Relating To The Tax Credit For Research Activities.
One significant aspect of SB951 is the introduction of a cap on the amount of tax credits that qualified high technology businesses can claim, specifically limiting it to $1.5 million per taxable year for related entities. This cap is designed to regulate the financial implications of the tax credit system and manage the state budget allocated for economic development initiatives related to research activities. Additionally, the bill consolidates the requirements for tax credit certification, transitioning to a first-come, first-served basis for applications, allowing greater control over claims made by businesses.
SB951 is a bill that modifies tax credit provisions for research activities in Hawaii, specifically amending Section 235-110.91 of the Hawaii Revised Statutes. The legislation aims to align state tax credits with federal provisions detailed in the Internal Revenue Code, particularly regarding the credit for increasing research activities. Notably, the bill stipulates that the federal tax credit provisions that were in effect as of December 31, 2011, will remain applicable in calculating the state tax credit, notwithstanding any subsequent changes to these federal laws. This alignment is intended to facilitate a smoother process for qualified high technology businesses to claim tax credits in relation to their research activities.
Among the points of contention surrounding SB951 is the balance between incentivizing innovation through tax credits and ensuring that such financial provisions do not disproportionately impact the state’s budget. Critics of having a high cap may argue that it could lead to significant fiscal strain if many businesses simultaneously claim the maximum allowable tax credits. Furthermore, issues of accountability and the requirement for businesses to provide extensive data on employment, wages, and research activities could be seen as burdensome by some sectors, particularly smaller enterprises that might lack the resources to meet these administrative requirements.