SB338 temporarily reinstates Hawaii’s technology infrastructure renovation tax credit for taxable years beginning after December 31, 2025, and extends the credit through taxable years beginning before January 1, 2028. The bill updates the credit so it is no longer limited to commercial building renovations in the traditional sense, and instead applies to renovation costs for technology-enabled infrastructure, including high-speed telecommunications systems, physical security systems, environmental and life-safety systems, backup power systems, and newly added data servers.
The measure also revises the definition of renovation costs to cover planning, design, installation, construction, repair, replacement, monitoring, testing, and purchase of qualifying equipment and infrastructure. It keeps the credit at 4 percent of eligible renovation costs, clarifies how the credit is allocated among pass-through entities, and requires the Department of Taxation to report findings and recommendations to the Legislature by early 2029. The bill is framed as a response to resilience and cybersecurity needs, especially after a 2023 local data outage disrupted businesses and state agencies.
SB338 would amend section 235-110.51, Hawaii Revised Statutes, to revive and broaden a tax incentive for technology-related building and data infrastructure upgrades. It expands the statutory definition of "technology-enabled infrastructure" to expressly include data servers, which could benefit data centers, businesses with significant digital infrastructure, and entities investing in resilience, cybersecurity, and backup systems. The bill also changes the sunset date for the credit and limits taxpayers from stacking this credit with other chapter credits for taxable years beginning before January 1, 2026. The Department of Taxation would be required to provide a report to the Legislature on the credit’s collection and effectiveness before the 2029 session.
The available voting history suggests strong support for the bill. It passed the Senate Labor and Technology Committee 3-0 and the Senate Ways and Means Committee 13-0, both with amendments. The bill’s findings and purpose section also reflects a favorable policy view toward technology investment, infrastructure resilience, and economic development. No committee transcripts were provided, so the record shows support but not detailed debate.
The main policy issue appears to be the scope and cost of the tax credit, particularly whether the state should extend a tax incentive to data servers and related infrastructure rather than limiting it to more traditional commercial building renovations. Another likely point of concern is fiscal impact, since the bill temporarily reinstates a tax credit and broadens eligible expenditures, which could reduce tax revenue. The reporting requirement suggests lawmakers wanted follow-up on how the credit is used and whether it is effective. However, the voting record provided shows no recorded opposition in committee.