-techniques-guide-rccatg-credit-for-increasing-research-activities-section-41
58. Multipliers and the effectiveness of government policies – UHERO – University of Hawaii, accessed on March 21, 2026, https://uhero.hawaii.edu/multipliers-and-the-effectiveness-of-government-policies/
59. Economic Impact of the Natural Energy Laboratory Hawaii Tenants on the State of Hawaii, accessed on March 21, 2026, https://nelha.hawaii.gov/wp-content/uploads/2013/05/NELHA-Tenants-Impact-Study-UHERO-2012_Color.pdf
60. Economic Impact of the City and County of Honolulu’s Department of Environmental Services on the State of Hawai’i in Fiscal – UHERO Hawaii, accessed on March 21, 2026, https://uhero.hawaii.edu/wp-content/uploads/2025/10/EconomicImpactOfTheCityAndCountyOfHonolulusDepartmentOfEnvironmentalServices.pdf
61. Economic Impact of the City and County of Honolulu’s Department of Environmental Services on the State of Hawai’i in Fiscal Year 2024 – UHERO Hawaii, accessed on March 21, 2026, https://uhero.hawaii.edu/economic-impact-of-the-city-and-county-of-honolulus-department-of-environmental-services-on-the-state-of-hawaii-in-fiscal-year-2024/
62. DBEDT Projects 1.7 Percent Growth for 2026 | Department of Business, Economic Development & Tourism – Hawaii.gov, accessed on March 21, 2026, https://dbedt.hawaii.gov/blog/26-11/
63. Editor’s Note: Brain Gains – Hawaii Business Magazine, accessed on March 21, 2026, https://www.hawaiibusiness.com/editors-note-brain-gains/
64. 25Q4 UHERO State Forecast Update, accessed on March 21, 2026, https://uhero.hawaii.edu/wp-content/uploads/2025/12/UHEROForecastForTheStateOfHawaii25Q4.pdf