STATE OF HAWAII—DEPARTMENT OF TAXATION                                       Clear Form

   FORM                                                                                                                   TAX
                        TAX CREDIT FOR RESEARCH ACTIVITIES                                                                YEAR
                                                                       
  N-346
  (REV. 2020)        Or fiscal year beginning ________________, 20___, and ending _________________, 20____               20__
                                         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 and 2 and start on line 3.
1  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. Attach 
  a copy of federal Form(s) 6765).
                                                      Column A                      Column B
                                                   Reported On federal Form 6765    IN HAWAII
  a Certain amounts paid or  
    incurred to energy consortia ..             1a
  b Basic research payments to 
    qualified organizations ...........         1b
  c Wages for qualified services 
    (do not include wages used in 
    figuring the federal work 
    opportunity credit) ....................... 1c
  d Cost of supplies .....................      1d
  e Rental or lease costs of 
    computers ..............................    1e
  f Enter the applicable 
    percentage of contract 
    research expenses ................          1f
  g Total Eligible Research 
    Expenses.  Add lines 1a 
    through 1f, and enter result. ...           1g
 
2  Tentative tax credit for research activities. 
  Multiply the amount in line 1g, Column B by 0.20 (20%) ..................................................              2
3 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:

      aPartner — enter appropriate amount from Schedule K-1 (Form N-20)                           ......................
      bS Corp. shareholder —            enter the appropriate amount from Schedule K-1 (Form     N-35).........
      cBeneficiary — enter the appropriate amount from the Schedule K-1 (Form N-40) 
      dPatron — enter the amount from federal Form 1099-PATR ....................................                       3
4 Total credit allowed — Add lines 2 and 3. 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. .............................                 4

N346_I 2020A 01 VID01
                                                      ID NO 01

FORM N-346 
(REV. 2020)                                                                                                                                       PAGE 2
GENERAL INSTRUCTIONS                                                             to the taxpayer’s income tax return.
Note: In order to claim the Hawaii tax credit for research activities,           (3)  The QHTB must complete an annual survey as prescribed by DBEDT. 
you must also claim the federal tax credit for increasing research               See DBEDT’s website dbedt.hawaii.gov for more information.
activities under section 41 of the Internal Revenue Code (IRC).                  Failure to satisfy these requirements shall constitute a waiver of the right 
Note: The tax credit for research activities can only be claimed by              to claim the credit.  The total amount of the certified tax credits is limited 
qualified high technology businesses.   “Qualified high technology               to $5,000,000 in the aggregate for all taxpayers in every taxable year after 
business” is defined in section 235-7.3(c), Hawaii Revised Statutes.             December 31, 2019, provided that no claim for the tax credit shall be made 
Act 270, Session Laws of Hawaii (SLH) 2013 (Act 270), which reenacts             for research expenses incurred after December 31, 2024. Certification is 
the Hawaii tax credit for research activities (TCRA), applies to taxable         issued on a first-come, first-served basis.
years beginning after December 31, 2012, and sunsets for taxable years           Calculation of the Hawaii TCRA
beginning after December 31, 2019.
                                                                                 In order for a taxpayer to compute the amount of the Hawaii TCRA, it is 
In particular, Act 270 adopts IRC section 41 as of December 31, 2011,            necessary for the taxpayer to compute the amount of the eligible research 
with the further requirement that eligible research expenses do not include      expenses for research activities conducted in Hawaii. Calculate the Hawaii 
research expenses incurred outside of Hawaii.  If the amount of the Hawaii       TCRA by multiplying the eligible Hawaii research expenses by 0.20 (20%).
credit exceeds the amount of the taxpayer’s Hawaii tax liability (if any) for 
the applicable tax year, the difference is refunded to the taxpayer.             Deadline For Claiming the Credit
Significantly, Act 270 adopts the base amount as set forth under IRC             The deadline to claim the credit, including amended claims, is 12 months 
section 41(c), such that only the increasing incremental amounts are eligible    after the close of your taxable year.  You cannot claim the credit after the 
for the credit.  Act 270 also requires that in order for a taxpayer to claim     deadline.
the Hawaii TCRA, said taxpayer must also claim the federal tax credit for        SPECIFIC INSTRUCTIONS
increasing research activities under IRC section 41.  For more information, 
see Tax Information Release No. 2013-02.                                         Note:  If you are claiming your share of the TCRA from a partnership, 
Act 261, SLH 2019, amends the TCRA by extending the credit through               S corporation, estate, trust, or cooperative, skip lines 1 through 4 and 
2024, allowing the credit to be claimed for all research expenses incurred in    start on line 5.
Hawaii without regard to the amount of expenses for previous years (base         Enter your fiscal or short tax year in the space provided.
amount), and imposing an annual cap of $5,000,000, effective for taxable         Line 1a through 1f, Column A — Enter in Column A the amount of the 
years beginning after December 31, 2019.                                         eligible research expenses reported on federal Form(s) 6765 for the tax 
Purpose of Form                                                                  year.  Attach a copy of your federally filed Form 6765(s) for the tax year to 
Use Form N-346 to figure and claim the  TCRA under section 235-                  Form N-346.
110.91, Hawaii Revised Statutes (HRS).                                           Note: The tax credit is allocated by DBEDT on a calendar year basis. 
Who May Claim the Credit                                                         This means that after tax year 2020, the tax credit allocated to a fiscal year 
                                                                                 taxpayer may cover eligible research expenses incurred by the taxpayer 
This credit may be claimed by a qualified high technology business               in the same year as the calendar year and in the previous tax year. In this 
(QHTB) as defined under section 235-7.3(c), HRS.  Any partnership, S             case, the fiscal year taxpayer may need to attach federal Forms 6765 that 
corporation, estate, trust, or cooperative that allocates this credit (including were filed for more than one tax year.
a pro rata share of the credit from a flow-through entity) must attach Form 
N-346, Form N-346A, and federal Form 6765 to its income tax return.              Lines 1a through 1f, Column B — Enter  in Column B the amount of the 
Taxpayers claiming their pro rata share of the credit must also attach a copy    eligible  research  expenses  attributable  to  research  activity  conducted IN 
of their Schedule K-1s.                                                          HAWAII for the tax year and which are part of the amounts reported on lines 
When the Credit May Not Be Claimed                                               2a through 2f, Column A.
This credit may not be claimed if either of the following apply to your tax      Note: Expenses attributable to research activities OUTSIDE HAWAII do 
situation:                                                                       not qualify for the credit.
(1)  you are not claiming the federal tax credit for research activities under   Line 2 — Multiply the amount on line 1g, Column B by 0.20 (20%).  Enter 
IRC section 41.                                                                  the result here.  This is your tentative TCRA.
(2)  You have no eligible Hawaii research expenses.                              Line 3 — If you are claiming your share of the TCRA from a partnership, 
                                                                                 S corporation, estate, trust, or cooperative, then enter the amount here.  
Credit Requirements                                                              Also, enter the name and federal employer identification number of any 
To claim the credit, the following requirements must be satisfied:               flow-through entity who has passed the TCRA through to you.  If additional 
(1)  The credit must be certified by the Department of Business, Economic        space is needed, include the information on an attached schedule.
Development and  Tourism (DBEDT).  See Form N-346A for more                      Line 4 — Add lines 2 and 3.  This is your total TCRA allowed for the tax 
information.                                                                     year.  Enter the amount here, rounded to the nearest dollar, and on the 
(2)  The credit form (Form N-346), certification form (Form N-346A), federal     appropriate line for the credit on Schedule CR. For pass-through entities, 
Form 6765, Schedule K-1s (pro rata share credit claims), and Schedule            enter this amount on the appropriate lines of your tax return.
CR (for tax returns for which Schedule CR is required) must be attached