Hawaii Research Tax Credit Terminology
Review the comprehensive definitions regarding entity eligibility, required tax forms, and qualifying activities for claiming the R&D credit in Hawaii.
| Glossary Term | Definition |
|---|---|
| Tax Credit for Research Activities (TCRA) | A refundable state tax incentive designed to encourage businesses to perform qualified scientific research locally. |
| Hawaii Revised Statutes (HRS) §235−110.91 | The specific section of Hawaii state law establishing and governing the research activities tax credit. |
| Hawaii Department of Taxation (DOTAX) | The official state governmental agency responsible for administering and enforcing Hawaii’s corporate tax credit laws. |
| Department of Business, Economic Development, and Tourism (DBEDT) | The Hawaii state department responsible for reviewing applications and certifying eligibility for research tax credits. |
| Qualified High Technology Business (QHTB) | A business entity meeting strict state criteria regarding extensive research operations conducted exclusively within Hawaii. |
| QHTB Annual Survey | A mandatory yearly reporting requirement for eligible technology businesses to maintain their state certification status. |
| QHTB Full-Time or Part-Time Employees Limit (500) | The maximum allowable employee headcount for a business to maintain eligibility for this specific incentive. |
| Activities in Qualified Research (> 50%) | The requirement that over half of a business’s activities must involve qualified, experimental scientific research. |
| Domiciled and Registered to do Business in the State | Legal proof that a corporate entity is officially formed and authorized to operate within Hawaii. |
| Independently Owned and Operated | A requirement ensuring the claiming business is autonomous and not a subsidiary of another corporation. |
| Qualified Research Expenses (QREs) | Specific operational costs, including employee wages and supplies, directly linked to developing new technological products. |
| Research Activity Conducted IN HAWAII | The strict geographic limitation mandating that claimed scientific experiments must take place inside Hawaii borders. |
| IRC §41 (Federal Research Credit Reference) | The foundational Federal Internal Revenue Code section outlining rules that Hawaii adopts for research credits. |
| IRC §41 as Enacted on December 31, 2011 | The historical version of the federal tax code Hawaii uses as its benchmark for compliance. |
| Wages for Qualified Services (Hawaii) | Compensation paid to employees actively performing or directly supervising eligible scientific research within the state. |
| Cost of Supplies (Hawaii) | Expenditures for tangible materials completely consumed or utilized during the local qualified research and development process. |
| Rental or Lease Costs of Computers (Hawaii) | Eligible expenses incurred from renting cloud servers or computing hardware specifically utilized for experimental research. |
| Contract Research Expenses Percentage (65%) | The statutory rule allowing exactly sixty-five percent of third-party contractor expenses to qualify for credits. |
| Applicable Percentage of Contract Research Expenses | The designated portion of costs paid to outside vendors that legally qualifies for tax calculations. |
| Basic Research Payments to Qualified Organizations | Funds transferred to universities or scientific institutions for fundamental research intended to advance general knowledge. |
| Research Expenses Incurred Outside of the State (Exclusion) | Costs for research activities conducted beyond Hawaii’s borders, which are strictly ineligible for state credits. |
| Fully Refundable Credit | A tax benefit where any excess amount beyond the taxpayer’s liability is paid as a refund. |
| Refund of Excess Credit over Tax Liability | The mechanism allowing businesses to receive cash back when their calculated credit exceeds taxes owed. |
| Annual Aggregate Cap ($5,000,000 or §10,000,000) | The maximum total dollar amount of tax credits the state will approve across all participating taxpayers. |
| First-Come, First-Served Basis | The method of allocating limited state tax credits based strictly on the chronological order of application. |
| Certification of Credits | The formal official approval process confirming a business meets all legal requirements to claim the incentive. |
| DBEDT Certification Application | The official mandatory paperwork package businesses submit to the state to request research credit approval. |
| Form N-346A (Application for Certification) | The precise administrative document used by taxpayers to apply for Hawaii’s research activity tax credit certification. |
| Application Date/Time (N-346A Receipt) | The exact timestamp recorded when the state receives the certification application, determining place in line. |
| DBEDT Questionnaire Part B | A detailed section of the state application requiring deep technical explanations of the research performed. |
| Application Deadline (March 31st) | The absolute final statutory date each year by which businesses must submit their credit certification requests. |
| Form N-346 (Tax Credit for Research Activities) | The state tax return attachment used to formally claim the previously certified research credit amounts. |
| Schedule CR (Credit Schedule) | The supplementary Hawaii tax form used to summarize and aggregate various claimed state tax credits. |
| Taxpayer’s Net Income Tax Liability | The total final amount of state income tax a business owes before applying the refundable credit. |
| Corporate Income Tax (Form N-30) | The primary yearly tax return document filed by standard C-corporations operating within the state of Hawaii. |
| Individual Income Tax (Form N-11/N-15) | The personal tax returns filed by Hawaii residents or non-residents reflecting pass-through business income and credits. |
| S Corporation (Form N-20) | The annual informational state tax return filed by S-corporations to report income, deductions, and credits. |
| Partnership (Flow-Through Entity) | A business structure where earned research credits pass directly to individual owners rather than the entity. |
| Pro-Rata Share of Credit | The proportional distribution of total research credits allocated to shareholders based on their ownership percentages. |
| Schedule K-1 (Pass-Through Allocation) | The specific tax document used to report a partner’s or shareholder’s share of the generated credits. |
| Technological in Nature (4-Part Test) | A core requirement demanding the research fundamentally relies on principles of hard sciences or engineering disciplines. |
| Elimination of Uncertainty (4-Part Test) | The requirement that research activities must aim to discover missing information regarding capability, methodology, or design. |
| Process of Experimentation (4-Part Test) | The systematic evaluation of alternatives, such as modeling or simulation, used to overcome technical design uncertainties. |
| Permitted Purpose (4-Part Test) | The rule stating research must aim to create a new or improved function, performance, or quality. |
| Sunset Provision (December 31, 2029) | The established legal expiration date when the current Hawaii research tax credit program will officially end. |
| Amended Claims Deadline (12 Months) | The strictly enforced twelve-month window allowed for taxpayers to submit corrections or retrospective credit claims. |
| Taxable Year | The designated annual twelve-month accounting period utilized by the business for calculating eligible research expenses. |
| Base Amount Inapplicability (Previous Law) | The historical exclusion rule meaning businesses did not need to calculate historical baseline spending thresholds previously. |
| High Technology Business Investment Tax Credit (§235−110.9) | A separate, related statutory Hawaii tax incentive encouraging external private capital investment into high-technology businesses. |
Hawaii inventionINDEX April 2026:
