Relating To Tax Credit For Research Activities.
The implications of HB2083 on state laws involve a tightening of the regulations surrounding the research activities tax credit. The bill stipulates that to qualify for the state tax credit, a high technology business must also claim a corresponding federal tax credit for the same activities. This alignment serves a dual purpose: it encourages businesses to engage in research and development while ensuring that those claiming local credits are also benefiting from federal provisions, thereby promoting compliance with federal standards and potentially enhancing state revenues through increased research activities.
House Bill 2083 aims to amend the existing tax credit for research activities in Hawaii by modifying the eligibility criteria and requirements for claiming the tax credit. The bill outlines that each qualified high technology business can claim an income tax credit equal to the federal tax credit for research activities as specified by Section 41 of the Internal Revenue Code. Furthermore, all businesses will be capped at a maximum of $1 million in tax credits per taxable year, ensuring that the benefits are shared among many businesses rather than concentrated among a few large entities.
A critical point of contention regarding HB2083 is its cap on tax credits, which could disproportionately affect smaller research-oriented firms that may not have the same financial clout as larger corporations. Critics argue that this could limit the ability of emerging tech startups and small businesses to engage in significant research projects that could lead to job creation and innovation within the state. Additionally, the annual reporting requirements placed on businesses seeking to claim these credits may be seen as a burden, particularly for smaller entities that already operate with limited resources.