HB 1685 Summary

• Establishes a cybersecurity and artificial intelligence business investment tax credit for taxpayers subject to Hawaii income tax, deductible from net income tax liability over five years following the investment.

• Credit amounts decrease over the five-year period: year of investment up to $700,000; first year after up to $500,000; second year after up to $400,000; third and fourth years after up to $200,000 each (specific percentages not filled in).

• Allows excess credits exceeding annual tax liability to be carried forward to subsequent years until exhausted, with claims requiring filing by the end of the twelfth month following the close of the taxable year.

• Requires taxpayers to submit annual certified statements to the director of taxation identifying qualified investments and tax credits claimed; department must maintain records, verify investments, and issue certificates.

• Applies recapture provisions requiring repayment of prior two years of credits if the qualified business ceases to qualify, is sold, or the taxpayer withdraws their investment during the five-year credit period.