By Krista A. Cohane, Esq., Checkpoint News
Hawaii has amended its Enterprise Zone Program by redefining “eligible business activity,” amending enterprise zone designations, extending the period during which qualified businesses may receive certain tax benefits, and extending the general excise tax standard exemption period. (L. 2026, S2360 (Act 182), effective 07/01/2026 and as stated.)
Enterprise zone designation
The Department of Business, Economic Development, and Tourism may declare up to two census tracts on state land, that contain an innovation enterprise to be designated as an enterprise zone, subject to the governor’s approval. The designation of census tracts must be made without regard to county application requirements, geographic limitations, or eligibility criteria otherwise applicable to enterprise zones.
Eligible business activity
The definition of “eligible business activity” is amended to include additional activities that may qualify for enterprise zone benefits, which include the sale of tangible personal property that is manufactured and sold within an enterprise zone for consumption or use by the purchaser, rather than for resale. Eligible activities are further expanded to include research, development, sale, or production of all types of medical biotechnology products, agricultural biotechnology products, all types of maritime biotechnology products, and medical and health care services. It also adds activities of the Hawaii food and product innovation network, professional services by health care professionals in health care-related sectors, aerospace technology research and development, and information technology design and production services.
New definitions
The following terms have been defined:
- Hawaii food and product innovation network: “Hawaii food and product innovation network” means an entity engaged in research, development, testing, production, or commercialization of proprietary or novel food products, including food processing technologies, value-added food products derived from agricultural crops, and food science and nutrition research with commercial applications; provided that the entity’s primary business activity involves such research, development, testing, production, or commercialization.
- Innovation enterprise: “Innovation enterprise” means an area located on property owned by the state that is intended to support, or currently contains, businesses primarily engaged in space domain awareness; information technology design and production services; aerospace, medical technology, biomedical, or life sciences research and development; clinical trials; or pharmaceutical manufacturing.
- Tangible personal property: “Tangible personal property” means property that can be touched or felt and relocated. Tangible personal property does not include electricity, real property, or intellectual property.
- Value-added agricultural product: “Value-added agricultural product” means a product that has been processed, enhanced, or otherwise modified beyond its raw state in a manner that increases its economic value.
Tax benefits
For taxable years beginning after December 31, 2026, the standard credit period is extended from seven years to nine years for state business tax credits, For qualified businesses engaged in manufacturing tangible personal property or producing or processing agricultural products, the additional 3-year credit period would begin after the ninth tax year instead of after the seventh tax year. Similarly, the unemployment tax credit schedule is extended from seven years to nine years, with the 20% credit available in the seventh, eighth, and ninth tax years (previously seventh year). For manufacturing and agricultural production or processing businesses, the additional 3-year 20% unemployment tax credit period would begin after the ninth tax year (previously seventh year).
General excise tax
Effective January 1, 2028, the general excise tax standard exemption period will increase from seven years to nine years. For qualified businesses engaged in manufacturing tangible personal property or producing or processing agricultural products, the exemption period will increase from 10 years to 12 years.
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