DAVID Y. IGE

ISAAC W. CHOY

GOVERNORDIRECTOR OF TAXATIONJOSH GREEN M.D.
LT. GOVERNORSTATE OF HAWAII

DEPARTMENT OF TAXATIONP.O. BOX 259
HONOLULU, HAWAII 96809

PHONE NO: (808) 587-1530
FAX NO: (808) 587-1584

January 27, 2021

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2021-03
RE:Department of Business, Economic Development, and Tourism – Certification of the
Income Tax Credit for Research Activities

Act 261, Session Laws of Hawaii 2019, amended the Income Tax Credit for ResearchActivities (Research Credit) established under Hawaii Revised Statutes section 235-110.91. Theamendments to the Research Credit apply to taxable years beginning after December 31, 2019.
The Research Credit is set to be repealed on December 31, 2024. Among other changes to theResearch Credit, two significant modifications were made to the Credit’s certification process.
First, the Department of Business, Economic Development, and Tourism (DBEDT) will
be certifying the credit. Under prior law, certifications were performed by the Department ofTaxation. Second, the Research Credit now has an aggregate cap for all taxpayers of $5 million.
Therefore, DBEDT must cease certifying credits once $5 million of credit has been certified forthe year.1
For taxable years beginning after December 31, 2019 (i.e., the 2020 tax year), eachtaxpayer eligible for the Research Credit must submit their application to DBEDT no later thanMarch 31st following the taxable year in which the activities were conducted.2 DBEDT isrequired to certify the Research Credit on a first-come first-served basis.3
APPLICATION & CERTIFCATION PROCESSDBEDT will begin accepting applications for the Research Credit by online
submission only for the 2020 tax year on March 1, 2021 at 9:00 a.m. Applications will only
be accepted through the DBEDT tax credit webpage at https://dbedt.hawaii.gov/taxcredits/.
Applications for the 2020 tax year will not be accepted after March 31, 2021. There are two
mandatory steps to the application process.
Step 1 consists of submitting a fully completed and executed Form N-346A. The order inwhich a fully complete and executed Form N-346A is received by DBEDT will determine theorder in which credits are allocated. Incomplete or non-executed forms will be rejected. In thesecases, taxpayers may resubmit Form N-346A, but their credit allocation priority will be based on
1 Hawaii Revised Statutes (HRS) §235-110.91(f).
2 HRS §235-110.91(d).
3 HRS §235-110.91(f).

Department of Taxation Announcement No. 2021-03
January 27, 2021
Page 2 of 2

the date and time that the resubmission is received.
Step 2 of the application process requires taxpayers to complete an online questionnaire
no later than March 31, 2021 for the 2020 tax year. The information required for thequestionnaire is the information previously required as part of the Research Credit survey
administered by DBEDT. Credits will not be allocated to any taxpayer who fails to complete thequestionnaire by the deadline. A sample questionnaire in PDF format can be obtained from theDBEDT tax credit webpage at https://dbedt.hawaii.gov/taxcredits/.
DBEDT will begin reviewing applications after March 31, 2021. After reviewing all
applications and information submitted, DBEDT will return Form N-346A to qualifying
taxpayers, specifying the amount of Research Credit that the taxpayer has been certified toreceive. Taxpayers who do not qualify for the Research Credit or for whom credits cannot becertified because the $5 million aggregate cap has already been exceeded will be notified inwriting.
Tax forms, including Form N-346A, and information are available on the Department's
website at tax.hawaii.gov. If you have any questions regarding the Research Credit certification
process, please contact DBEDT by email at dbedt.tcra@hawaii.gov.

ISAAC W. CHOY
Director of Taxation