Relating To The Tax Credit For Research Activities.
This bill also seeks to consolidate and refine the certification requirements for claiming the tax credit, streamlining the application process for small businesses involved in technology sectors. It mandates that tax credits be certified on a first-come, first-served basis, based on the date that a complete application is received. By extending the sunset date for the tax credits from December 31, 2025, to December 31, 2030, the bill provides additional certainty and encourages continued investment in research activities within qualified high technology businesses.
Senate Bill 2110 aims to amend the existing tax credit for research activities in Hawaii by introducing a cap on the amount of tax credits that can be claimed by qualified high technology businesses. The bill specifies that each taxpayer, along with their related entities, may receive a maximum of $1,500,000 in tax credits per taxable year. Additionally, to qualify for these credits, businesses must be registered to do business in Hawaii and classify as small businesses, defined as having no more than 500 employees.
Notably, the discussions surrounding the bill have raised concerns about whether the new cap on tax credits might limit the capacity of larger research initiatives. Critics fear that while small businesses may benefit from the structured cap and credit system, larger entities could be disproportionately affected, potentially stifling broader innovation efforts in the state. Furthermore, the requirement for businesses to complete annual surveys detailing their research expenditures and outcomes may impose an additional administrative burden on smaller firms that could deter participation in the program.