H.B. 25 Enrolled

INCOME TAX DEDUCTION FOR HEALTH CARE INSURANCE
1999 GENERAL SESSION
STATE OF UTAH
Sponsor: Michael R. Styler
AN ACT RELATING TO THE INDIVIDUAL INCOME TAX ACT; INCREASING THE
INDIVIDUAL INCOME TAX DEDUCTION FOR AMOUNTS PAID FOR HEALTH CARE
INSURANCE; MAKING TECHNICAL CHANGES; AND PROVIDING AN EFFECTIVE
DATE.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
59-10-114, as last amended by Chapter 56, Laws of Utah 1997
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-10-114 is amended to read:
59-10-114. Additions to and subtractions from federal taxable income of an
individual.
(1) There shall be added to federal taxable income of a resident or nonresident individual:
(a) the amount of any income tax imposed by this or any predecessor Utah individual
income tax law and the amount of any income tax imposed by the laws of another state, the District
of Columbia, or a possession of the United States, to the extent deducted from federal adjusted
gross income, as defined by Section 62, Internal Revenue Code, in determining federal taxable
income;
(b) a lump sum distribution allowable as a deduction under Section 402(e)(3), Internal
Revenue Code, to the extent deductible under Section 62(a)(8), Internal Revenue Code, in
determining federal adjusted gross income;
(c) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
Code;
(d) a withdrawal from a medical care savings account and any penalty imposed in the
taxable year if:
(i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant

to Section 220, Internal Revenue Code; and
(ii) the withdrawal is subject to Subsections 31A-32-105 (1) and (2); and
(e) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education
Savings Incentive Program, in the year in which the amount is refunded.
(2) There shall be subtracted from federal taxable income of a resident or nonresident
individual:
(a) the interest or dividends on obligations or securities of the United States and its
possessions or of any authority, commission, or instrumentality of the United States, to the extent
includable in gross income for federal income tax purposes but exempt from state income taxes
under the laws of the United States, but the amount subtracted under this subsection shall be reduced
by any interest on indebtedness incurred or continued to purchase or carry the obligations or
securities described in this subsection, and by any expenses incurred in the production of interest or
dividend income described in this subsection to the extent that such expenses, including amortizable
bond premiums, are deductible in determining federal taxable income;
(b) 1/2 of the net amount of any income tax paid or payable to the United States after all
allowable credits, as reported on the United States individual income tax return of the taxpayer for
the same taxable year;
(c) the amount of adoption expenses which, for purposes of this subsection, means any actual
medical and hospital expenses of the mother of the adopted child which are incident to the child's
birth and any welfare agency, child placement service, legal, and other fees or costs relating to the
adoption;
(d) amounts received by taxpayers under age 65 as retirement income which, for purposes
of this section, means pensions and annuities, paid from an annuity contract purchased by an
employer under a plan which meets the requirements of Section 404 (a)(2), Internal Revenue Code,
or purchased by an employee under a plan which meets the requirements of Section 408, Internal
Revenue Code, or paid by the United States, a state, or political subdivision thereof, or the District
of Columbia, to the employee involved or the surviving spouse;
(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500 personal

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retirement exemption;
(f) 75% of the amount of the personal exemption, as defined and calculated in the Internal
Revenue Code, for each dependent child with a disability and adult with a disability who is claimed
as a dependent on a taxpayer's return;
(g) any amount included in federal taxable income that was received pursuant to any federal
law enacted in 1988 to provide reparation payments, as damages for human suffering, to United
States citizens and resident aliens of Japanese ancestry who were interned during World War II;
(h) subject to the limitations of Subsection (3)(e), [60% of the] amounts [paid by the] a
taxpayer pays during the taxable year for health care insurance, as defined in Title 31A, Chapter 1,
[Insurance Code,] General Provisions:
(i) for:
(A) the taxpayer[,];
(B) the taxpayer's spouse[,]; and
(C) the taxpayer's dependents; and
(ii) to the extent the taxpayer does not deduct the amounts [paid for health insurance were
not deductible] under [Sections] Section 125, 162, or 213, Internal Revenue Code, in determining
federal taxable income for the taxable year;
(i) except as otherwise provided in this subsection, the amount of a contribution made in the
tax year on behalf of the taxpayer to a medical care savings account and interest earned on a
contribution to a medical care savings account established pursuant to Title 31A, Chapter 32,
Medical Care Savings Account Act, to the extent the contribution is accepted by the account
administrator as provided in the Medical Care Savings Account Act, and if the taxpayer did not
deduct or include amounts on his federal tax return pursuant to Section 220, Internal Revenue Code.
A contribution deductible under this subsection may not exceed either of the following:
(i) the maximum contribution allowed under the Medical Care Savings Account Act for the
tax year multiplied by two for taxpayers who file a joint return, if neither spouse is covered by health
care insurance as defined in Section 31A-1-301 or self-funded plan that covers the other spouse, and
each spouse has a medical care savings account; or

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(ii) the maximum contribution allowed under the Medical Care Savings Account Act for the
tax year for taxpayers:
(A) who do not file a joint return; or
(B) who file a joint return, but do not qualify under Subsection (2)(i)(i); and
(j) the amount included in federal taxable income that was derived from money paid by the
taxpayer to the program fund and investment income earned on those payments under Title 53B,
Chapter 8a, Higher Education Savings Incentive Program.
(3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted for
taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or $4,800,
except that:
(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
over $32,000, the amount of the retirement income exemption that may be subtracted shall be
reduced by 50 cents;
(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income earned
over $16,000, the amount of the retirement income exemption that may be subtracted shall be
reduced by 50 cents; and
(iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000, the
amount of the retirement income exemption that may be subtracted shall be reduced by 50 cents.
(b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption shall
be further reduced according to the following schedule:
(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
over $32,000, the amount of the personal retirement exemption shall be reduced by 50 cents;
(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income earned
over $16,000, the amount of the personal retirement exemption shall be reduced by 50 cents; and
(iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000, the
amount of the personal retirement exemption shall be reduced by 50 cents.
(c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be calculated by
adding to federal adjusted gross income any interest income not otherwise included in federal

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adjusted gross income.
(d) For purposes of determining ownership of items of retirement income common law
doctrine will be applied in all cases even though some items may have originated from service or
investments in a community property state. Amounts received by the spouse of a living retiree
because of the retiree's having been employed in a community property state are not deductible as
retirement income of such spouse.
(e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
insurance as defined in Title 31A, Chapter 1, [Insurance Code] General Provisions, is not allowed:
(i) for an amount that is reimbursed or funded in whole or in part by the federal government,
the state, or an agency or instrumentality of the federal government or the state; and
(ii) for a taxpayer who is eligible to participate in a health plan maintained and funded in
whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
Section 2. Effective date.
This act takes effect for taxable years beginning on or after January 1, 2000.

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