Hawaii Tax Credit for Research Activities (Rev. 2016)

Tax Credit for Research Activities (Rev. 2016)
Form N-346 (Rev. 2024) Tax Credit for Research Activities
STATE OF HAWAII—DEPARTMENT OF TAXATION

Clear Form

TAX CREDIT FOR RESEARCH ACTIVITIES	

TAX
YEAR

		

			
FORM
	
	

		
		 N-346
	 Or fiscal year beginning ________________, 20___, and ending _________________, 20____	
20__
(REV. 2024)
ATTACH TO FORM N-11, N-15, N-20, N-30, N-35, N-40, OR, N-70NP
Name(s) as shown on tax return	

SSN or FEIN

  NOTE: If you received a Schedule K-1 from a flow-through entity, skip lines 1 through 4 and start on line 5.

1	 Enter the amount of your federal tax credit from federal Form 6765
for the tax year (Attach a copy of federal Form(s) 6765)................................................... 	 1
2	 Enter the amount of your eligible research expenses reported on federal Form(s) 6765
for the tax year and the amount of your eligible research expenses attributable to
research activity conducted IN HAWAII for the tax year: (See instructions)
	
Column A	
Column B
	
Reported On federal Form 6765	
IN HAWAII
	
a	 Certain amounts paid or
	
incurred to energy consortia......	 2a
	
b	 Basic research payments to
	
qualified organizations...............	 2b
	
c	 Wages for qualified services
	
(do not include wages used in
	
figuring the federal work
	
opportunity credit)......................	 2c
	
d	 Cost of supplies.........................	 2d
	
e	 Rental or lease costs of
	computers..................................	 2e
	f	Enter the applicable
	
percentage of contract
	
research expenses....................	 2f
	
g	 Total Eligible Research
	
Expenses. Add lines 2a
	
through 2f, and enter result.......	 2g
	
3	 Percentage of eligible research expenses attributable to Hawaii.
Divide line 2g, Column B by line 2g, Column A. Enter the result as a decimal rounded
to six (6) decimal places.................................................................................................... 	 3
4	 Tentative tax credit for research activities.
Multiply line 1 by line 3....................................................................................................... 	 4
5	 Flow through of Hawaii tax credit for research activities received from other entities, if any.
Check the applicable box below. Enter the name and Federal Employer I.D. No. of Entity:






	
	 a	 Partner — enter appropriate amount from Schedule K-1 (Form N-20).............................
	
	 b	 S Corp. shareholder — enter the appropriate amount from Schedule K-1 (Form N-35) .
	
	 c	 Beneficiary — enter the appropriate amount from the Schedule K-1 (Form N-40)...........
	
	 d	 Patron — enter the amount from federal Form 1099-PATR...............................................	 5
6	 Total credit allowed — Add lines 4 and 5. Enter the result here, rounded to the nearest
dollar, and on the appropriate line for the credit on Schedule CR. For Pass-through
entities, enter this amount on the appropriate lines of your tax return............................... 	 6

N346_I 2024A 01 VID01

ID NO 01

FORM N-346
(REV. 2024)	

PAGE 2

CHANGES TO NOTE

Calculation of the Hawaii TCRA

GENERAL INSTRUCTIONS

Deadline For Claiming the Credit

Act 139, Session Laws of Hawaii 2024, amends the Hawaii tax credit for
research activities (TCRA) for taxable years beginning after December 31,
2023 by (1) repealing the provision that previously made the base amount
in the Internal Revenue Code (IRC) inapplicable to the TCRA and allowed
credits for all qualified research expenses to be taken without regard to
previous years’ expenses; (2) amending the definition of “qualified high
technology business” to a small business that conducts more than 50
percent of its activities in qualified research in Hawaii and is registered to
do business in Hawaii; (3) adding the definition of a small business to mean
a company with no more than five hundred employees; and (4) extending
the sunset date of the TCRA to December 31, 2029.
Note: In order to claim the Hawaii tax credit for research activities,
you must also claim the federal tax credit for increasing research
activities under section 41 of the IRC.

Purpose of Form

Use Form N-346 to figure and claim the TCRA under section 235110.91, Hawaii Revised Statutes.

Who May Claim the Credit

This credit may be claimed by a qualified high technology business
(QHTB) defined as a small business that conducts more than 50 percent
of its activities in research in Hawaii and is registered to do business in
Hawaii. Any partnership, S corporation, estate, trust, or cooperative that
allocates this credit (including a pro rata share of the credit from a flowthrough entity) must attach Form N-346, Form N-346A, and federal Form
6765 to its income tax return. Taxpayers claiming their pro rata share of the
credit must also attach a copy of their Schedule K-1s.

When the Credit May Not Be Claimed

This credit may not be claimed if either of the following apply to your tax
situation:
(1)	 you are not claiming the federal tax credit for research activities under
IRC section 41.
(2)	 You have no eligible Hawaii research expenses.

Credit Requirements

To claim the credit, the following requirements must be satisfied:
(1)	 The credit must be certified by the Department of Business, Economic
Development and Tourism (DBEDT). See Form N-346A for more
information.
(2)	 The credit form (Form N-346), certification form (Form N-346A), federal
Form 6765, Schedule K-1s (pro rata share credit claims), and Schedule
CR (for tax returns for which Schedule CR is required) must be attached
to the taxpayer’s income tax return.
(3)	 The QHTB must complete an annual survey as prescribed by DBEDT.
See DBEDT’s website dbedt.hawaii.gov for more information.
Failure to satisfy these requirements shall constitute a waiver of the right
to claim the credit. The total amount of the certified tax credits is limited to
$5,000,000 in the aggregate for all taxpayers in every taxable year after
December 31, 2019, provided that no claim for the tax credit shall be made
for research expenses incurred after December 31, 2029. Certification is
issued on a first-come, first-served basis.

In order for a taxpayer to compute the amount of the Hawaii TCRA,
it is necessary for the taxpayer to compute the amount of the federal tax
credit for increasing research activities (using federal Form 6765) prior to
calculating the Hawaii TCRA, since the federal tax credit for increasing
research activities is the baseline upon which the TCRA is measured.
Calculation of the Hawaii TCRA involves a straight forward calculation
by multiplying the federal tax credit for increasing research activities
by a fraction, the numerator of which is the amount of eligible research
expenses for research conducted in Hawaii and the denominator of which
is the amount of expenses eligible for the federal tax credit for increasing
research activities.
The deadline to claim the credit, including amended claims, is 12
months after the close of your taxable year. You cannot claim the credit
after the deadline.

SPECIFIC INSTRUCTIONS

Note: If you are claiming your share of the TCRA from a partnership,
S corporation, estate, trust, or cooperative, skip lines 1 through 4 and
start on line 5.
Enter your fiscal or short tax year in the space provided.
Line 1 — Enter the amount of your federal tax credit for increasing research
activities calculated on federal Form 6765. Attach a copy of your federally
filed Form(s) 6765 for the tax year to Form N-346.
Lines 2a through 2f, Column A — Enter in Column A the amount of the
eligible research expenses reported on federal Form(s) 6765 for the tax
year.
Note: The tax credit is allocated by DBEDT on a calendar year basis.
This means that after tax year 2024, the tax credit allocated to a fiscal year
taxpayer may cover eligible research expenses incurred by the taxpayer
in the same year as the calendar year and in the previous tax year. In this
case, the fiscal year taxpayer may need to attach federal Forms 6765 that
were filed for more than one tax year.
Lines 2a through 2f, Column B — Enter in Column B the amount of the
eligible research expenses attributable to research activity conducted IN
HAWAII for the tax year and which are part of the amounts reported on lines
2a through 2f, Column A.
Note: Expenses attributable to research activities OUTSIDE HAWAII do
not qualify for the credit.
Line 3 — Divide line 2g, Column B by line 2g, Column A. Enter the result
here rounded to six (6) decimal places. This is the percentage of the eligible
research expenses for research conducted in Hawaii.
Line 4 — Multiply line 1 by line 3. Enter the result here. This is your tentative
TCRA.
Line 5 — If you are claiming your share of the TCRA from a partnership,
S corporation, estate, trust, or cooperative, then enter the amount here.
Also, enter the name and federal employer identification number of any
flow-through entity who has passed the TCRA through to you. If additional
space is needed, include the information on an attached schedule.
Line 6 — Add lines 4 and 5. This is your total TCRA allowed for the tax
year. Enter the amount here, rounded to the nearest dollar, and on the
appropriate line for the credit on Schedule CR. For pass-through entities,
enter this amount on the appropriate lines of your tax return.