Register Custom Taxonomy with Hierarchical Terms

/**
 * Register 'project_type' taxonomy for the portfolio CPT.
 */
add_action( 'init', function(): void {
    register_taxonomy( 'project_type', array( 'portfolio' ), array(
        'labels' => array(
            'name'              => __( 'Project Types', 'theme-domain' ),
            'singular_name'     => __( 'Project Type', 'theme-domain' ),
            'search_items'      => __( 'Search Project Types', 'theme-domain' ),
            'all_items'         => __( 'All Project Types', 'theme-domain' ),
            'parent_item'       => __( 'Parent Project Type', 'theme-domain' ),
            'parent_item_colon' => __( 'Parent Project Type:', 'theme-domain' ),
            'edit_item'         => __( 'Edit Project Type', 'theme-domain' ),
            'add_new_item'      => __( 'Add New Project Type', 'theme-domain' ),
        ),
        'hierarchical'      => true,
        'show_in_rest'      => true,
        'show_admin_column' => true,
        'rewrite'           => array( 'slug' => 'project-type' ),
    ) );
} );