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HI — State Policy Updated January 2026

Hawaii

Enterprise Zones Program Environmental review (HRS 343) Water use permits (designated areas) Special Management Area permits (coastal) Water Constraints

Overview

Hawaii does not offer data-center-specific tax breaks or incentives at the state level. Projects may qualify for the Enterprise Zones program if they meet certification and location requirements, but the law’s definition of eligible businesses does not explicitly include data centers. The state’s strict environmental review process, water use permitting in designated areas, and 100% renewable energy mandate by 2045 shape the feasibility and economics of large-scale data center development in the islands.

Incentives

Enterprise Zones Program

The Enterprise Zones Partnership Program offers state and county tax reductions for certified businesses in designated zones. The program runs for up to seven years, with credits declining over time.[1][2]

  • Credits are calculated based on Hawaii income tax liability and unemployment insurance premiums attributable to enterprise-zone activity.
  • Eligible service businesses include telecommunications and IT design/production services, but it is unclear whether data center operations qualify under current definitions.
  • Certification by the Department of Business, Economic Development and Tourism (DBEDT) is required to claim the credit on Form N-756.

Requirements and Conditions

Environmental Review

State environmental review can be a significant hurdle. HRS Chapter 343 requires an environmental assessment for actions using state or county lands or funds, and for certain project categories.[3]

  • Power-generating facilities over 5 MW are covered actions that trigger the EA/EIS process.
  • A large data center needing state land, state funding, or a new fossil generation build can require a full environmental impact statement if the EA determines significant environmental effects.

Special Management Area Permits (Coastal Zones)

Projects in coastal zones must obtain SMA permits under HRS Chapter 205A. Counties administer these permits and must consider cumulative environmental effects.[4]

  • SMA permitting adds a discretionary review step for any data center sited near the coast.
  • Public notice and comment may be required depending on the project’s scope and location.

Land Use Districting

The state Land Use Commission classifies all land into Urban, Rural, Conservation, or Agricultural districts. Boundary amendments for parcels over 15 acres or any Conservation District lands require LUC review.[5]

  • This creates a formal state-level approval process for site changes, particularly for large industrial facilities in non-urban zones.

Water and Environmental Rules

Water Use Permits

Water use in designated water management areas requires a permit from the Commission on Water Resource Management (CWRM). The permit process includes public notice and, in some cases, public hearings.[6]

  • Data centers with significant cooling water demand can trigger this requirement.
  • The state manages water allocation through a priority system that balances competing uses.

Air Permits

Stationary air pollution sources must obtain an Air Pollution Control Permit unless specifically exempted under Hawaii Administrative Rules 11-60.1.[7]

  • Backup generators and on-site turbines can require covered or noncovered source permits from the Clean Air Branch.
  • Construction and operation timelines must account for permit review and approval.

Wastewater and Stormwater Permits

Facilities needing NPDES permit coverage for wastewater or stormwater discharge must apply and obtain coverage before discharge begins.[8]

  • Construction-phase stormwater is a common trigger for large sites.
  • The Clean Water Branch administers general permits for qualifying discharges.

What to Watch

  • Real-time pricing for large loads: A 2024 UHERO report proposes hourly marginal-cost pricing for large commercial customers, which could materially affect data center operating economics if adopted by regulators.[10]
  • Enterprise Zone eligibility: Whether data centers qualify as “service businesses” under current DBEDT certification rules remains unresolved in public guidance.
  • Utility interconnection rules: No recent PUC dockets or Hawaiian Electric filings specifically target large-load interconnections or data center tariffs, but the state’s renewable energy mandate may drive future rulemaking as grid constraints emerge.

Sources

[1] Hawaii Department of Business, Economic Development and Tourism (DBEDT), “Enterprise Zones,” n.d., https://invest.hawaii.gov/business-programs/enterprise-zones/ (accessed 2026-01-07).

[2] Hawaii Department of Taxation, “Instructions for Form N-756 (Rev. 2025) Enterprise Zone Tax Credit,” 2025, https://files.hawaii.gov/tax/forms/current/n756ins.pdf (accessed 2026-01-07).

[3] State of Hawaii, “Hawaii Revised Statutes Chapter 343 - Environmental Impact Statements,” updated Jan 2008, https://files.hawaii.gov/luc/docs/hrs_343.pdf (accessed 2026-01-07).

[4] Hawaii Office of Planning and Sustainable Development, “Hawaii Coastal Zone Management Program Guidance in Special Management Area Permitting,” rev. Apr 2023, https://files.hawaii.gov/dbedt/op/czm/program/sma/HCZM-Guidance-SMA-Permitting.pdf (accessed 2026-01-07).

[5] Hawaii Land Use Commission, “About the LUC,” n.d., https://luc.hawaii.gov/about/ (accessed 2026-01-07).

[6] Hawaii Department of Land and Natural Resources, Commission on Water Resource Management, “Water Use Permit Process (Designated WMA),” n.d., https://files.hawaii.gov/dlnr/cwrm/forms/dgwup.pdf (accessed 2026-01-07).

[7] Hawaii Department of Health, Clean Air Branch, “Permit Application Forms,” n.d., https://health.hawaii.gov/cab/permit-application-forms/ (accessed 2026-01-07).

[8] Hawaii Department of Health, Clean Water Branch, “NPDES General Permits,” n.d., https://health.hawaii.gov/cwb/general-permits/ (accessed 2026-01-07).

[9] Hawaii State Energy Office, “Energy Policy,” n.d., https://energy.hawaii.gov/energy-policy/ (accessed 2026-01-07).

[10] University of Hawaii System News, “Electricity pricing change for large Hawaii businesses proposed,” Aug 29, 2024, https://www.hawaii.edu/news/2024/08/29/electricity-pricing-change-proposed/ (accessed 2026-01-07).