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First Substitute H.B. 98

Representative Bradley T. Johnson proposes to substitute the following bill:


             1     
ENTERPRISE ZONE AMENDMENTS

             2     
2001 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Bradley T. Johnson

             5      This act modifies provisions relating to enterprise zones to provide a refundable income tax
             6      credit to targeted businesses located in certain areas within enterprise zones. The act defines
             7      terms and makes technical changes. The act creates an application process and defines the
             8      duties of the department, local zone administrators and the State Tax Commission. The act
             9      prohibits a targeted business claiming the refundable income tax credit from claiming other
             10      tax credits under certain circumstances.
             11      This act affects sections of Utah Code Annotated 1953 as follows:
             12      AMENDS:
             13          9-2-413, as last amended by Chapter 170, Laws of Utah 1999
             14          59-7-610, as last amended by Chapter 139, Laws of Utah 2000
             15          59-10-108.7, as last amended by Chapter 139, Laws of Utah 2000
             16      ENACTS:
             17          9-2-1801, Utah Code Annotated 1953
             18          9-2-1802, Utah Code Annotated 1953
             19          9-2-1803, Utah Code Annotated 1953
             20      Be it enacted by the Legislature of the state of Utah:
             21          Section 1. Section 9-2-413 is amended to read:
             22           9-2-413. State tax credits.
             23          (1) Subject to the limitations of Subsections (2) through (4), the following state tax credits
             24      against individual income taxes or corporate franchise and income taxes are applicable in an
             25      enterprise zone:


             26          (a) a tax credit of $750 may be claimed by a business for each new full-time position filled
             27      for not less than six months during a given tax year;
             28          (b) an additional $500 tax credit may be claimed if the new position pays at least 125%
             29      of:
             30          (i) the county average monthly nonagricultural payroll wage for the respective industry as
             31      determined by the Department of Workforce Services; or
             32          (ii) if the county average monthly nonagricultural payroll wage is not available for the
             33      respective industry, the total average monthly nonagricultural payroll wage in the respective county
             34      where the enterprise zone is located;
             35          (c) an additional credit of $750 may be claimed if the new position is in a business that
             36      adds value to agricultural commodities through manufacturing or processing;
             37          (d) an additional credit of $200 may be claimed for two consecutive years for each new
             38      employee who is insured under an employer-sponsored health insurance program if the employer
             39      pays at least 50% of the premium cost for two consecutive years;
             40          (e) a credit of 50% of the value of a cash contribution to a private nonprofit corporation,
             41      except that the credit claimed may not exceed $100,000:
             42          (i) that is exempt from federal income taxation under Section 501(c)(3), Internal Revenue
             43      Code;
             44          (ii) whose primary purpose is community and economic development; and
             45          (iii) that has been accredited by the board of directors of the Utah Rural Development
             46      Council;
             47          (f) a credit of 25% of the first $200,000 spent on rehabilitating a building in the enterprise
             48      zone that has been vacant for two years or more; and
             49          (g) an annual investment tax credit of 10% of the first $250,000 in investment, and 5% of
             50      the next $1,000,000 qualifying investment in plant, equipment, or other depreciable property.
             51          (2) (a) Subject to the limitations of Subsection (2)(b), a business claiming a credit under
             52      Subsections (1)(a) through (d) may claim a credit for 30 full-time employee positions or less in
             53      each of its taxable years.
             54          (b) A business that received a credit for its full-time employee positions under Subsections
             55      (1)(a) through (d) may claim an additional credit for a full-time employee position under
             56      Subsections (1)(a) through (d) if:


             57          (i) the business creates a new full-time employee position;
             58          (ii) the total number of full-time employee positions at the business is greater than the
             59      number of full-time employee positions previously claimed by the business under Subsections
             60      (1)(a) through (d); and
             61          (iii) the total number of credits the business has claimed for its current taxable year,
             62      including the new full-time employee position for which the business is claiming a credit, is less
             63      than or equal to 30.
             64          (c) A business existing in an enterprise zone on the date of its designation shall calculate
             65      the number of full-time positions based on the average number of employees reported to the
             66      Department of Workforce Services.
             67          (d) Construction jobs are not eligible for the tax credit under Subsections (1)(a) through
             68      (d).
             69          (3) If the amount of a tax credit under this section exceeds a business entity's tax liability
             70      under this chapter for a taxable year, the amount of the credit exceeding the liability may be carried
             71      forward for a period that does not exceed the next three taxable years.
             72          (4) (a) If a business entity is located in a county that met the requirements of Subsections
             73      9-2-404 (1)(b) and (c) but did not qualify as an enterprise zone prior to January 1, 1998, because
             74      the county was located in a metropolitan statistical area in more than one state, the business entity:
             75          (i) shall qualify for tax credits for a taxable year beginning on or after January 1, 1997, but
             76      beginning before December 31, 1997;
             77          (ii) may claim a tax credit as described in Subsection (4)(a) in a taxable year beginning on
             78      or after January 1, 1997, but beginning before December 31, 1997; and
             79          (iii) may qualify for tax credits for any taxable year beginning on or after January 1, 1998,
             80      if the county is designated as an enterprise zone in accordance with this part.
             81          (b) If a business entity claims a tax credit under Subsection (4)(a)(ii), the business entity:
             82          (i) may claim the tax credit by filing for the taxable year beginning on or after January 1,
             83      1997, but beginning before December 31, 1997:
             84          (A) an individual income tax return;
             85          (B) an amended individual income tax return;
             86          (C) a corporate franchise and income tax return; or
             87          (D) an amended corporate franchise and income tax return; and


             88          (ii) may carry forward the tax credit to a taxable year beginning on or after January 1,
             89      1998, in accordance with Subsection (3).
             90          (5) The tax credits under Subsections (1)(a) through (g) may not be claimed by a business
             91      engaged in retail trade or by a public utilities business.
             92          (6) A business may not claim or carry forward a tax credit available under this part for a
             93      taxable year during which the business has claimed the targeted business income tax credit
             94      available under Section 9-2-1803 .
             95          Section 2. Section 9-2-1801 is enacted to read:
             96     
Part 18. Targeted Business Income Tax Credits Within an Enterprise Zone

             97          9-2-1801. Definitions.
             98          (1) As used in this part:
             99          (a) "Allocated cap amount" means the total amount of the targeted business income tax
             100      credit that a business applicant is allowed to claim for a taxable year that represents a pro rata share
             101      of the total amount of S [ $500,000 ] $300,000 s for each fiscal year allowed under Subsection
             101a      9-2-1803 (2).
             102          (b) "Business applicant" means a business that meets the criteria established in Section
             103      9-2-1802 .
             104          (c) "Community investment project" means a project that includes one or more of the
             105      following criteria in addition to the normal operations of the business applicant:
             106          (i) substantial new employment;
             107          (ii) new capital development; or
             108          (iii) a combination of both Subsections (1)(c)(i) and (ii).
             109          (d) "Community investment project period" means the total number of years that the
             110      department determines a business applicant is eligible for a targeted business income tax credit for
             111      each community investment project.
             112          (e) "Enterprise zone" means an area within a county or municipality that has been
             113      designated as an enterprise zone by the department under Part 4, Enterprise Zones.
             114          (f) "Local zone administrator" means a person:
             115          (i) designated by the governing authority of the county or municipal applicant as the local
             116      zone administrator in an enterprise zone application; and
             117          (ii) approved by the department as the local zone administrator.
             118          (g) "Targeted business income tax credit " means an income tax credit available under


             119      Section 9-2-1803 .
             120          (h) "Targeted business income tax credit eligibility form" means a document provided
             121      annually to the business applicant by the department that complies with the requirements of
             122      Subsection 9-2-1803 (6).
             123          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, for
             124      purposes of Subsection (1), the department shall make rules:
             125          (a) to define what constitutes:
             126          (i) substantial new employment;
             127          (ii) new capital development; and
             128          (iii) a project; and
             129          (b) to establish a formula for determining the allocated cap amount for each business
             130      applicant.
             131          Section 3. Section 9-2-1802 is enacted to read:
             132          9-2-1802. Application for targeted business income tax credits.
             133          (1) (a) For taxable years beginning on or after January 1, 2002, a business applicant may
             134      elect to claim a targeted business income tax credit available under Section 9-2-1803 if the
             135      business applicant:
             136          (i) is located in:
             137          (A) an enterprise zone; and
             138          (B) a county with:
             139          (I) a population of less than 25,000; and
             140          (II) an unemployment rate that for six months or more of each calendar year is at least one
             141      percentage point higher than the state average;
             142          (ii) meets the requirements of Section 9-2-412 ;
             143          (iii) provides:
             144          (A) a community investment project within the enterprise zone; and
             145          (B) a portion of the community investment project during each taxable year for which the
             146      business applicant claims the targeted business tax incentive; and
             147          (iv) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, is not
             148      engaged in the following, as defined by the State Tax Commission by rule:
             149          (A) construction;


             150          (B) retail trade; or
             151          (C) public utility activities.
             152          (b) For a taxable year for which a business applicant claims a targeted business income tax
             153      credit available under this part, the business applicant may not claim h OR CARRY FORWARD h a
             153a      tax credit available under
             154      Section 9-2-413 , 59-7-610 , or 59-10-108.7 .
             155          (2) (a) A business applicant seeking to claim a targeted business income tax credit under
             156      this part shall file an application as provided in Subsection (2)(b) with the local zone administrator
             157      by no later than June 1 of the year in which the business applicant is seeking to claim a targeted
             158      business income tax credit.
             159          (b) The application described in Subsection (2)(a) shall include:
             160          (i) any documentation required by the local zone administrator to demonstrate that the
             161      business applicant meets the requirements of Subsection (1);
             162          (ii) a plan developed by the business applicant that outlines:
             163          (A) if the community investment project includes substantial new employment, the
             164      projected number and anticipated wage level of the jobs that the business applicant plans to create
             165      as the basis for qualifying for a targeted business income tax credit;
             166          (B) if the community investment project includes new capital development, a description
             167      of the capital development the business applicant plans to make as the basis for qualifying for a
             168      targeted business income tax credit; and
             169          (C) a description of how the business applicant's plan coordinates with:
             170          (I) the goals of the enterprise zone in which the business applicant is providing a
             171      community investment project; and
             172          (II) the overall economic development goals of the county or municipality in which the
             173      business applicant is providing a community investment project; and
             174          (iii) any additional information required by the local zone administrator.
             175          (3) (a) The local zone administrator shall:
             176          (i) evaluate an application filed under Subsection (2); and
             177          (ii) determine whether the business applicant is eligible for a targeted business income tax
             178      credit.
             179          (b) If the local zone administrator determines that the business applicant is eligible for a
             180      targeted business income tax credit, the local zone administrator shall:


             181          (i) certify that the business applicant is eligible for the targeted business income tax credit;
             182          (ii) structure the targeted business income tax credit for the business applicant in
             183      accordance with Section 9-2-1803 ; and
             184          (iii) monitor a business applicant to ensure compliance with this section.
             185          (4) A local zone administrator shall report to the department by no later than June 30 of
             186      each year:
             187          (a) (i) any application approved by the local zone administrator during the last fiscal year;
             188      and
             189          (ii) the information established in Subsections 9-2-1803 (4)(a) through (d) for each new
             190      business applicant; and
             191          (b) (i) the status of any existing business applicants that the local zone administrator
             192      monitors; and
             193          (ii) any information required by the department to determine the status of an existing
             194      business applicant.
             195          (5) (a) By July 15 of each year, the department shall notify the local zone administrator of
             196      the allocated cap amount that each business applicant that the local zone administrator monitors
             197      is eligible to claim.
             198          (b) By September 15 of each year, the local zone administrator shall notify, in writing,
             199      each business applicant that the local zone administrator monitors of the allocated cap amount
             200      determined by the department under Subsection (5)(a) that the business applicant is eligible to
             201      claim for a taxable year.
             202          Section 4. Section 9-2-1803 is enacted to read:
             203          9-2-1803. Targeted business income tax credit structure -- Duties of the local zone
             204      administrator -- Duties of the State Tax Commission.
             205          (1) For taxable years beginning on or after January 1, 2002, a business applicant that is
             206      certified under Subsection 9-2-1802 (3) and issued a targeted business tax credit eligibility form
             207      by the department under Subsection (8) may claim a refundable income tax credit:
             208          (a) against the business applicant's tax liability under:
             209          (i) Title 59, Chapter 10, Individual Income Tax Act; or
             210          (ii) Title 59, Chapter 7, Corporate Franchise and Income Taxes; and
             211          (b) subject to requirements and limitations provided by this part.


             212          (2) The total amount of the targeted business income tax credits allowed under this part
             213      for all business applicants may not exceed S [ $500,000 ] $300,00 0 s in any fiscal year.
             214          (3) (a) A targeted business income tax credit allowed under this part for each community
             215      investment project provided by a business applicant may not:
             216          (i) be claimed by a business applicant for more than h [ ten ] SEVEN h consecutive taxable
             216a      years from
             217      the date the business applicant first qualifies for a targeted business income tax credit on the basis
             218      of a community investment project;
             219          (ii) be carried forward or carried back;
             220          (iii) exceed $100,000 in total amount for the community investment project period during
             221      which the business applicant is eligible to claim a targeted business income tax credit; or
             222          (iv) exceed in any year that the targeted business income tax credit is claimed the lesser
             223      of:
             224          (A) 50% of the maximum amount allowed by the local zone administrator; or
             225          (B) the allocated cap amount determined by the department under Subsection 9-2-1802 (5).
             226          (b) A business applicant may apply to the local zone administrator to claim a targeted
             227      business income tax credit allowed under this part for each community investment project
             228      provided by the business applicant as the basis for its eligibility for a targeted business income tax
             229      credit.
             230          (4) Subject to other provisions of this section, the local zone administrator shall establish
             231      for each business applicant that qualifies for a targeted business income tax credit:
             232          (a) criteria for maintaining eligibility for the targeted business income tax credit that are
             233      reasonably related to the community investment project that is the basis for the business applicant's
             234      targeted business income tax credit;
             235          (b) the maximum amount of the targeted business income tax credit the business applicant
             236      is allowed for the community investment project period;
             237          (c) the time period over which the total amount of the targeted business income tax credit
             238      may be claimed;
             239          (d) the maximum amount of the targeted business income tax credit that the business
             240      applicant will be allowed to claim each year; and
             241          (e) requirements for a business applicant to report to the local zone administrator
             242      specifying:


             243          (i) the frequency of the business applicant's reports to the local zone administrator, which
             244      shall be made at least quarterly; and
             245          (ii) the information needed by the local zone administrator to monitor the business
             246      applicant's compliance with this Subsection (3) or Section 9-2-1802 that shall be included in the
             247      report.
             248          (5) In accordance with Subsection (4)(e), a business applicant allowed a targeted business
             249      income tax credit under this part shall report to the local zone administrator.
             250          (6) The amount of a targeted business income tax credit that a business applicant is
             251      allowed to claim for a taxable year shall be reduced by 25% for each quarter in which the
             252      department or the local zone administrator determines that the business applicant has failed to
             253      comply with a requirement of Subsection (3) or Section 9-2-1802 .
             254          (7) The department or local zone administrator may audit a business applicant to ensure:
             255          (a) eligibility for a targeted business income tax credit; or
             256          (b) compliance with Subsection (3) or Section 9-2-1802 .
             257          (8) The department shall issue a targeted business income tax credit eligibility form in a
             258      form jointly developed by the State Tax Commission and the department no later than 30 days after
             259      the last day of the business applicant's taxable year showing:
             260          (a) the maximum amount of the targeted business income tax credit that the business
             261      applicant is eligible for that taxable year;
             262          (b) any reductions in the maximum amount of the targeted business income tax credit
             263      because of failure to comply with a requirement of Subsection (3) or Section 9-2-1802 ;
             264          (c) the allocated cap amount that the business applicant may claim for that taxable year;
             265      and
             266          (d) the actual amount h OF THE TARGETED BUSINESS INCOME TAX CREDIT h that the
             266a      business applicant may claim for that taxable year.
             267          (9) (a) A business applicant shall attach a copy of the targeted business income tax credit
             268      eligibility form provided by the department under this Subsection (5) to any return upon which a
             269      business applicant claims a targeted business income tax credit under this section.
             270          (b) The tax commission may audit a business applicant to ensure:
             271          (i) eligibility for a targeted business income tax credit; or
             272          (ii) compliance with Subsection (3) or Section 9-2-1802 .
             273          Section 5. Section 59-7-610 is amended to read:


             274           59-7-610. Credit -- Recycling market development zone.
             275          (1) For tax years beginning on or after January 1, 1996, the following state tax credits are
             276      applicable to businesses operating in a recycling market development zone as defined in Section
             277      9-2-1602 :
             278          (a) (i) There shall be allowed a nonrefundable tax credit of 5% of the purchase price paid
             279      for machinery and equipment used directly in:
             280          (A) commercial composting; or
             281          (B) manufacturing facilities or plant units that:
             282          (I) manufacture, process, compound, or produce recycled items of tangible personal
             283      property for sale; or
             284          (II) reduce or reuse postconsumer waste material.
             285          (ii) The Department of Community and Economic Development shall certify that the
             286      machinery and equipment are integral to the composting or recycling process on a form provided
             287      by the tax commission before the taxpayer is entitled to the tax credit under this section.
             288          (iii) The taxpayer shall enclose with its tax return the certification received under
             289      Subsection (1)(a)(ii).
             290          (b) There shall be allowed a nonrefundable tax credit equal to 20% of net expenditures up
             291      to $10,000 to third parties for rent, wages, supplies, tools, test inventory, and utilities made by the
             292      taxpayer for establishing and operating recycling or composting technology in Utah, with an annual
             293      maximum credit of $2,000.
             294          (2) The total nonrefundable credit allowed under this section may not exceed 40% of the
             295      Utah income tax liability of the taxpayer prior to any credits in the taxable year of purchase prior
             296      to claiming the credit authorized by this section.
             297          (3) (a) Any tax credit not used for the taxable year in which the purchase price on
             298      composting or recycling machinery and equipment was paid may be carried over for credit against
             299      the business's income taxes in the three succeeding taxable years until the total credit amount is
             300      used.
             301          (b) Tax credits not claimed by a business on its state income tax return within three years
             302      are forfeited.
             303          (4) The tax commission shall make rules governing what information shall be filed with
             304      the tax commission to verify the entitlement to and amount of a tax credit.


             305          (5) (a) Notwithstanding Subsection (1)(a), for taxable years beginning on or after January
             306      1, 2001, a taxpayer may not claim or carry forward a tax credit described in Subsection (1)(a) in
             307      a taxable year during which the taxpayer claims or carries forward a tax credit under Section
             308      9-2-413 .
             309          (b) For a taxable year other than a taxable year during which the taxpayer may not claim
             310      or carry forward a tax credit in accordance with Subsection (5)(a), a taxpayer may claim or carry
             311      forward a tax credit described in Subsection (1)(a):
             312          (i) if the taxpayer may claim or carry forward the credit in accordance with Subsections
             313      (1) and (2); and
             314          (ii) subject to Subsections (3) and (4).
             315          (6) Notwithstanding Subsection (1)(b), for taxable years beginning on or after January 1,
             316      2001, a taxpayer may not claim a tax credit described in Subsection (1)(b) in a taxable year during
             317      which the taxpayer claims or carries forward a tax credit under Section 9-2-413 .
             318          (7) A taxpayer may not claim or carry forward a tax credit available under this section for
             319      a taxable year during which the taxpayer has claimed the targeted business income tax credit
             320      available under Section 9-2-1803 .
             321          Section 6. Section 59-10-108.7 is amended to read:
             322           59-10-108.7. Recycling market development zones credit.
             323          (1) For tax years beginning on or after January 1, 1996, the following state tax credits are
             324      applicable to an individual in a recycling market development zone as defined in Section 9-2-1602 :
             325          (a) (i) There shall be allowed a nonrefundable tax credit of 5% of the purchase price paid
             326      for machinery and equipment used directly in:
             327          (A) commercial composting; or
             328          (B) manufacturing facilities or plant units that:
             329          (I) manufacture, process, compound, or produce recycled items of tangible personal
             330      property for sale; or
             331          (II) reduce or reuse postconsumer waste material.
             332          (ii) The Department of Community and Economic Development shall certify that the
             333      machinery and equipment are integral to the composting or recycling process on a form provided
             334      by the tax commission before the taxpayer is entitled to the tax credit under this section.
             335          (iii) The taxpayer shall enclose with its tax return the certification received under


             336      Subsection (1)(a)(ii).
             337          (b) There shall be allowed a nonrefundable tax credit equal to 20% of net expenditures up
             338      to $10,000 to third parties for rent, wages, supplies, tools, test inventory, and utilities made by the
             339      taxpayer for establishing and operating recycling or composting technology in Utah, with an annual
             340      maximum credit of $2,000.
             341          (2) The total credit allowed under this section may not exceed 40% of the Utah income tax
             342      liability of the taxpayer prior to any credits in the taxable year of purchase prior to claiming the
             343      credit authorized by this section.
             344          (3) (a) Any tax credit not used for the taxable year in which the purchase price on
             345      composting or recycling machinery and equipment was paid may be carried over for credit against
             346      the individual's income taxes in the three succeeding taxable years until the total credit amount is
             347      used.
             348          (b) Tax credits not claimed by an individual on the individual's state income tax return
             349      within three years are forfeited.
             350          (4) The tax commission shall make rules governing what information shall be filed with
             351      the tax commission to verify the entitlement to and amount of a tax credit.
             352          (5) (a) Notwithstanding Subsection (1)(a), for taxable years beginning on or after January
             353      1, 2001, a taxpayer may not claim or carry forward a tax credit described in Subsection (1)(a) in
             354      a taxable year during which the taxpayer claims or carries forward a tax credit under Section
             355      9-2-413 .
             356          (b) For a taxable year other than a taxable year during which the taxpayer may not claim
             357      or carry forward a tax credit in accordance with Subsection (5)(a), a taxpayer may claim or carry
             358      forward a tax credit described in Subsection (1)(a):
             359          (i) if the taxpayer may claim or carry forward the credit in accordance with Subsections
             360      (1) and (2); and
             361          (ii) subject to Subsections (3) and (4).
             362          (6) Notwithstanding Subsection (1)(b), for taxable years beginning on or after January 1,
             363      2001, a taxpayer may not claim a tax credit described in Subsection (1)(b) in a taxable year during
             364      which the taxpayer claims or carries forward a tax credit under Section 9-2-413 .
             365          (7) A taxpayer may not claim or carry forward a tax credit available under this section for
             366      a taxable year during which the taxpayer has claimed the targeted business income tax credit


             367      available under Section 9-2-1803 .


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