HRS § 235-7.3 — Royalties derived from patents, copyrights, or trade secrets excluded from gross income


§235-7.3 Royalties derived from patents,
copyrights, or trade secrets excluded from gross income. (a) In addition
to the exclusions in section 235-7, there shall be excluded from gross income,
adjusted gross income, and taxable income, amounts received by an individual or
a qualified high technology business as royalties and other income derived from
any patents, copyrights, and trade secrets:
(1) Owned by the individual or qualified high
technology business; and
(2) Developed and arising out of a qualified high
technology business.
(b) With respect to performing arts products,
this exclusion shall extend to:
(1) The authors of performing arts products, or any
parts thereof, without regard to the application of the work-for-hire doctrine
under United States copyright law;
(2) The authors of performing arts products, or any
parts thereof, under the work-for-hire doctrine under United States copyright
law; and
(3) The assignors, licensors, and licensees of any
copyright rights in performing arts products, or any parts thereof.
(c) For the purposes of this section:
"Performing arts products" means:
(1) Audio files, video files, audiovideo files,
computer animation, and other entertainment products perceived by or through
the operation of a computer; and
(2) Commercial television and film products for sale
or license, and reuse or residual fee payments from these products.
"Qualified high technology business"
means a business that conducts more than fifty per cent of its activities in
qualified research.
"Qualified research" means:
(1) The same as in section 41(d) of the Internal
Revenue Code;
(2) The development and design of computer software
for ultimate commercial sale, lease, license or to be otherwise marketed, for
economic consideration. With respect to the software's development and design,
the business shall have substantial control and retain substantial rights to
the resulting intellectual property;
(3) Biotechnology;
(4) Performing arts products;
(5) Sensor and optic technologies;
(6) Ocean sciences;
(7) Astronomy; or
(8) Nonfossil fuel energy-related technology.