SB 3046: DLIR; DOTAX; Nonrefundable Income Tax Credit; Workforce Builder Tax Credit; Report; Appropriation

A BILL FOR AN ACT

RELATING TO INCOME TAX CREDIT.

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

     SECTION 1.  The legislature finds that the State's long-term economic competitiveness depends on a skilled, adaptable, and locally trained workforce aligned with the needs of private-sector employers.  Employers across multiple industries report that the costs associated with recruiting, training, and supervising interns and apprentices are a significant barrier to expanding work-based learning opportunities.

     The legislature further finds that while the State currently provides indirect workforce support through grants, training reimbursements, and allocation of funding from federal programs, the State does not offer a direct, broad-based tax incentive to encourage private-sector employers to create and sustain internship and apprenticeship placements.  Unfortunately, while the State has established workforce-related tax credits and incentive programs administered by the department of labor and industrial relations, employer participation in certain existing credit programs has been limited, in part due to narrow eligibility criteria, administrative complexity, or lack of alignment with employer-driven workforce needs.

     The legislature also finds that employer-led, demand-driven workforce initiatives have demonstrated higher levels of private-sector engagement.  In particular, sector partnerships coordinated by The Chamber of Commerce of Hawaii have successfully engaged a broad cross-section of employers to collaboratively identify workforce needs, develop training pathways, and support work-based learning opportunities aligned with industry demand.

     Furthermore, the legislature finds that expanding private-sector participation in internship and apprenticeship programs requires a broad-based, accessible incentive that complements existing workforce programs, leverages proven employer networks, and reduces the cost barriers faced by businesses, particularly small and medium-sized employers, when offering paid work-based learning placements.

     Therefore, the purpose of this Act is to establish a workforce builder tax credit to incentivize private-sector employers to provide paid internships and apprenticeships, increase employer participation in work-based learning programs, and strengthen Hawaii's workforce pipeline through employer-led, industry-aligned pathways.

     SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Workforce builder tax credit.  (a)  There is allowed to each eligible taxpayer subject to the taxes imposed under this chapter, a nonrefundable workforce builder income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

     (b)  The amount of the tax credit shall be:

     (1)  $1,000 for each qualified intern; or

     (2)  $2,000 for each qualified apprentice.

     (c)  The department of taxation shall allow the credit under this section upon certification by the department of labor and industrial relations that the eligible taxpayer has employed a qualified intern or qualified apprentice during the taxable year.

     (d)  The total amount of the tax credits allowed under this section shall not exceed $5,000,000 in the aggregate for all taxable years combined; provided that the department of taxation shall disallow any credit claimed once the aggregate cap has been reached.

     (e)  If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted.  All claims, including amended claims, for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (f)  The director of taxation:

     (1)  Shall prepare any forms necessary to claim a tax credit under this section; and

     (2)  May require proof of the claim for the tax credit.

     (g)  The department of labor and industrial relations, in coordination with the department of taxation, shall adopt rules pursuant to chapter 91 necessary to carry out the purposes of this section.

     (h)  For the purposes of this section:

     "Eligible taxpayer" means a private-sector business entity subject to taxation under this chapter that employs one or more qualified interns or qualified apprentices in the State.

     "Qualified apprentice" means an individual who is employed by an eligible taxpayer and is registered as a participant in a state or federally recognized apprenticeship program.

     "Qualified intern" means an individual who:

     (1)  Is engaged in a paid internship or work-based learning placement with an eligible taxpayer for not less than three months during the taxable year; and

     (2)  Is participating in a structured internship or work-based learning program connected to an educational institution, workforce training program, or industry-recognized credential pathway, as determined by the department of labor and industrial relations."

     SECTION 3.  The department of labor and industrial relations, in coordination with the department of taxation, shall submit a report of its findings and recommendations, including any proposed legislation, on the workforce builder tax credit to the legislature no later than twenty days prior to the convening of the regular session of 2029.  This report shall be submitted in accordance with section 93-16, Hawaii Revised Statutes, and shall include:

     (1)  The number of participating employers;

     (2)  The number of interns and apprentices supported;

     (3)  Industry sectors represented;

     (4)  The fiscal impact of the tax credit; and

     (5)  Any recommendation for continuation, modification, or expansion of the tax credit.

     SECTION 4.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2026-2027 to administer and fund the workforce builder tax credit.

     The sum appropriated shall be expended by the department of taxation for the purposes of this Act.

     SECTION 5.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on January 1, 2077.

Report Title:

DLIR; DOTAX; Nonrefundable Income Tax Credit; Workforce Builder Tax Credit; Report; Appropriation

Description:

Establishes a nonrefundable Workforce Builder Tax Credit for employers who employ qualified interns and apprentices, to be applied to taxable years beginning after 12/31/2026.  Requires a report to the Legislature.  Appropriates funds.  Effective 1/1/2077.  (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 INCOME tax credit.

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

     SECTION 1.  The legislature finds that the State's long-term economic competitiveness depends on a skilled, adaptable, and locally trained workforce aligned with the needs of private-sector employers.  Employers across multiple industries report that the costs associated with recruiting, training, and supervising interns and apprentices are a significant barrier to expanding work-based learning opportunities.

     The legislature further finds that while the State currently provides indirect workforce support through grants, training reimbursements, and allocation of funding from federal programs, the State does not offer a direct, broad-based tax incentive to encourage private-sector employers to create and sustain internship and apprenticeship placements.  Unfortunately, while the State has established workforce-related tax credits and incentive programs administered by the department of labor and industrial relations, employer participation in certain existing credit programs has been limited, in part due to narrow eligibility criteria, administrative complexity, or lack of alignment with employer-driven workforce needs.

     The legislature also finds that employer-led, demand-driven workforce initiatives have demonstrated higher levels of private-sector engagement.  In particular, sector partnerships coordinated by The Chamber of Commerce of Hawaii have successfully engaged a broad cross-section of employers to collaboratively identify workforce needs, develop training pathways, and support work-based learning opportunities aligned with industry demand.

     Furthermore, the legislature finds that expanding private-sector participation in internship and apprenticeship programs requires a broad-based, accessible incentive that complements existing workforce programs, leverages proven employer networks, and reduces the cost barriers faced by businesses, particularly small and medium-sized employers, when offering paid work-based learning placements.

     Therefore, the purpose of this Act is to establish a workforce builder tax credit to incentivize private-sector employers to provide paid internships and apprenticeships, increase employer participation in work-based learning, programs, and strengthen Hawaii's workforce pipeline through employer-led, industry-aligned pathways.

     SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Workforce builder tax credit.  (a)  There is allowed to each eligible taxpayer subject to the taxes imposed under this chapter, a nonrefundable workforce builder income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

     (b)  The amount of the tax credit shall be:

     (1)  $1,000 for each qualified intern; or

     (2)  $2,000 for each qualified apprentice.

     (c)  The department of taxation shall allow the credit under this section upon certification by the department of labor and industrial relations that the eligible taxpayer has employed a qualified intern or qualified apprentice during the taxable year.

     (d)  The total amount of the tax credits allowed under this section shall not exceed $5,000,000 in the aggregate for all taxable years combined; provided that the department of taxation shall disallow any credit claimed once the aggregate cap has been reached.

     (e)  If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted.  All claims, including amended claims, for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (f)  The director of taxation:

     (1)  Shall prepare any forms necessary to claim a tax credit under this section; and

     (2)  May require proof of the claim for the tax credit.

     (g)  The department of labor and industrial relations, in coordination with the department of taxation, shall adopt rules pursuant to chapter 91 necessary to carry out the purposes of this section.

     (h)  For the purposes of this section:

     "Eligible taxpayer" means a private-sector business entity subject to taxation under this chapter that employs one or more qualified interns or qualified apprentices in the State.

     "Qualified apprentice" means an individual who:

     (1)  Is a resident of the State; and

     (2)  Is employed by an eligible taxpayer and is registered as a participant in a state or federally recognized apprenticeship program.

     "Qualified intern" means an individual who:

     (1)  Is a resident of the State;

     (2)  Is engaged in a paid internship or work-based learning placement with an eligible taxpayer for not less than three months during the taxable year; and

     (3)  Is participating in a structured internship or work-based learning program connected to an educational institution, workforce training program, or industry-recognized credential pathway, as determined by the department of labor and industrial relations."

     SECTION 3.  The department of labor and industrial relations, in coordination with the department of taxation, shall submit a report of its findings and recommendations, including any proposed legislation, on the workforce builder tax credit to the legislature no later than twenty days prior to the convening of the regular session of 2029.  This report shall be submitted in accordance with section 93-16, Hawaii Revised Statutes, and shall include:

     (1)  The number of participating employers;

     (2)  The number of interns and apprentices supported;

     (3)  Industry sectors represented;

     (4)  The fiscal impact of the tax credit; and

     (5)  Any recommendation for continuation, modification, or expansion of the tax credit.

     SECTION 4.  There is appropriated out of the general revenues of the State of Hawaii the sum of $5,000,000 or so much thereof as may be necessary for fiscal year 2026-2027 to administer and fund the workforce builder tax credit.

     The sum appropriated shall be expended by the department of taxation for the purposes of this Act.

     SECTION 5.  New statutory material is underscored.

     SECTION 6.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2026.

Report Title:

DLIR; DOTAX; Nonrefundable Income Tax Credit; Workforce Builder Tax Credit; Report; Appropriation

Description:

Establishes a nonrefundable Workforce Builder Tax Credit for employers who employ qualified interns and apprentices, to be applied to taxable years beginning after 12/31/2026.  Requires a report to the Legislature.  Appropriates funds.

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. 2534

Honolulu, Hawaii

RE:     S.B. No. 3046

        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 Labor and Technology, to which was referred S.B. No. 3046 entitled:

"A BILL FOR AN ACT RELATING TO INCOME TAX CREDIT,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  For taxable years beginning January 1, 2027, establish a nonrefundable Workforce Builder Tax Credit for employers who employ qualified interns and apprentices; and

     (2)  Require a report to the Legislature.

     Your Committee received testimony in support of this measure from the University of Hawaiʻi System, Chamber of Commerce Hawaii, Hawaii Food Industry Association, Maui Chamber of Commerce, and one individual.

     Your Committee received comments on this measure from the Department of the Attorney General, Department of Labor and Industrial Relations, and Tax Foundation of Hawaii.

     Your Committee finds that paid internships and registered apprenticeship programs are in relatively short supply.  Your Committee further finds that the State's small- and medium-sized businesses could be incentivized to take advantage of a Workforce Builder Tax Credit to create and expand paid internships and registered apprenticeship programs to help reduce graduate underemployment.  Your Committee finds that this measure will complement existing workforce investments and reinforce a shared commitment to expand the supply side of the work-based learning opportunity equation.

     Your Committee acknowledges the concerns raised in testimony by the Department of the Attorney General that requiring individuals to be a resident of the State to be a qualified apprentice may subject the bill to challenge under the Privileges and Immunities Clause of the United States Constitution.  Therefore, amendments to this measure are needed to address this concern.

     Accordingly, your Committee has amended this measure by:

     (1)  Changing the definition of "qualified apprentice" and "qualified intern" to delete the requirement that the individual be a resident of the State;

     (2)  Inserting a blank appropriation amount;

     (3)  Inserting an effective date of January 1, 2077, to encourage further discussion; and

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

     Your Committee notes that although this measure, as amended, maintains the $5,000,000 aggregate cap for the tax credit, should your Committee on Ways and Means choose to deliberate on this measure, your Committee respectfully requests that it consider inserting $1,000,000 for the aggregate tax credit cap.

     As affirmed by the record of votes of the members of your Committee on Labor and Technology that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3046, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3046, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Labor and Technology,