active State Tax Credit

Hawaii Research Activities Tax Credit

Hawaii Department of Taxation

20% of Hawaii QRE (refundable)

See if you qualify — free Visit official program ↗

Researched for this program: 4 rejection traps · 6 required documentsWhat decides this award ↓

The short version

Fully refundable 20% Hawaii R&D credit

Hawaii provides a refundable income tax credit equal to 20% of qualified research expenses (QRE) for in-state research — one of the most generous and most accessible state R&D credits in the country. Because the credit is fully refundable, Hawaii-based companies with little or no income tax liability receive the full credit as a cash refund. The credit tracks the federal IRC §41 definition of QRE but requires research to be physically conducted in Hawaii.

Funding type: Tax Credit
Level: State
Amount: 20% of qualified research expenses (QRE) physically conducted in Hawaii. The credit is fully refundable — the full amount is paid as a cash refund if it exceeds Hawaii income tax liability. No incremental base calculation required; the credit applies to total (volume-based) Hawaii QRE.
Realistic amount: A 10-person Honolulu biotech company with $500,000 of Hawaii-located QRE (wages + supplies) generates a $100,000 credit…
Deadline: Rolling — claimed annually on Hawaii income tax return
Status: active
States: HI
Payment model: tax offset

Who qualifies

Must conduct qualified research activities physically located within Hawaii — follows federal IRC §41 four-part test but requires Hawaii-located activity
Qualified research expenses include: wages of Hawaii-based employees performing, supervising, or supporting research; supplies consumed in Hawaii research; 65% of contract research payments for Hawaii-located work
All entity types eligible: C-corporations, S-corporations, LLCs, partnerships, sole proprietors — must file a Hawaii income tax return
No minimum revenue, employee count, or project size thresholds
The credit is fully refundable — excess credit over Hawaii income tax liability is paid as a cash refund; no carryforward election required
Must use Form N-346 to calculate and claim the credit
Research must satisfy all four prongs of the §41 test: technological in nature, for developing or improving a business component, subject to uncertainty, and conducted through a process of experimentation

What it covers

Eligible expenses

Wages of Hawaii-based employees directly performing qualified research activities
Wages of Hawaii-based employees directly supervising or directly supporting qualified research
Supplies and materials consumed or destroyed in Hawaii-located qualified research
65% of payments to contractors for qualified research conducted in Hawaii
Computer rental costs for Hawaii-located qualified research

Ineligible expenses

Research conducted outside Hawaii (by any employee, regardless of Hawaii residency)
Research funded or reimbursed by a third party such as a government contract or client
Social sciences, arts, humanities, cosmetic design changes
Market research and consumer surveys
Research after commercial production begins
Routine quality assurance testing and data collection not involving technological uncertainty
Management and administrative time not directly tied to qualified research

How to apply

1

Identify Hawaii-located qualified research expenses

Calculate your total QRE using federal IRC §41 definitions but limit to research physically conducted in Hawaii. Wages for employees working remotely from the mainland, out-of-state supply costs, and mainland contractor payments do not qualify. Build a location-by-project allocation supporting your Hawaii-specific QRE amount.

~6 hrs
2

Apply the 20% volume credit rate

Unlike the federal §41 credit and many state credits, Hawaii does NOT require an incremental base calculation. The 20% credit applies to total (volume-based) Hawaii QRE for the taxable year. Multiply your Hawaii-located QRE by 20% to get your credit amount.

~1 hrs
3

Complete Hawaii Form N-346

File Form N-346 (Tax Credit for Research Activities) to claim the credit. The form captures Hawaii-located QRE and computes the 20% credit. Attach to your Hawaii income tax return — Form N-11 (individuals), Form N-30 (C-corporations), Form N-35 (S-corporations), or Form N-20 (partnerships).

~3 hrs
4

File Hawaii income tax return and receive refund

Submit your Hawaii income tax return with Form N-346 attached by April 20 (or applicable extension). The credit first offsets any Hawaii income tax liability; any excess is refunded to the taxpayer. The Hawaii Department of Taxation typically issues refunds within 8-12 weeks of filing for electronic returns.

~2 hrs
5

Maintain supporting documentation

Keep records supporting your Hawaii-located QRE for at least 3 years (Hawaii's standard audit lookback period). Documentation should include: employee timesheets showing Hawaii work location by project, supply invoices showing Hawaii delivery or consumption, contract research agreements with Hawaii-located scope.

~4 hrs

Insider tip

Hawaii's credit is volume-based (no base calculation) AND fully refundable — a rare combination. Most state R&D credits are either incremental or non-refundable. Hawaii startups and small companies receive actual cash even in pre-profit years.

Deadline & timing

Claimed on Form N-346 (Tax Credit for Research Activities) filed with the Hawaii income tax return. Hawaii individual and corporate income tax returns are generally due April 20 (not April 15 — Hawaii has a different due date). Extensions are available. Because the credit is refundable, there is no strategic timing incentive to defer.

Applications are open — don’t lose the window

GrantCompass tracks Hawaii Research Activities Tax Credit’s application windows in the live catalog. Leave an email and we’ll warn you before this window closes — and tell you when the next round opens.

Free. One email when the window moves, deadline warnings on your watchlist, and the monthly closing-soon digest. Unsubscribe anytime.

Programs that stack well

Related programs

This program is not taking applications today — these are

Alternatives computed from the live GrantCompass catalog on August 25, 2026 — all 183 open grant programs · filter the database.

Explore more funding

Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.