SB 2816: DBEDT; DOTax; Enterprise Zones; Eligible Business Activity; Innovation Enterprises; Comprehensive Review; Report

A BILL FOR AN ACT

RELATING TO STATE ENTERPRISE ZONES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that the State enterprise zones program was established in 1986 for the purpose of stimulating business activity, job growth, and job retention in areas where they are needed the most.  These areas, known as enterprise zones, are designated by the counties and approved by the governor.  Qualified companies that establish themselves in enterprise zones receive benefits that include state tax credits and tax waivers, as well as additional incentives provided by the counties.

     The legislature further finds that incentivizing private-sector investment through enterprise zone designation will accelerate clinical research and trials, medical device development, and the commercialization of new treatments and technologies.  Co‑locating these activities alongside academic medicine, health systems, and technology incubation resources strengthens industry clustering, attracts investments and new business development, fosters high-wage job creation for local residents, and expands access to advanced clinical services for Hawaii patients.  This growth will support the State's long-term economic diversification strategy by positioning Hawaii as a globally competitive health care technology hub and increasing export-oriented economic activity.

     The legislature also finds that supporting economic activity around innovative sectors will attract investment, create high-skilled jobs, and diversify Hawaii's economy consistent with the State's economic and workforce development goals.

     Accordingly, the purpose of this Act is to maximize the utilization of state-owned properties through the creation of innovation enterprises that support targeted industries and stimulate the surrounding census tracts by:

     (1)  Expanding the definition of "eligible business activity" for the purposes of the enterprise zones program to include certain research and development activities and information technology design and production services;

     (2)  Authorizing the department of business, economic development, and tourism to declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the governor's approval; and

     (3)  Requiring the department of business, economic development, and tourism to conduct an in-house comprehensive review, in consultation with the department of taxation, of the state enterprise zones program and report to the legislature.

     SECTION 2.  Section 209E-2, Hawaii Revised Statutes, is amended as follows:

     1.  By adding a new definition to be appropriately inserted and to read:

     ""Innovation enterprise" means an area located on property owned by the State that is intended to support, or currently contains, businesses primarily engaged in biomedical or life sciences research, clinical trials, medical technology development, pharmaceutical manufacturing, aerospace technology research and development, space domain awareness, or information technology design and production services."

     2.  By amending the definition of "eligible business activity" to read:

     ""Eligible business activity" means the:

     (1)  Manufacture of tangible personal property, the wholesale sale of tangible personal property as described in section 237-4, or a service business as defined in this section;

     (2)  Production of agricultural products where the business is a producer as defined in section 237-5, or the processing of agricultural products, all or some of which were grown within an enterprise zone;

     (3)  Research, development, sale, or production of [all]:

          (A)  All types of [genetically-engineered] medical, agricultural, or maritime biotechnology products; [or] and

          (B)  Medical and health care services;

     (4)  Production of electric power from wind energy for sale primarily to a public utility company for resale to the public;

     (5)  Research and development of aerospace technology; or

     (6)  Information technology design and production services;

provided that medical cannabis dispensary activities pursuant to chapter 329D shall not be considered an eligible business activity for the purposes of this chapter."

     SECTION 3.  Section 209E-4, Hawaii Revised Statutes, is amended to read as follows:

     "§209E-4  Enterprise zone designation.  (a)  The governing body of any county may apply in writing to the department to have an area declared to be an enterprise zone.  The application shall include a description of the location of the area or areas in question, and a general statement identifying proposed local incentives to complement the state and any federal incentives.

     (b)  The governor, upon the recommendation of the director, shall approve the designation of up to six areas in each county as enterprise zones for a period of twenty years.  Any such area shall be located in one United States census tract or two or more contiguous United States census tracts in accordance with the most recent decennial United States Census.  The census tract or tracts within which each enterprise zone is located also shall meet at least one of the following criteria:

     (1)  Twenty-five per cent or more of the population have incomes below eighty per cent of the median family income of the county; or

     (2)  The unemployment rate is 1.5 times the state average.

     (c)  The department may declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the governor's approval."

     SECTION 4.  (a)  The department of business, economic development, and tourism, in consultation with the department of taxation, shall conduct an in-house comprehensive review of the state enterprise zones program established under chapter 209E, Hawaii Revised Statutes.

     (b)  The comprehensive review shall include:

     (1)  An evaluation of the economic impact of the program, including the number of jobs created and the types of industries supported;

     (2)  An assessment of whether existing enterprise zones continue to meet the statutory eligibility criteria for designation; and

     (3)  Revenues generated by participating companies for each county.

     (c)  The department of business, economic development, and tourism shall submit a report of its findings to the legislature no later than twenty days prior to the convening of the regular session of 2027.

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 3000.

Report Title:

DBEDT; DOTax; Enterprise Zones; Eligible Business Activity; Innovation Enterprises; Comprehensive Review; Report

Description:

Expands the definition of "eligible business activity" for the purposes of the Enterprise Zone Program to include certain research and development activities and information technology design and production services.  Authorizes the Department of Business, Economic Development, and Tourism to declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the Governor's approval.  Requires DBEDT to conduct an in-house comprehensive review, in consultation with the Department of Taxation, of the State Enterprise Zones Program and requires a report to the Legislature.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO STATE ENTERPRISE ZONES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that the State enterprise zones program was established in 1986 for the purpose of stimulating business activity, job growth, and job retention in areas where they are needed the most.  These areas, known as enterprise zones, are designated by the counties and approved by the governor.  Qualified companies that establish themselves in enterprise zones receive benefits that include state tax credits and tax waivers, as well as additional incentives provided by the counties.

     The legislature finds that incentivizing private-sector investment through enterprise zone designation will accelerate clinical research and trials, medical device development, and the commercialization of new treatments and technologies.  Co‑locating these activities alongside academic medicine, health systems, and technology incubation resources strengthens industry clustering, attracts investments and new business development, fosters high-wage job creation for local residents, and expands access to advanced clinical services for Hawaii patients.  This growth will support the State's long-term economic diversification strategy by positioning Hawaii as a globally competitive health care technology hub and increasing export-oriented economic activity.

     The legislature finds that supporting economic activity around innovative sectors will attract investment, create high-skilled jobs, and diversify Hawaii's economy consistent with the State's economic and workforce development goals.

     Accordingly, the purpose of this Act is to maximize the utilization of state-owned properties through the creation of innovation enterprises that support targeted industries and stimulate the surrounding census tracts by:

     (1)  Authorizing the department of business, economic development, and tourism to declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the governor's approval;

     (2)  Requiring the department of business, economic development, and tourism to conduct a comprehensive in-house review, in consultation with the department of taxation, of the state enterprise zones program established under chapter 209E, Hawaii Revised Statutes; and

     (3)  Requiring a report to the legislature.

     SECTION 2.  Section 209E-2, Hawaii Revised Statutes, is amended as follows:

     1.  By adding one new definition to be appropriately inserted and to read:

     ""Innovation enterprise" means an area located on property owned by the State that is intended to support, or currently contains, businesses primarily engaged in biomedical or life sciences research, clinical trials, medical technology development, pharmaceutical manufacturing, aerospace technology research and development, space domain awareness, or information technology design and production services."

     2.  By amending the definition of "eligible business activity" to read:

     ""Eligible business activity" means the:

     (1)  Manufacture of tangible personal property, the wholesale sale of tangible personal property as described in section 237-4, or a service business as defined in this section;

     (2)  Production of agricultural products where the business is a producer as defined in section 237-5, or the processing of agricultural products, all or some of which were grown within an enterprise zone;

     (3)  Research, development, sale, or production of [all]:

          (A)  All types of [genetically-engineered] medical, agricultural, or maritime biotechnology products; [or] and

          (B)  Medical and health care services;

     (4)  Production of electric power from wind energy for sale primarily to a public utility company for resale to the public;

     (5)  Research and development of aerospace technology; or

     (6)  Information technology design and production services;

provided that medical cannabis dispensary activities pursuant to chapter 329D shall not be considered an eligible business activity for the purposes of this chapter."

     SECTION 3.  Section 209E-4, Hawaii Revised Statutes, is amended to read as follows:

     "§209E-4  Enterprise zone designation.  (a)  The governing body of any county may apply in writing to the department to have an area declared to be an enterprise zone.  The application shall include a description of the location of the area or areas in question, and a general statement identifying proposed local incentives to complement the state and any federal incentives.

     (b)  The governor, upon the recommendation of the director, shall approve the designation of up to six areas in each county as enterprise zones for a period of twenty years.  Any such area shall be located in one United States census tract or two or more contiguous United States census tracts in accordance with the most recent decennial United States Census.  The census tract or tracts within which each enterprise zone is located also shall meet at least one of the following criteria:

     (1)  Twenty-five per cent or more of the population have incomes below eighty per cent of the median family income of the county; or

     (2)  The unemployment rate is 1.5 times the state average.

     (c)  The department may declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the governor's approval."

     SECTION 4.  (a)  The department of business, economic development, and tourism, in consultation with the department of taxation, shall conduct an in-house comprehensive review of the state enterprise zones program established under chapter 209E, Hawaii Revised Statutes.

     (b)  The comprehensive review shall include:

     (1)  An evaluation of the economic impact of the program, including the number of jobs created and the types of industries supported;

     (2)  An assessment of whether existing enterprise zones continue to meet the statutory eligibility criteria for designation; and

     (3)  Revenues generated by participating companies for each county.

     (c)  The department of business, economic development, and tourism shall submit a report of its findings to the legislature no later than twenty days prior to the convening of the regular session of 2027.

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2050.

Report Title:

DBEDT; DOTax; Enterprise Zones; Innovation Enterprises; Comprehensive Review; Report

Description:

Expands the definition of "eligible business activity" to include certain research and development activities and information technology design and production services.  Authorizes the Department of Business, Economic Development, and Tourism to declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the Governor's approval.  Requires DBEDT to conduct an in-house comprehensive review, in consultation with the Department of Taxation, of the State Enterprise Zones Program established under chapter 209E, HRS.  Requires a report to the Legislature.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to STATE enterprise zones.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that the State enterprise zones program was established in 1986 for the purpose of stimulating business activity, job growth, and job retention in areas where they are needed the most.  These areas, known as enterprise zones, are designated by the counties and approved by the governor.  Qualified companies who establish themselves in enterprise zones receive benefits that include state tax credits and tax waivers, as well as additional incentives provided by the counties.

     The legislature finds that the John A. Burns school of medicine and the university of Hawaii cancer center serve as the nexus of Hawaii's emerging health innovation and biotechnology sector.  Incentivizing private-sector investment through enterprise zone designation will accelerate clinical research and trials, medical device development, and the commercialization of new treatments and technologies.  Co‑locating these activities alongside academic medicine, health systems, and technology incubation resources strengthens industry clustering, attracts investments and new business development, fosters high-wage job creation for local residents, and expands access to advanced clinical services for Hawaii patients.  Such growth will support the State's long-term economic diversification strategy by positioning Hawaii as a globally competitive healthcare technology hub and increasing export-oriented economic activity.

     The legislature also finds that the university of Hawaii John A. Burns school of medicine and university of Hawaii cancer center play a vital role in advancing Hawaii's science, technology, research, and advanced manufacturing sectors.  These institutions conduct cutting-edge research, clinical trials, and medical device and pharmaceutical manufacturing that contribute globally to the fields of oncology, healthcare, telemedicine, and biotechnology, and support the State's focus on fostering innovation and strengthening Hawaii's position in the science‑based industries of the future.

     The legislature further finds that supporting economic activity around these centers will attract investment, create high-skilled jobs, and diversify Hawaii's economy consistent with the State's economic and workforce developments goals.

     Accordingly, the purpose of this Act is to:

     (1)  Authorize enterprise zone designation for census tracts on state lands containing an innovation center, including the university of Hawaii John A. Burns school of medicine and the university of Hawaii cancer center; and

     (2)  Allow businesses not established in an enterprise zone to qualify for enterprise zone benefits; provided that they have entered into a binding collaboration or contract with a business that is established in the census tract that contains the university of Hawaii John A. Burns school of medicine and the university of Hawaii cancer center.

     SECTION 2.  Section 209E-2, Hawaii Revised Statutes, is amended as follows:

     1.  By adding a new definition to be appropriately inserted and to read:

     ""Affiliated collaborator" means a Hawaii-based business that:

     (1)  Is not established within an enterprise zone but has entered into a written, binding agreement with a qualified business established in the enterprise zone that includes the university of Hawaii John A. Burns school of medicine and the university of Hawaii cancer center to perform an eligible business activity;

     (2)  Is engaged in an eligible business activity, as defined in this section; and

     (3)  Conducts economic activity, including Hawaii-based payroll, research expenditures, and clinical operations, in the same county as the qualified business described in paragraph (1)."

     2.  By amending the definition of "eligible business activity" to read:

     ""Eligible business activity" means the:

     (1)  Manufacture of tangible personal property, the wholesale sale of tangible personal property as described in section 237-4, or a service business as defined in this section;

     (2)  Production of agricultural products where the business is a producer as defined in section 237-5, or the processing of agricultural products, all or some of which were grown within an enterprise zone;

     (3)  Research, development, sale, or production of [all]:

          (A)  All types of [genetically-engineered] medical, agricultural, or maritime biotechnology products[; or]; and

          (B)  Medical and health care services;

     (4)  Production of electric power from wind energy for sale primarily to a public utility company for resale to the public;

     (5)  Research and development of aerospace technology; or

     (6)  Information technology design and production services;

provided that medical cannabis dispensary activities pursuant to chapter 329D shall not be considered an eligible business activity for the purposes of this chapter."

     SECTION 3.  Section 209E-4, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The governor, upon the recommendation of the director, shall approve the designation of up to [six] eight areas in each county as enterprise zones for a period of twenty years.  Any such area shall be located in one United States census tract or two or more contiguous United States census tracts in accordance with the most recent decennial United States Census.  The census tract or tracts within which each enterprise zone is located also shall meet at least one of the following criteria:

     (1)  Twenty-five per cent or more of the population have incomes below eighty per cent of the median family income of the county; [or]

     (2)  The unemployment rate is 1.5 times the state average[.]; or

     (3)  Contain the university of Hawaii John A. Burns school of medicine or the university of Hawaii cancer center."

     SECTION 4.  Section 209E-9, Hawaii Revised Statutes, is amended to read as follows:

     "§209E-9  Eligibility; qualified business; sale of property or services.  (a)  Any business firm may be eligible to be designated a qualified business for purposes of this chapter if the business:

     (1)  Begins the operation of a trade or business in an eligible business activity within an enterprise zone;

     (2)  During each taxable year has at least fifty per cent of its enterprise zone establishments' gross receipts attributable to the active conduct of trade or business within enterprise zones located within the same county; and

     (3)  Either:

          (A)  Increases its average annual number of full-time employees employed at the business' establishment or establishments within enterprise zones located within the same county by at least ten per cent by the end of its first tax year of participation, and during each subsequent taxable year at least maintains that higher level of employment; or

          (B)  Increases its gross sales of agricultural crops produced, or agricultural products processed within enterprise zones located within the same county by two per cent annually.

For business firms engaged in producing or processing agricultural products, receipts from value-added products made from crops grown within enterprise zones located within the same county and sold at retail pursuant to the limits of subsection (e) shall count toward the gross receipts requirement under paragraph (2).

     (b)  A business firm may also be eligible to be designated a qualified business for purposes of this chapter if the business:

     (1)  Is actively engaged in the conduct of a trade or business in an eligible business activity in an area immediately prior to the area being designated an enterprise zone;

     (2)  Meets the requirements of subsection (a)(2); and

     (3)  Either:

          (A)  Increases its average annual number of full-time employees employed at the business' establishment or establishments within enterprise zones located within the same county by at least ten per cent by the end of the first year of operation, and by at least fifteen per cent by the end of each of the fourth, fifth, sixth, and seventh years of operation, and for businesses eligible for tax credits extending past the seventh year, at least maintains that higher level of employment during each subsequent taxable year; provided that the percentage increase shall be based upon the employee count at the beginning of the initial year of operation within the enterprise zone or zones; or

          (B)  Increases its gross sales of agricultural crops produced, or agricultural products processed within enterprise zones located within the same county by two per cent annually.

     (c)  After designation of an enterprise zone, each qualified business firm in the zone shall submit annually to the department an approved form supplied by the department that provides the information necessary for the department to determine if it may certify the applicability of the tax credits and exemptions provided in this chapter for the business firm.  The approved form shall be submitted by each business to the governing body of the county in which the enterprise zone is located, then forwarded to the department by the governing body of the county.

     (d)  The form referred to in subsection (c) shall be prima facie evidence of the eligibility of a business for the purposes of this section.

     (e)  Tangible personal property shall be sold at an establishment of a qualified business within an enterprise zone and the transfer of title to the buyer of the tangible personal property shall take place in an enterprise zone located within the same county in which the tangible personal property is sold.  Services shall be sold at an establishment of a qualified business engaged in a service business within an enterprise zone.

     (f)  For any fiscal year that includes September 11, 2001, a business may use its average annual number of full-time employees as of August 31, 2001--rather than its average annual number at the end of its fiscal year including September 11, 2001--if necessary to meet the requirements of subsection (a)(3) and (4) or (b)(3).  A business may also use its average annual number of full-time employees at the end of its fiscal year that includes September 11, 2001, as its base number of full-time employees if necessary to meet the requirements of subsection (a)(3) and (4) or (b)(3) in future fiscal years.

     (g)  An affiliated collaborator may be treated as a qualified business for the limited purpose of receiving state and county enterprise zone benefits; provided that:

     (1)  The affiliated collaborator shall have a written, binding agreement with a qualified business established in the enterprise zone that includes the university of Hawaii John A. Burns school of medicine or the university of Hawaii cancer center;

     (2)  The affiliated collaborator shall maintain a valid binding agreement for the duration of its eligibility; provided that the affiliated collaborator's eligibility for enterprise zone benefits shall terminate upon the expiration, termination, or breach of the agreement; and

     (3)  The affiliated collaborator's eligibility for enterprise zone benefits under this subsection shall not exceed seven years."

     SECTION 5.  Section 209E-10, Hawaii Revised Statutes, is amended to read as follows:

     "§209E-10  State business tax credit.  (a)  The department shall certify annually to the department of taxation the applicability of the tax credit provided in this chapter for a qualified business against any taxes due the State.  Except for the general excise tax, the credit shall be eighty per cent of the tax due for the first tax year, seventy per cent of the tax due for the second tax year, sixty per cent of the tax due for the third year, fifty per cent of the tax due the fourth year, forty per cent of the tax due the fifth year, thirty per cent of the tax due the sixth year, and twenty per cent of the tax due the seventh year.  For qualified businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products, the credit shall continue after the seventh year at the rate of twenty per cent of the tax due for each of the subsequent three tax years.  Any tax credit not usable shall not be applied to future tax years.

     (b)  When a partnership is eligible for a tax credit under this section, each partner shall be eligible for the tax credit provided for in this section on the partner's income tax return in proportion to the amount of income received by the partner from the partnership.  Any qualified business having taxable income from business activity, both within and without the enterprise zone, shall allocate and apportion its taxable income attributable to the conduct of business.  Tax credits provided for in this section shall only apply to taxable income of a qualified business attributable to the conduct of business within enterprise zones located within the same county.

     (c)  In addition to any tax credit authorized under this section, any qualified business shall be entitled to a tax credit against any taxes due the State in an amount equal to a percentage of unemployment taxes paid.  The amount of the credit shall be equal to eighty per cent of the unemployment taxes paid during the first year, seventy per cent of the taxes paid during the second year, sixty per cent of the taxes paid during the third year, fifty per cent of the taxes paid during the fourth year, forty per cent of the taxes paid during the fifth year, thirty per cent of the taxes paid during the sixth year, and twenty per cent of the taxes paid during the seventh year.  For qualified businesses engaged in the manufacturing of tangible personal property or the producing or processing of agricultural products, the credit shall continue after the seventh year in an amount equal to twenty per cent of the taxes paid during each of the subsequent three tax years.

     (d)  Tax credits provided for in subsection (c) shall only apply to the unemployment tax paid on employees employed at the qualified business' establishment or establishments within enterprise zones located within the same county.  Any tax credit not usable shall not be applied to future tax years.

     (e)  An affiliated collaborator certified under this chapter shall be eligible for enterprise zone benefits only with respect to income, gross receipts, and payroll that are directly attributed to and derived from each certified partnership, collaboration, or binding agreement with a qualified business established in the enterprise zone that includes the university of Hawaii John A. Burns school of medicine or the university of Hawaii cancer center."

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act shall take effect upon its approval.

Report Title:

Enterprise Zones; University of Hawaii John A. Burns School of Medicine; University of Hawaii Cancer Center; Affiliated Collaborators

Description:

Increases the number of enterprise zones that may be nominated by each county.  Authorizes enterprise zone designation for census tracts that contain the University of Hawaii John A. Burns School of Medicine and the University of Hawaii Cancer Center.  Allow businesses not established in an enterprise zone to qualify for enterprise zone benefits; provided that they have entered into a binding collaboration or contract with a business that is established in the census tract that contains the University of Hawaii John A. Burns School of Medicine or the University of Hawaii Cancer Center.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 2899

Honolulu, Hawaii

RE:     S.B. No. 2816

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 2816, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO STATE ENTERPRISE ZONES,"

begs leave to report as follows:

     The purpose and intent of this measure is to promote the development of innovative industries in the State.

     More specifically, this measure:

     (1)  Expands the definition of "eligible business activity" under the State Enterprise Zones Program to include certain research and development activities and information technology design and production services;

     (2)  Authorizes the Department of Business, Economic Development, and Tourism to declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the Governor's approval;

     (3)  Requires the Department of Business, Economic Development, and Tourism to conduct an in-house comprehensive review, in consultation with the Department of Taxation, of the State Enterprise Zones Program established under chapter 209E, Hawaii Revised Statutes; and

     (4)  Requires a report to the Legislature.

     Your Committee received written comments in support of this measure from the Department of Business, Economic Development, and Tourism; Business Development and Support Division of the Department of Business, Economic Development, and Tourism; Hawaii Technology Development Corporation; Chamber of Commerce Hawaii; Pacific Rim Land, Inc.; and one individual.

     Your Committee received written comments on this measure from the Department of Taxation.

     Your Committee finds that the State Enterprise Zones Program was established in 1986 for the purpose of stimulating business activity, job growth, and job retention in areas where they are needed the most.  Qualified companies that establish themselves in enterprise zones receive benefits that include state tax credits and tax waivers, as well as additional incentives provided by the counties.  Your Committee also finds that incentivizing private-sector investment through enterprise zone designation could be used to accelerate clinical research and trials, medical device development, and the commercialization of new treatments and technologies.  Your Committee further finds that supporting economic activity around innovative sectors will attract investment, create high-skilled jobs, and diversify Hawaii's economy consistent with the State's economic and workforce development goals.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2816, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

STAND. COM. REP. NO. 2693

Honolulu, Hawaii

RE:     S.B. No. 2816

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committees on Economic Development and Tourism and Education, to which was referred S.B. No. 2816 entitled:

"A BILL FOR AN ACT RELATING TO STATE ENTERPRISE ZONES,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Increase the number of enterprise zones that may be nominated by each county;

     (2)  Authorize enterprise zone designation for census tracts that contain the University of Hawaii John A. Burns School of Medicine and the University of Hawaii Cancer Center; and

     (3)  Allow businesses not established in an enterprise zone to qualify for enterprise zone benefits; provided that they have entered into a binding collaboration or contract with a business that is established in the enterprise zone that contains the University of Hawaii John A. Burns School of Medicine and the University of Hawaii Cancer Center.

     Your Committees received testimony in support of this measure from the Department of Business, Economic Development, and Tourism; Business Development and Support Division of the Department of Business, Economic Development, and Tourism; Hawaiʻi Technology Development Corporation; Hawaii Community Development Authority; Oceanit Laboratories, Inc.; Hawaii Medical Association; and The Queen's Health Systems.

     Your Committees received comments on this measure from the Department of Taxation; University of Hawaiʻi System; Tax Foundation of Hawaii; and Pacific Rim Land, Inc.

     Your Committees find that the Enterprise Zones Program was established to stimulate job growth and economic activity in underserved areas of the State.  However, as the State's demographics and economic trends evolve, state and county governments require greater flexibility in designating enterprise zones to fulfill the Program's mission.  Expanding the Enterprise Zones Program to include more entities will support patient care, economic growth, workforce development, and private-sector investment.  This measure modernizes the Enterprise Zones Program to reflect the evolution of economic development and foster the development of innovative sectors such as medical and health care services and research and development of aerospace and information technology.

     Your Committees have amended this measure by:

     (1)  Deleting language that would have defined "affiliated collaborator";

     (2)  Inserting a definition for "innovation enterprise";

     (3)  Restoring existing statutory language that authorizes the approval of six enterprise zones in each county;

     (4)  Deleting language that would have authorized enterprise zone designation for census tracts that contain the University of Hawaii John A. Burns School of Medicine and the University of Hawaii Cancer Center;

     (5)  Authorizing the Department of Business, Economic Development, and Tourism to declare up to two census tracts in the State that contain an innovation enterprise to be designated as an enterprise zone, subject to the Governor's approval;

     (6)  Deleting language that would have allowed affiliated collaborators to qualify for enterprise zone benefits and the State Business Tax Credit if they had entered into a binding collaboration or contract with a business that is established in the census tract that contains the University of Hawaii John A. Burns School of Medicine and the University of Hawaii Cancer Center;

     (7)  Requiring the Department of Business, Economic Development, and Tourism, in consultation with the Department of Taxation, to:

          (A)  Conduct an in-house comprehensive review of the Enterprise Zones Program established pursuant to chapter 209E, Hawaii Revised Statutes; and

          (B)  Submit a report to the Legislature no later than twenty days prior to the Regular Session of 2027;

     (8)  Amending section 1 to reflect its amended purpose;

     (9)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (10) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Economic Development and Tourism and Education that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2816, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2816, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Economic Development and Tourism and Education,