S.B. 24 Enrolled

INDIVIDUAL INCOME TAX - ADDITIONS
TO FEDERAL TAXABLE INCOME
2001 GENERAL SESSION
STATE OF UTAH
Sponsor: John L. Valentine
This act modifies the Individual Income Tax Act by amending an addition to federal taxable
income for certain lump sum distributions, requiring an addition to federal taxable income
for certain amounts of a child's income, and making technical changes. This act has
retrospective operation for taxable years beginning on or after January 1, 2001.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
59-10-114, as last amended by Chapter 257, Laws of Utah 2000
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(d)(3), Internal
Revenue Code, to the extent deductible under Section 62(a)(8), Internal Revenue Code, in
determining federal adjusted gross] that the taxpayer does not include in adjusted gross income on
the taxpayer's federal individual income tax return for the taxable year;
(c) for taxable years beginning on or after January 1, 2002, the amount of a child's income
calculated under Subsection (5) that:
(i) a parent elects to report on the parent's federal individual income tax return for the

taxable year; and
(ii) the parent does not include in adjusted gross income on the parent's federal individual
income tax return for the taxable year;
[(c)] (d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
Code;
[(d)] (e) 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-32a-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

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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
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), amounts a taxpayer pays during the taxable
year for health care insurance, as defined in Title 31A, Chapter 1, 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 under 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 32a,
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

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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
(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 under Title 53B, Chapter 8a, Higher Education Savings Incentive
Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d) and investment
income earned on participation agreements under Subsection 53B-8a-106 (1) when used for higher
education costs of the beneficiary;
(k) for tax years beginning on or after January 1, 2000, any amounts paid for premiums [on]
for long-term care insurance [policies] as defined in Section 31A-22-1402 to the extent the amounts
paid for long-term care insurance were not deducted under Section 213, Internal Revenue Code, in
determining federal taxable income; and
(l) for taxable years beginning on or after January 1, 2000, if the conditions of Subsection
(4)(a) are met, the amount of income derived by a Ute tribal member:
(i) during a time period that the Ute tribal member resides on homesteaded land diminished
from the Uintah and Ouray Reservation; and
(ii) from a source within the Uintah and Ouray Reservation.
(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

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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
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, 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

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whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
(4) (a) A subtraction for an amount described in Subsection (2)(l) is allowed only if:
(i) the taxpayer is a Ute tribal member; and
(ii) the governor and the Ute tribe execute and maintain an agreement meeting the
requirements of this Subsection (4).
(b) The agreement described in Subsection (4)(a):
(i) may not:
(A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
(B) provide a subtraction under this section greater than or different from the subtraction
described in Subsection (2)(l); or
(C) affect the power of the state to establish rates of taxation; and
(ii) shall:
(A) provide for the implementation of the subtraction described in Subsection (2)(l);
(B) be in writing;
(C) be signed by:
(I) the governor; and
(II) the chair of the Business Committee of the Ute tribe;
(D) be conditioned on obtaining any approval required by federal law; and
(E) state the effective date of the agreement.
(c) (i) The governor shall report to the commission by no later than February 1 of each year
regarding whether or not an agreement meeting the requirements of this Subsection (4) is in effect.
(ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
subtraction permitted under Subsection (2)(l) is not allowed for taxable years beginning on or after
the January 1 following the termination of the agreement.
(d) For purposes of Subsection (2)(l) and in accordance with Title 63, Chapter 46a, Utah
Administrative Rulemaking Act, the commission may make rules:
(i) for determining whether income is derived from a source within the Uintah and Ouray
Reservation; and

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(ii) that are substantially similar to how federal adjusted gross income derived from Utah
sources is determined under Section 59-10-117 .
(5) (a) For purposes of this Subsection (5), "Form 8814" means:
(i) the federal individual income tax Form 8814, Parents' Election To Report Child's Interest
and Dividends; or
(ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by the
commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to 2000 Form
8814 if for purposes of federal individual income taxes the information contained on 2000 Form
8814 is reported on a form other than Form 8814; and
(B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter 46a,
Utah Administrative Rulemaking Act, the commission may make rules designating a form as being
substantially similar to 2000 Form 8814 if for purposes of federal individual income taxes the
information contained on 2000 Form 8814 is reported on a form other than Form 8814.
(b) The amount of a child's income added to adjusted gross income under Subsection (1)(c)
is equal to the difference between:
(i) the lesser of:
(A) the base amount specified on Form 8814; and
(B) the sum of the following reported on Form 8814:
(I) the child's taxable interest;
(II) the child's ordinary dividends; and
(III) the child's capital gain distributions; and
(ii) the amount not taxed that is specified on Form 8814.
Section 2. Retrospective operation.
This act has retrospective operation for taxable years beginning on or after January 1, 2001.

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