• Section 235-110.9, Hawaii Revised Statutes (HRS), provides a 100% investment income tax credit (over a five-year period) to investors in performing arts products.

• Section 235-7.3, HRS, states that royalties derived from performing arts products are excluded from income and not subject to state income tax.

Section 235-110.9, HRS, High technology business investment tax credit.

What is the tax credit?

• This is a business investment tax credit designed to stimulate greater investment in Hawaii's high technology industry.
• The credit is non-refundable.
• The credit is available to the Hawaii taxpayer for each investment in a "qualified high technology business" (QHTB).
• The credit is deductible from the Hawaii taxpayer's net income liability.
• The maximum amount of an investment qualifying for the tax credit is $2 million annually, per investor, per QHTB.

How much is the tax credit?

• The tax credit is applied in percentages, spread out over five years, totaling 100% at the end of the five-year period.

• The credit applies to investments made in taxable years beginning after December 31, 2000 and before January 1, 2006.

Definitions:

“Qualified high technology business” (QHTB) is defined as:

• The tax credit is applied in percentages, spread out over five years, totaling 100% at the end of the five-year period.
• A business employing or owning capital or property or maintaining an office in Hawaii, provided that:
• More that 50% of the total business activities are qualified research and that the business conducts more than 75% of its qualified research in Hawaii, or,
• More than 75% of its gross income is derived from qualified research and that this income is received from products sold from, manufactured in, or produced in Hawaii, and services performed in Hawaii.

For a business to be considered a QHTB, a “Comfort Ruling” must be obtained from the Hawaii State Department of Taxation. - http://www.state.hi.us/tax/hi_tech.html

“Qualified Research” is defined as:

• Development and design of computer software
• Biotechnology
• Performing arts products
• Sensor and optic technologies
• Ocean sciences
• Astronomy
• Non-fossil fuel energy-related technology

“Performing arts products” is defined as:

• Audio files, video files, audio-video files, computer animation, and other entertainment products perceived by or through the operation of a computer; and
• Commercial television and film products for sale or license, and reuse or residual fee payments from these products.

Section 235-7.3, HRS,   Royalties derived from patents, copyright, or trade secrets excluded from gross income. 

Amounts received by an individual or qualified high technology business as royalties, copyright, and trade secrets, are excluded from gross income, adjusted gross income and taxable income.

With respect to performing arts products, this exclusion extends to:

• The authors of performing arts products, or parts thereof, with or without regard to the application of the work for hire doctrine under United States copyright law.
• The assignors, licensors, and licensees of any copyright rights in performing arts products, or any parts thereof.

Please call the Hawaii Film Office at 808-586-2570 for more information.