Hawaii Enterprise Zones
“The state has been moving to diversify its economy, which is heavily dependent on tourism. A generous Enterprise Zones program offers incentives—including relief from that General Excise Tax—for a wide variety of businesses, from call centers to medical research firms.”
– Scott Cohn, CNBC, America’s Top States for Business 2013
The Enterprise Zones (EZ) partnership program is a joint state-county effort intended to stimulate—via tax and other incentives—certain types of business activity, job preservation, and job creation in areas where they are most appropriate or most needed. Up to six zones can be designated per county. (See maps for existing zones.)
If your business (or a branch of your business) is eligible and located in one of the Enterprise Zones (EZ), you can reduce your state taxes and receive other county benefits for up to seven years by satisfying the EZ hiring or, for agricultural related companies, gross receipts requirements.
Businesses which satisfy annual requirements will qualify for the following state tax benefits for up to seven consecutive years:
- 100% exemption from the General Excise Tax (GET). (The GET exemption applies only to revenues from EZ-eligible activities.) Licensed contractors are also exempt from GET on construction done within an EZ for an EZ-qualified business.
- An 80% non-refundable state income tax credit the first year. (This non-refundable credit goes down 10% each year for 6 more years – ending at 20%.)
- An additional non-refundable income tax credit equal to 80% of annual Unemployment Insurance premiums the first year. (This non-refundable credit goes down 10% each year for 6 more years – ending at 20%.)
NOTE: The two non-refundable income tax credits combined may not exceed 100% of income tax due.
State Legislative Changes:
As of July 1, 2008
May increase gross sales by 2% annually rather than the hiring requirements
May use income from value-added products (retail and wholesale) towards certification
In the event of a natural disaster, agricultural producers and processors will receive EZ benefits
Leased employees or joint employment contract
Employees may be counted as full time employees
As of July 1, 2009
Extended the EZ tax credits and exemptions, for businesses engaged in the manufacturing of tangible personal property or in the producing or processing of agricultural products, for an additional three years.
Allow the receipts, sales, and employees of a business’s establishments in all enterprise zones located within the same county to count towards qualification requirements.
Each county will offer eligible businesses additional benefits that may include one or more of the following:
- Priority permit processing
- Zoning or building permit waivers or variances
- Property tax adjustments
- Priority consideration for federal job training or community development funds
CITY AND COUNTY OF HONOLULU (THE ISLAND OF OAHU):
- Two-year exemption from any increase in property taxes resulting from new construction by EZ firms at their EZ sites.
- Waiver of building and grading permit fees for enrolled EZ firms.
HAWAII COUNTY (THE “BIG” ISLAND):
- Three-year exemption from any increase in property taxes resulting from new construction by EZ firms at their EZ sites.
KAUAI COUNTY (THE ISLANDS OF KAUAI AND NIIHAU):
- Priority business permit processing.
MAUI COUNTY (THE ISLANDS OF LANAI, MAUI AND MOLOKAI):
- Priority business permit processing.
To enroll in the Enterprise Zones partnership, at least half of a firm’s annual gross income in an EZ must be from one or more of the following activities:
- Agricultural production or processing
- Aviation or maritime repair or maintenance
- Telecommunications switching and delivery systems
- Information technology design and production
- Medical research, clinical trails, and telemedicine
- For-profit training programs in international business management or environmental remediation
- Biotechnology research, development, production, or sales
- Repair or maintenance of assisted technology equipment
- Certain types of call centers
- Wind energy producers
Other businesses are not eligible, including retailers and some professional services. Contractors (firms which build, maintain, or repair real estate, such as custodial, construction, painting, electrical, and plumbing firms) also are ineligible to enroll in the EZ program.
Each county may select up to six zones for approval by the Governor. Zones exist for 20 years each. Zones may also be expanded to include adjacent eligible areas during the zone’s 20-year existence. 22 zones currently exist statewide. All or part of the following areas have been designated on the dates indicated:
- Pearl City-Ewa-Central Oahu
- North Shore Oahu
- Leeward Oahu
- Urban Honolulu
- North Kona
- South Kona
- North Kohala
- North Shore Kauai
- South Central Kauai
- West Kauai
Maui County (Molokai/Lanai)
- East Maui
- Greater Maui
- West Maui
Forms and Business Participation Guidelines
Go to Electronic EZ Program Forms. Note: if you do not already have an eHawaii account, you will be prompted to set one up in order to file EZ forms electronically. Also, for current EZ Program companies, after you establish your eHawaii account, please notify us if you haven’t already so we may link your email with your company EZ record (this is done automatically only for new applicants). For current EZ Program companies we must manually link your email with your company account. We will then send you a confirmation that you may now use the system to file your reports. We have attached a short notification form here (link to pdf attached) for your reference if you would like to complete and return to us.
- Complete and submit EZ Application form. DBEDT will verify that your business is EZ-eligible and will then forward your application to your County EZ Coordinator.
- DBEDT will notify you by mail if your EZ application is approved. If approved, your 84-month period of eligibility will begin on the first day of the month following your approval date.
- Allocate and apportion gross receipts from EZ-eligible activities that take place in the county throughout each tax year. Eligible activities include: manufacturing; wholesaling; agriculture; aviation and maritime cleaning, repair, and maintenance; telecommunications switching and delivery systems; information technology design and production; medical research, clinical trials, and telemedicine; and/or for-profit training programs in international business management or environmental remediation.
- Keep track of your number of full-time employees during each pay period throughout each tax year. (Full-time = 20 or more hours per week per pay period.)
- Complete and submit the End-of-Year Report form within one month following the end of each tax year.
- DBEDT will review the report to determine if your business has satisfied the EZ hiring or for agricultural businesses, gross receipts requirements. Upon approval,
- DBEDT will issue a certification letter to your company and notify the County.
- Attach copies of the certification letter to your state general excise tax reconciliation form and your state income tax return.
- Also complete and attach State Tax Department Form 756 (enterprise zones tax credit) to the state income tax return.
- Contact your county EZ coordinator for instructions on how to claim the county’s EZ tax benefits, if applicable.
If you have any questions, the State Enterprise Zones Partnership coordinator can be reached at: (Oahu) 587-2772.
For more information on the County benefits listed above, contact your county coordinator: Honolulu County– (808) 768-5859; Hawaii County–(808) 961-8496; Kauai County– (808) 241-4949; Maui, Molokai, & Lanai County– (808) 270-7710.
Hawaii Revised Statutes
Hawaii Administrative Rules