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H.B. 1008
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6 Wayne A. Harper
7 This act modifies the Individual Income Tax Act by providing that a federal individual
8 income tax credit or advance refund amount allowed as a result of the 2001 federal rate
9 bracket benefit is not subject to state individual income taxation, and making technical
10 changes. This act has retrospective operation for taxable years beginning on or after
11 January 1, 2001.
12 This act affects sections of Utah Code Annotated 1953 as follows:
13 AMENDS:
14 59-10-114, as last amended by Chapters 116 and 233, Laws of Utah 2001
15 Be it enacted by the Legislature of the state of Utah:
16 Section 1. Section 59-10-114 is amended to read:
17 59-10-114. Additions to and subtractions from federal taxable income of an
18 individual.
19 (1) There shall be added to federal taxable income of a resident or nonresident individual:
20 (a) the amount of any income tax imposed by this or any predecessor Utah individual
21 income tax law and the amount of any income tax imposed by the laws of another state, the District
22 of Columbia, or a possession of the United States, to the extent deducted from federal adjusted
23 gross income, as defined by Section 62, Internal Revenue Code, in determining federal taxable
24 income;
25 (b) a lump sum distribution that the taxpayer does not include in adjusted gross income
26 on the taxpayer's federal individual income tax return for the taxable year;
27 (c) for taxable years beginning on or after January 1, 2002, the amount of a child's income
28 calculated under Subsection (5) that:
29 (i) a parent elects to report on the parent's federal individual income tax return for the
30 taxable year; and
31 (ii) the parent does not include in adjusted gross income on the parent's federal individual
32 income tax return for the taxable year;
33 (d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
34 Code;
35 (e) a withdrawal from a medical care savings account and any penalty imposed in the
36 taxable year if:
37 (i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant
38 to Section 220, Internal Revenue Code; and
39 (ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2); and
40 (f) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education
41 Savings Incentive Program, in the year in which the amount is refunded.
42 (2) There shall be subtracted from federal taxable income of a resident or nonresident
43 individual:
44 (a) the interest or dividends on obligations or securities of the United States and its
45 possessions or of any authority, commission, or instrumentality of the United States, to the extent
46 includable in gross income for federal income tax purposes but exempt from state income taxes
47 under the laws of the United States, but the amount subtracted under this Subsection (2)(a) shall
48 be reduced by any interest on indebtedness incurred or continued to purchase or carry the
49 obligations or securities described in this Subsection (2)(a), and by any expenses incurred in the
50 production of interest or dividend income described in this Subsection (2)(a) to the extent that such
51 expenses, including amortizable bond premiums, are deductible in determining federal taxable
52 income;
53 (b) (i) except as provided in Subsection (2)(b)(ii), 1/2 of the net amount of any income tax
54 paid or payable to the United States after all allowable credits, as reported on the United States
55 individual income tax return of the taxpayer for the same taxable year; and
56 (ii) notwithstanding Subsection (2)(b)(i), for taxable years beginning on or after January
57 1, 2001, the amount of a credit or an advance refund amount reported on a resident or nonresident
58 individual's United States individual income tax return allowed as a result of the acceleration of
59 the income tax rate bracket benefit for 2001 in accordance with Section 101, Economic Growth
60 and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, may not be used in calculating the
61 amount described in Subsection (2)(b)(i);
62 (c) the amount of adoption expenses which, for purposes of this Subsection (2)(c), means
63 any actual medical and hospital expenses of the mother of the adopted child which are incident to
64 the child's birth and any welfare agency, child placement service, legal, and other fees or costs
65 relating to the adoption;
66 (d) amounts received by taxpayers under age 65 as retirement income which, for purposes
67 of this section, means pensions and annuities, paid from an annuity contract purchased by an
68 employer under a plan which meets the requirements of Section 404(a)(2), Internal Revenue Code,
69 or purchased by an employee under a plan which meets the requirements of Section 408, Internal
70 Revenue Code, or paid by the United States, a state, or political subdivision thereof, or the District
71 of Columbia, to the employee involved or the surviving spouse;
72 (e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500 personal
73 retirement exemption;
74 (f) 75% of the amount of the personal exemption, as defined and calculated in the Internal
75 Revenue Code, for each dependent child with a disability and adult with a disability who is
76 claimed as a dependent on a taxpayer's return;
77 (g) any amount included in federal taxable income that was received pursuant to any
78 federal law enacted in 1988 to provide reparation payments, as damages for human suffering, to
79 United States citizens and resident aliens of Japanese ancestry who were interned during World
80 War II;
81 (h) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
82 taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
83 (i) for:
84 (A) the taxpayer;
85 (B) the taxpayer's spouse; and
86 (C) the taxpayer's dependents; and
87 (ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or 213,
88 Internal Revenue Code, in determining federal taxable income for the taxable year;
89 (i) (i) except as otherwise provided in this Subsection (2)(i), the amount of a contribution
90 made [
91 and interest earned on a contribution to a medical care savings account established pursuant to
92 Title 31A, Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is
93 accepted by the account administrator as provided in the Medical Care Savings Account Act, and
94 if the taxpayer did not deduct or include amounts on [
95 tax return pursuant to Section 220, Internal Revenue Code[
96 (ii) contribution deductible under this Subsection (2)(i) may not exceed either of the
97 following:
98 [
99 for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is covered
100 by health care insurance as defined in Section 31A-1-301 or self-funded plan that covers the other
101 spouse, and each spouse has a medical care savings account; or
102 [
103 for the tax year for taxpayers:
104 [
105 [
106 (j) the amount included in federal taxable income that was derived from money paid by
107 the taxpayer to the program fund under Title 53B, Chapter 8a, Higher Education Savings Incentive
108 Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d) and investment
109 income earned on participation agreements under Subsection 53B-8a-106 (1) when used for higher
110 education costs of the beneficiary;
111 (k) for [
112 premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the amounts
113 paid for long-term care insurance were not deducted under Section 213, Internal Revenue Code,
114 in determining federal taxable income; and
115 (l) for taxable years beginning on or after January 1, 2000, if the conditions of Subsection
116 (4)(a) are met, the amount of income derived by a Ute tribal member:
117 (i) during a time period that the Ute tribal member resides on homesteaded land
118 diminished from the Uintah and Ouray Reservation; and
119 (ii) from a source within the Uintah and Ouray Reservation.
120 (3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted for
121 taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or $4,800,
122 except that:
123 (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
124 over $32,000, the amount of the retirement income exemption that may be subtracted shall be
125 reduced by 50 cents;
126 (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
127 earned over $16,000, the amount of the retirement income exemption that may be subtracted shall
128 be reduced by 50 cents; and
129 (iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
130 the amount of the retirement income exemption that may be subtracted shall be reduced by 50
131 cents.
132 (b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
133 shall be further reduced according to the following schedule:
134 (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
135 over $32,000, the amount of the personal retirement exemption shall be reduced by 50 cents;
136 (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
137 earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
138 cents; and
139 (iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
140 the amount of the personal retirement exemption shall be reduced by 50 cents.
141 (c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be calculated
142 by adding to federal adjusted gross income any interest income not otherwise included in federal
143 adjusted gross income.
144 (d) For purposes of determining ownership of items of retirement income common law
145 doctrine will be applied in all cases even though some items may have originated from service or
146 investments in a community property state. Amounts received by the spouse of a living retiree
147 because of the retiree's having been employed in a community property state are not deductible as
148 retirement income of such spouse.
149 (e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
150 insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:
151 (i) for an amount that is reimbursed or funded in whole or in part by the federal
152 government, the state, or an agency or instrumentality of the federal government or the state; and
153 (ii) for a taxpayer who is eligible to participate in a health plan maintained and funded in
154 whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
155 (4) (a) A subtraction for an amount described in Subsection (2)(l) is allowed only if:
156 (i) the taxpayer is a Ute tribal member; and
157 (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
158 requirements of this Subsection (4).
159 (b) The agreement described in Subsection (4)(a):
160 (i) may not:
161 (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
162 (B) provide a subtraction under this section greater than or different from the subtraction
163 described in Subsection (2)(l); or
164 (C) affect the power of the state to establish rates of taxation; and
165 (ii) shall:
166 (A) provide for the implementation of the subtraction described in Subsection (2)(l);
167 (B) be in writing;
168 (C) be signed by:
169 (I) the governor; and
170 (II) the chair of the Business Committee of the Ute tribe;
171 (D) be conditioned on obtaining any approval required by federal law; and
172 (E) state the effective date of the agreement.
173 (c) (i) The governor shall report to the commission by no later than February 1 of each year
174 regarding whether or not an agreement meeting the requirements of this Subsection (4) is in effect.
175 (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
176 subtraction permitted under Subsection (2)(l) is not allowed for taxable years beginning on or after
177 the January 1 following the termination of the agreement.
178 (d) For purposes of Subsection (2)(l) and in accordance with Title 63, Chapter 46a, Utah
179 Administrative Rulemaking Act, the commission may make rules:
180 (i) for determining whether income is derived from a source within the Uintah and Ouray
181 Reservation; and
182 (ii) that are substantially similar to how federal adjusted gross income derived from Utah
183 sources is determined under Section 59-10-117 .
184 (5) (a) For purposes of this Subsection (5), "Form 8814" means:
185 (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
186 Interest and Dividends; or
187 (ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by the
188 commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to 2000
189 Form 8814 if for purposes of federal individual income taxes the information contained on 2000
190 Form 8814 is reported on a form other than Form 8814; and
191 (B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter 46a,
192 Utah Administrative Rulemaking Act, the commission may make rules designating a form as being
193 substantially similar to 2000 Form 8814 if for purposes of federal individual income taxes the
194 information contained on 2000 Form 8814 is reported on a form other than Form 8814.
195 (b) The amount of a child's income added to adjusted gross income under Subsection (1)(c)
196 is equal to the difference between:
197 (i) the lesser of:
198 (A) the base amount specified on Form 8814; and
199 (B) the sum of the following reported on Form 8814:
200 (I) the child's taxable interest;
201 (II) the child's ordinary dividends; and
202 (III) the child's capital gain distributions; and
203 (ii) the amount not taxed that is specified on Form 8814.
204 Section 2. Retrospective operation.
205 This act has retrospective operation for taxable years beginning on or after January 1, 2001.
Legislative Review Note
as of 6-19-01 3:01 PM
A limited legal review of this legislation raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
Committee Note
The Revenue and Taxation Interim Committee recommended this bill.
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