HB2520 amends Hawaii’s income tax credit for research activities under section 235-110.91, Hawaii Revised Statutes. The bill clarifies that, for purposes of the credit, references to the “base amount” in section 41 of the Internal Revenue Code do not apply, meaning taxpayers could claim the credit for qualified research expenses without regard to prior years’ spending levels. In practical terms, this removes a federal-style limitation that can reduce or complicate the calculation of the state research credit.
The bill also increases the annual statewide cap on certified research activity credits from $5 million to $15 million. The Department of Business, Economic Development, and Tourism (DBEDT) would continue to certify credits on a first-come, first-served basis and must stop certifying once the cap is reached. The bill applies to taxable years beginning after December 31, 2025, so it would affect future tax filings rather than current-year claims.
Impact
HB2520 would directly change the administration of Hawaii’s research and development tax credit by expanding the amount of credits that may be certified each year and by removing the statutory reference to the IRC base amount from the credit calculation. This would likely make the credit more accessible to businesses with qualified research expenses, especially those that previously could have been limited by the base amount concept or by the lower annual cap. The bill affects DBEDT’s certification duties and the Department of Taxation’s administration of the credit, while also potentially reducing state tax revenue to the extent more credits are claimed.
Sentiment
Based on the bill text and its referral history, the measure appears to be framed as a pro-business, economic-development tax incentive bill. There are no recorded committee transcripts or votes in the provided material, so there is no direct evidence of opposition or support from debate. The overall tone of the legislation suggests an intent to encourage research activity and increase the availability of the credit for eligible taxpayers.
Contention
The main points of potential contention are the fiscal cost and the policy choice to expand a tax credit rather than keep the existing $5 million annual cap. Supporters would likely emphasize economic development, innovation, and competitiveness for research-intensive businesses, while critics may focus on reduced state revenue, the fairness of increasing a credit that is first-come, first-served, and whether the expanded cap provides sufficient public return on investment. Another possible issue is the removal of the base amount limitation, which could broaden eligibility and increase claims more than under the current structure.