REPORT TITLE:
Income Tax; Excludes Royalties


DESCRIPTION:
Excludes from gross income, for income tax purposes, all amounts
received from royalties from intellectual properties.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.835        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
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                   A  BILL  FOR  AN  ACT

RELATING TO INCOME TAX. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The State of Hawaii has established precedents
 
 2 in exempting pensions from taxation in order to support our
 
 3 senior citizens.  Similar efforts regarding royalties would make
 
 4 Hawaii a much more attractive place to live for those whose
 
 5 expertise and intellectual developments are commercially
 
 6 profitable.
 
 7      The legislature finds that excluding royalty income from
 
 8 gross income for state income tax purposes will help promote
 
 9 economic diversification and the development of intellectual
 
10 industries such as research, writing, invention, and discovery.
 
11 Exemption of royalty income from inventions will encourage the
 
12 pursuit of those activities in the State and encourage the
 
13 relocation of those human resources to the State.
 
14      The purpose of this Act is to exempt royalty income derived
 
15 from protected intellectual property.
 
16      SECTION 2.  Section 237-7, Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  There shall be excluded from gross income, adjusted
 
19 gross income, and taxable income:
 

 
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 1      (1)  Income not subject to taxation by the State under the
 
 2           Constitution and laws of the United States;
 
 3      (2)  Rights, benefits, and other income exempted from
 
 4           taxation by section 88-91, having to do with the state
 
 5           retirement system, and the rights, benefits, and other
 
 6           income, comparable to the rights, benefits, and other
 
 7           income exempted by section 88-91, under any other
 
 8           public retirement system;
 
 9      (3)  Any compensation received in the form of a pension for
 
10           past services;
 
11      (4)  Compensation paid to a patient affected with Hansen's
 
12           disease employed by the State or the United States in
 
13           any hospital, settlement, or place for the treatment of
 
14           Hansen's disease;
 
15      (5)  Except as otherwise expressly provided, payments made
 
16           by the United States or this State, under an act of
 
17           Congress or a law of this State, which by express
 
18           provision or administrative regulation or
 
19           interpretation are exempt from both the normal and
 
20           surtaxes of the United States, even though not so
 
21           exempted by the Internal Revenue Code itself;
 
22      (6)  Any income expressly exempted or excluded from the
 
23           measure of the tax imposed by this chapter by any other
 

 
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 1           law of the State, it being the intent of this chapter
 
 2           not to repeal or supersede any such express exemption
 
 3           or exclusion;
 
 4      (7)  The first $1,750 received by each member of the reserve
 
 5           components of the Army, Navy, Air Force, Marine Corps,
 
 6           or Coast Guard of the United States of America, and the
 
 7           Hawaii national guard as compensation for performance
 
 8           of duty;
 
 9      (8)  Income derived from the operation of ships or aircraft
 
10           if the income is exempt under the Internal Revenue Code
 
11           pursuant to the provisions of an income tax treaty or
 
12           agreement entered into by and between the United States
 
13           and a foreign country, provided that the tax laws of
 
14           the local governments of that country reciprocally
 
15           exempt from the application of all of their net income
 
16           taxes, the income derived from the operation of ships
 
17           or aircraft which are documented or registered under
 
18           the laws of the United States;
 
19      (9)  The value of legal services provided by a prepaid legal
 
20           service plan to a taxpayer, the taxpayer's spouse, and
 
21           the taxpayer's dependents;
 
22     (10)  Amounts paid, directly or indirectly, by a prepaid
 
23           legal service plan to a taxpayer as payment or
 

 
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 1           reimbursement for the provision of legal services to
 
 2           the taxpayer, the taxpayer's spouse, and the taxpayer's
 
 3           dependents;
 
 4     (11)  Contributions by an employer to a prepaid legal service
 
 5           plan for compensation (through insurance or otherwise)
 
 6           to the employer's employees for the costs of legal
 
 7           services incurred by the employer's employees, their
 
 8           spouses, and their dependents; [and]
 
 9     (12)  Amounts received in the form of a monthly surcharge by
 
10           a utility acting on behalf of an affected utility under
 
11           section 269-16.3 shall not be gross income, adjusted
 
12           gross income, or taxable income for the acting utility
 
13           under this chapter.  Any amounts retained by the acting
 
14           utility for collection or other costs shall not be
 
15           included in this exemption[.]; and
 
16     (13)  Amounts received as royalties and other income derived
 
17           from patents and copyrights by the owners of those
 
18           patents or copyrights."
 
19      SECTION 3.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 
21      SECTION 4.  This Act, upon its approval, shall apply to
 
22 taxable years beginning after December 31, 1998.
 
23 
 
24                           INTRODUCED BY:  _______________________
 

 
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