N-346: Tax Credit for Research Activities (2024)
Hawaii · Hawaii DoTax · Used for tax years 2024
Hawaii Form N-346 is used to figure and claim the Tax Credit for Research Activities. It reports the federal research credit, eligible research expenses attributable to Hawaii, credits received from other entities, and the total Hawaii credit allowed.
Who files this form
Use Form N-346 to figure and claim Hawaii’s Tax Credit for Research Activities.
The credit may be claimed by a qualified high technology business that:
- Has no more than 500 employees.
- Conducts more than 50 percent of its activities in qualified research in Hawaii.
- Is registered to do business in Hawaii.
You must also claim the federal research activities credit under Internal Revenue Code section 41 and have eligible Hawaii research expenses.
Partnerships, S corporations, estates, trusts, and cooperatives that allocate this credit must attach Form N-346, Form N-346A, and federal Form 6765 to their income tax returns. Taxpayers claiming their share of the credit must also attach copies of their Schedule K-1s.
When it's due
For tax year 2024, 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 that deadline.
What you'll need
Attach these documents to your income tax return when claiming the credit:
- Form N-346, Tax Credit for Research Activities.
- Form N-346A, the certification form.
- A copy of your federally filed Form(s) 6765 for the tax year.
- Schedule K-1s if you are claiming your share of a credit from a flow-through entity.
- Schedule CR if it is required for your tax return.
To complete Form N-346, you will also need your federal research credit amount, eligible research expenses reported on federal Form 6765, and the portion attributable to research conducted in Hawaii. For a flow-through credit, have the entity’s name and federal employer identification number available. Patrons use the credit amount from federal Form 1099-PATR.
How to file
Attach Form N-346 to Form N-11, N-15, N-20, N-30, N-35, N-40, or N-70NP, as applicable, along with the required supporting forms.
Before claiming the credit:
- Obtain certification from the Department of Business, Economic Development and Tourism (DBEDT). See Form N-346A for more information.
- Complete the annual survey required of qualified high technology businesses. See dbedt.hawaii.gov for more information.
Calculate the federal research credit first. On Form N-346, multiply that credit by the share of eligible research expenses attributable to Hawaii. If you are claiming a credit passed through from another entity, skip lines 1 through 4 and start on line 5.
Enter the total credit on line 6, rounded to the nearest dollar, and on the appropriate credit line of Schedule CR. Pass-through entities enter the amount on the appropriate lines of their tax returns.
Common mistakes
- Claiming without the federal credit or eligible Hawaii expenses. The credit cannot be claimed if you are not claiming the federal section 41 research credit or have no eligible Hawaii research expenses.
- Including research expenses from outside Hawaii. Those expenses do not qualify for the Hawaii credit.
- Missing required certification, attachments, or the annual survey. Failure to satisfy these requirements waives the right to claim the credit.
- Starting on line 1 for a passed-through credit. If you are claiming your share from a partnership, S corporation, estate, trust, or cooperative, skip lines 1 through 4 and start on line 5.
- Including wages used for the federal work opportunity credit. The form says not to include those wages on line 2c.
Questions people ask
How is the Hawaii credit calculated?
Multiply your federal research activities credit by the fraction of eligible research expenses attributable to research conducted in Hawaii. Round that fraction on line 3 to six decimal places.
Do I need DBEDT certification?
Yes. DBEDT must certify the credit. Certification is issued on a first-come, first-served basis.
What if I receive the credit through another entity?
Skip lines 1 through 4 and start on line 5. Enter the credit amount and the entity’s name and federal employer identification number. Attach a schedule if you need more space for entity information.
Is there an overall limit on certified credits?
Yes. For tax year 2024, the aggregate limit for all taxpayers is $5,000,000. This is a combined limit, not a separate limit for each taxpayer.