RELATING TO STATE ENTERPRISE ZONES.
SB2360 modernizes Hawaii’s Enterprise Zone Program by expanding the kinds of businesses and activities that can qualify for program benefits. The bill adds or clarifies eligibility for certain retail sales by local manufacturers, value-added agricultural processing, medical products and health care services, Hawaii Food and Product Innovation Network activities, professional services by health care professionals in health care-related sectors, aerospace research and development, and information technology design and production services. It also defines new terms such as “innovation enterprise,” “value-added agricultural product,” and “Hawaii food and product innovation network,” and expressly excludes medical cannabis dispensary activities from eligibility.
The bill also authorizes the Department of Business, Economic Development, and Tourism to designate up to two census tracts on state-owned land containing an innovation enterprise as enterprise zones, with gubernatorial approval, even if those tracts do not meet the usual county-application or geographic-eligibility requirements. In addition, it requires DBEDT, in consultation with the Department of Taxation, to conduct a comprehensive review of the enterprise zone program and report to the Legislature by early 2027. The bill extends the duration of certain tax benefits for qualified businesses, including the state business tax credit and the general excise tax exemption, with longer periods for manufacturing and agricultural businesses, and applies prospectively to businesses joining on or after July 1, 2026.
SB2360 amends chapter 209E, Hawaii Revised Statutes, governing enterprise zones, by broadening the definition of eligible business activity, revising qualification rules for businesses, and extending the length of tax incentives. It changes the state business tax credit and unemployment tax credit schedules, extends the general excise tax exemption period, and creates a special pathway for state-land innovation enterprises to be designated as enterprise zones. The bill also imposes a new reporting obligation on DBEDT and the Department of Taxation to evaluate the program’s economic impact, eligibility criteria, and county-level revenues.
The bill appears to have broad support and little recorded opposition. It passed Senate Economic Development and Technology, Senate Ways and Means, and the House and Senate conference committees unanimously or near-unanimously, and it was enrolled to the Governor. The committee action suggests a generally favorable view of the bill’s goal of updating the enterprise zone program to reflect current business models and to encourage investment, job creation, and job retention.
The main policy questions raised by the bill are not reflected in recorded transcript debate, but the text itself shows the likely areas of concern: expanding tax incentives to additional industries, allowing enterprise zone designation on state land outside the usual county-driven process, and extending the duration of tax benefits. The bill also draws a line by excluding medical cannabis dispensary activities, indicating that eligibility expansion was not intended to be unlimited. Any disagreement would likely center on the fiscal cost of the expanded credits and exemptions versus the expected economic-development benefits, as well as whether the new state-land innovation enterprise designation could bypass local control or existing eligibility standards.