H.B. 123

1

TAX REVISIONS
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: John Dougall
5 Senate Sponsor: ____________
6
7 LONG TITLE
8 General Description:
9 This bill amends the Individual Income Tax Act, the Single Rate Individual Income Tax
10 Act, and the Sales and Use Tax Act.
11 Highlighted Provisions:
12 This bill:
13 . provides and modifies definitions;
14 . reduces a tax rate for purposes of the Individual Income Tax Act from 6.98% to
15 6.9%;
16 . reduces the tax rate from 5.35% to 4.9% for purposes of the Single Rate Individual
17 Income Tax Act;
18 . enacts tax credits allowed on the basis of filing status and the state sales and use tax
19 rate for purposes of the Single Rate Individual Income Tax Act, including:
20 . requiring the apportionment of those tax credits for a nonresident individual or
21 part-year resident individual;
22 . requiring the Division of Finance to make transfers from the General Fund to
23 the Education Fund equal to the amount of those tax credits claimed;
24 . requiring the State Tax Commission to report to the Division of Finance the
25 amount of those tax credits claimed; and
26 . granting rulemaking authority to the State Tax Commission;
27 . provides that food and food ingredients are not subject to the state sales and use tax,

28 except with respect to certain bundled transactions; and
29 . makes technical changes.
30 Monies Appropriated in this Bill:
31 None
32 Other Special Clauses:
33 This bill provides an effective date.
34 Utah Code Sections Affected:
35 AMENDS:
36 59-10-104, as last amended by Chapter 2, Laws of Utah 2006, Fourth Special Session
37 59-10-1202, as enacted by Chapter 2, Laws of Utah 2006, Fourth Special Session
38 59-10-1203, as enacted by Chapter 2, Laws of Utah 2006, Fourth Special Session
39 59-12-103, as last amended by Chapter 9, Laws of Utah 2006, Third Special Session
40 ENACTS:
41 59-10-1206.1, Utah Code Annotated 1953
42 59-10-1206.9, Utah Code Annotated 1953
43
44 Be it enacted by the Legislature of the state of Utah:
45 Section 1. Section 59-10-104 is amended to read:
46 59-10-104. Tax basis -- Rates -- Adjustment for changes in the consumer price
47 index -- Exemption.
48 (1) Except as provided in Subsection (5) or Part 12, Single Rate Individual Income Tax
49 Act, [for taxable years beginning on or after January 1, 2006,] a tax is imposed on the state
50 taxable income of every resident individual as provided in this section.
51 (2) For an individual, other than a husband and wife or head of household required to
52 use the tax table under Subsection (3), the tax under this section is imposed in accordance with
53 the following income brackets:
54 If the state taxable income is: The tax is:
55 Less than or equal to $1,000 2.3% of the state taxable income
56 Greater than $1,000 but less than $23, plus 3.3% of state taxable
57 or equal to $2,000 income greater than $1,000
58 Greater than $2,000 but less than $56, plus 4.2% of state taxable

59 or equal to $3,000 income greater than $2,000
60 Greater than $3,000 but less than $98, plus 5.2% of state taxable
61 or equal to $4,000 income greater than $3,000
62 Greater than $4,000 but less than $150, plus 6% of state taxable
63 or equal to $5,500 income greater than $4,000
64 Greater than $5,500 $240, plus [6.98] 6.9% of state taxable
65 income greater than $5,500
66 (3) For a husband and wife filing a single return jointly, or a head of household as
67 defined in Section 2(b), Internal Revenue Code, filing a single return, the tax under this section
68 is imposed in accordance with the following income brackets:
69 If the state taxable income is: The tax is:
70 Less than or equal to $2,000 2.3% of the state taxable income
71 Greater than $2,000 but less than $46, plus 3.3% of state taxable
72 or equal to $4,000 income greater than $2,000
73 Greater than $4,000 but less than $112, plus 4.2% of state taxable
74 or equal to $6,000 income greater than $4,000
75 Greater than $6,000 but less than $196, plus 5.2% of state taxable
76 or equal to $8,000 income greater than $6,000
77 Greater than $8,000 but less than $300, plus 6% of state taxable
78 or equal to $11,000 income greater than $8,000
79 Greater than $11,000 $480, plus [6.98] 6.9% of state taxable
80 income greater than $11,000
81 (4) (a) For taxable years beginning on or after January 1, 2009, the commission shall:
82 (i) make the following adjustments to the income brackets under Subsection (2):
83 (A) increase or decrease the income brackets under Subsection (2) by a percentage
84 equal to the percentage difference between the consumer price index for the preceding calendar
85 year and the consumer price index for the calendar year 2007; and
86 (B) after making an increase or decrease under Subsection (4)(a)(i)(A), round the
87 income brackets under Subsection (2) to the nearest whole dollar;
88 (ii) after making the adjustments described in Subsection (4)(a)(i) to the income
89 brackets under Subsection (2), adjust the income brackets under Subsection (3) so that for each

90 income bracket under Subsection (2) there is a corresponding income bracket under Subsection
91 (3) that is equal to the product of:
92 (A) each income bracket under Subsection (2); and
93 (B) two; and
94 (iii) to the extent necessary to reflect an adjustment under Subsection (4)(a)(i) or (ii):
95 (A) increase or decrease the amount of tax under Subsection (2) or (3) prior to adding
96 in the portion of the tax calculated as a percentage of state taxable income; and
97 (B) after making an increase or decrease under Subsection (4)(a)(iii)(A), round the
98 amount of tax under Subsection (2) or (3) to the nearest whole dollar.
99 (b) The commission may not increase or decrease the tax rate percentages provided in
100 Subsection (2) or (3).
101 (c) For purposes of Subsection (4)(a)(i), the commission shall calculate the consumer
102 price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.
103 (5) This section does not apply to a resident individual exempt from taxation under
104 Section 59-10-104.1 .
105 Section 2. Section 59-10-1202 is amended to read:
106 59-10-1202. Definitions.
107 As used in this part:
108 (1) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.
109 (2) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.
110 (3) "State income tax percentage for a nonresident individual" means a percentage
111 equal to a nonresident individual's adjusted gross income for the taxable year received from
112 Utah sources, as determined under Section 59-10-117 , divided by the difference between:
113 (a) the nonresident individual's total adjusted gross income for that taxable year; and
114 (b) if the nonresident individual described in Subsection (3)(a) is a servicemember, the
115 compensation the servicemember receives for military service if the servicemember is serving
116 in compliance with military orders.
117 (4) "State income tax percentage for a part-year resident individual" means, for a
118 taxable year, a fraction:
119 (a) the numerator of which is the sum of:
120 (i) for the time period during the taxable year that the part-year resident individual is a

121 resident, the part-year resident individual's total adjusted gross income for that time period; and
122 (ii) for the time period during the taxable year that the part-year resident individual is a
123 nonresident, the part-year resident individual's adjusted gross income for that time period
124 received from Utah sources, as determined under Section 59-10-117 ; and
125 (b) the denominator of which is the difference between:
126 (i) the part-year resident individual's total adjusted gross income for that taxable year;
127 and
128 (ii) if the part-year resident individual is a servicemember, any compensation the
129 servicemember receives for military service during the portion of the taxable year that the
130 servicemember is a nonresident if the servicemember is serving in compliance with military
131 orders.
132 [(4)] (5) "State taxable income" means a resident or nonresident individual's adjusted
133 gross income after making the:
134 (a) additions and subtractions required by Section 59-10-1204 ; and
135 (b) adjustments required by Section 59-10-1205 .
136 [(5)] (6) "Unapportioned state tax" means the product of the:
137 (a) difference between:
138 (i) a nonresident individual's state taxable income; and
139 (ii) if the nonresident individual described in Subsection [(5)] (6)(a)(i) is a
140 servicemember, compensation the servicemember receives for military service if the
141 servicemember is serving in compliance with military orders; and
142 (b) percentage listed in Subsection 59-10-1203 (2)(a)(i)(B).
143 Section 3. Section 59-10-1203 is amended to read:
144 59-10-1203. Single rate tax for resident or nonresident individual -- Tax rate --
145 Contributions -- Exemption -- Amended returns.
146 (1) For taxable years beginning on or after January 1, 2007, a resident or nonresident
147 individual may calculate and pay a tax under this section as provided in this part.
148 (2) (a) A resident individual that calculates and pays a tax under this section:
149 (i) shall pay for a taxable year an amount equal to the product of:
150 (A) the resident individual's state taxable income for that taxable year; and
151 (B) [5.35%] 4.9%; and

152 (ii) is exempt from paying the tax imposed by Section 59-10-104 .
153 (b) A nonresident individual that calculates and pays a tax under this section:
154 (i) shall pay for a taxable year an amount equal to the product of the nonresident
155 individual's:
156 (A) unapportioned state tax; and
157 (B) state income tax percentage for the nonresident individual; and
158 (ii) is exempt from paying the tax imposed by Section 59-10-116 .
159 (3) Except as required by Section 59-10-1204 or 59-10-1205 , a resident or nonresident
160 individual that calculates and pays a tax under this section may not make any addition or
161 adjustment to or subtraction from adjusted gross income.
162 (4) A resident or nonresident individual that calculates and pays a tax under this
163 section may designate on the resident or nonresident individual's individual income tax return
164 for a taxable year a contribution allowed by:
165 (a) Section 59-10-530 ;
166 (b) Section 59-10-530.5 ;
167 (c) Section 59-10-547 ;
168 (d) Section 59-10-549 ;
169 (e) Section 59-10-550 ;
170 (f) Section 59-10-550.1 ; or
171 (g) Section 59-10-550.2 .
172 (5) This section does not apply to a resident or nonresident individual exempt from
173 taxation under Section 59-10-104.1 .
174 (6) (a) A resident or nonresident individual may determine for each taxable year for
175 which the resident or nonresident individual files an individual income tax return under this
176 chapter whether to calculate and pay a tax under this section as provided in this part.
177 (b) If a resident or nonresident individual files an amended return for a taxable year
178 beginning on or after January 1, 2007, the resident or nonresident individual may determine
179 whether to calculate and pay a tax under this section as provided in this part for that taxable
180 year.
181 Section 4. Section 59-10-1206.1 is enacted to read:
182 59-10-1206.1. Definitions -- Nonrefundable tax credits allowed on the basis of

183 filing status and the state sales and use tax rate -- Division of Finance to transfer from the
184 General Fund into the Education Fund an amount equal to the amount of tax credits
185 claimed -- Commission to report to the Division of Finance the amount of tax credits
186 claimed -- Commission rulemaking authority.
187 (1) As used in this section:
188 (a) "Claimant" means a resident or nonresident individual that has state taxable income
189 under this part.
190 (b) "Joint filing status" means:
191 (i) a husband and wife who file a single return jointly; or
192 (ii) a surviving spouse, as defined in Section 2(a), Internal Revenue Code, who files a
193 single return.
194 (c) "Single filing status" means:
195 (i) a single individual who files a single return;
196 (ii) a married individual who:
197 (A) does not file a single return jointly with that individual's spouse; and
198 (B) files a single return; or
199 (iii) a head of household, as defined in Section 2(b), Internal Revenue Code, who files
200 a single return.
201 (2) Except as provided in Section 59-10-1206.9 and subject to Subsections (3) and (4),
202 for taxable years beginning on or after January 1, 2007, a claimant:
203 (a) who has a single filing status may claim a tax credit equal to the product of:
204 (i) $5,000; and
205 (ii) the percentage listed in Subsection 59-12-103 (2)(a)(i); or
206 (b) who has a joint filing status may claim a tax credit equal to the product of:
207 (i) $10,000; and
208 (ii) the percentage listed in Subsection 59-12-103 (2)(a)(i).
209 (3) A claimant may not carry forward or carry back a tax credit under this section.
210 (4) (a) For taxable years beginning on or after January 1, 2008, the commission shall
211 increase or decrease the dollar amounts described in Subsections (2)(a)(i) and (2)(b)(i) by a
212 percentage equal to the percentage difference between the consumer price index for the
213 preceding calendar year and the consumer price index for calendar year 2006.

214 (b) For purposes of Subsection (4)(a), the commission shall calculate the consumer
215 price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.
216 (c) After the commission increases the dollar amounts described in Subsections
217 (2)(a)(i) and (2)(b)(i), the commission shall round those increased or decreased dollar amounts
218 to the nearest whole dollar.
219 (5) (a) Subject to Subsection (5)(b), the Division of Finance shall transfer at least
220 annually from the General Fund into the Education Fund an amount equal to the amount of tax
221 credits claimed in accordance with this section.
222 (b) The commission shall report to the Division of Finance the amount of tax credits
223 claimed in accordance with this section.
224 (6) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
225 commission may make rules providing procedures for reporting to the Division of Finance the
226 amount of tax credits claimed in accordance with this section.
227 Section 5. Section 59-10-1206.9 is enacted to read:
228 59-10-1206.9. Apportionment of tax credits.
229 A nonresident individual or a part-year resident individual that claims a tax credit in
230 accordance with Section 59-10-1206.1 may only claim an apportioned amount of the tax credit
231 equal to:
232 (1) for a nonresident individual, the product of:
233 (a) the state income tax percentage for the nonresident individual; and
234 (b) the amount of the tax credit that the nonresident individual would have been
235 allowed to claim but for the apportionment requirements of this section; or
236 (2) for a part-year resident individual, the product of:
237 (a) the state income tax percentage for the part-year resident individual; and
238 (b) the amount of the tax credit that the part-year resident individual would have been
239 allowed to claim but for the apportionment requirements of this section.
240 Section 6. Section 59-12-103 is amended to read:
241 59-12-103. Sales and use tax base -- Rates -- Effective dates -- Use of sales and use
242 tax revenues.
243 (1) A tax is imposed on the purchaser as provided in this part for amounts paid or
244 charged for the following transactions:

245 (a) retail sales of tangible personal property made within the state;
246 (b) amounts paid:
247 (i) (A) to a common carrier; or
248 (B) whether the following are municipally or privately owned, to a:
249 (I) telephone service provider; or
250 (II) telegraph corporation as defined in Section 54-2-1 ; and
251 (ii) for:
252 (A) telephone service, other than mobile telecommunications service, that originates
253 and terminates within the boundaries of this state;
254 (B) mobile telecommunications service that originates and terminates within the
255 boundaries of one state only to the extent permitted by the Mobile Telecommunications
256 Sourcing Act, 4 U.S.C. Sec. 116 et seq.; or
257 (C) telegraph service;
258 (c) sales of the following for commercial use:
259 (i) gas;
260 (ii) electricity;
261 (iii) heat;
262 (iv) coal;
263 (v) fuel oil; or
264 (vi) other fuels;
265 (d) sales of the following for residential use:
266 (i) gas;
267 (ii) electricity;
268 (iii) heat;
269 (iv) coal;
270 (v) fuel oil; or
271 (vi) other fuels;
272 (e) sales of prepared food;
273 (f) except as provided in Section 59-12-104 , amounts paid or charged as admission or
274 user fees for theaters, movies, operas, museums, planetariums, shows of any type or nature,
275 exhibitions, concerts, carnivals, amusement parks, amusement rides, circuses, menageries,

276 fairs, races, contests, sporting events, dances, boxing matches, wrestling matches, closed circuit
277 television broadcasts, billiard parlors, pool parlors, bowling lanes, golf, miniature golf, golf
278 driving ranges, batting cages, skating rinks, ski lifts, ski runs, ski trails, snowmobile trails,
279 tennis courts, swimming pools, water slides, river runs, jeep tours, boat tours, scenic cruises,
280 horseback rides, sports activities, or any other amusement, entertainment, recreation,
281 exhibition, cultural, or athletic activity;
282 (g) amounts paid or charged for services for repairs or renovations of tangible personal
283 property, unless Section 59-12-104 provides for an exemption from sales and use tax for:
284 (i) the tangible personal property; and
285 (ii) parts used in the repairs or renovations of the tangible personal property described
286 in Subsection (1)(g)(i), whether or not any parts are actually used in the repairs or renovations
287 of that tangible personal property;
288 (h) except as provided in Subsection 59-12-104 (7), amounts paid or charged for
289 assisted cleaning or washing of tangible personal property;
290 (i) amounts paid or charged for tourist home, hotel, motel, or trailer court
291 accommodations and services that are regularly rented for less than 30 consecutive days;
292 (j) amounts paid or charged for laundry or dry cleaning services;
293 (k) amounts paid or charged for leases or rentals of tangible personal property if within
294 this state the tangible personal property is:
295 (i) stored;
296 (ii) used; or
297 (iii) otherwise consumed;
298 (l) amounts paid or charged for tangible personal property if within this state the
299 tangible personal property is:
300 (i) stored;
301 (ii) used; or
302 (iii) consumed; and
303 (m) amounts paid or charged for prepaid telephone calling cards.
304 (2) (a) Except as provided in Subsection (2)(b) or (f), a state tax and a local tax is
305 imposed on a transaction described in Subsection (1) equal to the sum of:
306 (i) a state tax imposed on the transaction at a rate of 4.75%; and

307 (ii) a local tax equal to the sum of the tax rates a county, city, or town imposes on the
308 transaction under this chapter other than this part.
309 (b) (i) A state tax and a local tax is imposed on a transaction described in Subsection
310 (1)(d) equal to the sum of:
311 (A) a state tax imposed on the transaction at a rate of 2%; and
312 (B) a local tax equal to the sum of the tax rates a county, city, or town imposes on the
313 transaction under this chapter other than this part; or
314 (ii) if a seller collects a tax in accordance with Subsection 59-12-107 (1)(b) on a
315 transaction described in Subsection (1), a state tax and a local tax is imposed on the transaction
316 equal to the sum of:
317 (A) a state tax imposed on the transaction at a rate of:
318 (I) 4.75% for a transaction other than a transaction described in Subsection (1)(d); or
319 (II) 2% for a transaction described in Subsection (1)(d); and
320 (B) a local tax imposed on the transaction at a rate equal to the sum of the following
321 rates:
322 (I) the tax rate authorized by Section 59-12-204 , but only if all of the counties, cities,
323 and towns in the state impose the tax under Section 59-12-204 ; and
324 (II) the tax rate authorized by Section 59-12-1102 , but only if all of the counties in the
325 state impose the tax under Section 59-12-1102 .
326 (iii) Except as provided in Subsection (2)(f), [beginning on January 1, 2007,] a state tax
327 and a local tax is imposed on amounts paid or charged for food and food ingredients equal to
328 the sum of:
329 (A) a state tax imposed on the amounts paid or charged for food and food ingredients
330 at a rate of [2.75] 0%; and
331 (B) a local tax equal to the sum of the tax rates a county, city, or town imposes on the
332 amounts paid or charged for food and food ingredients under this chapter other than this part.
333 (c) Subject to Subsections (2)(d) and (e), a tax rate repeal or tax rate change for a tax
334 rate imposed under the following shall take effect on the first day of a calendar quarter:
335 (i) Subsection (2)(a)(i);
336 (ii) Subsection (2)(b)(i)(A);
337 (iii) Subsection (2)(b)(ii)(A); or

338 (iv) Subsection (2)(b)(iii)(A).
339 (d) (i) For a transaction described in Subsection (2)(d)(iii), a tax rate increase shall take
340 effect on the first day of the first billing period:
341 (A) that begins after the effective date of the tax rate increase; and
342 (B) if the billing period for the transaction begins before the effective date of a tax rate
343 increase imposed under:
344 (I) Subsection (2)(a)(i);
345 (II) Subsection (2)(b)(i)(A); or
346 (III) Subsection (2)(b)(ii)(A).
347 (ii) For a transaction described in Subsection (2)(d)(iii), the repeal of a tax or a tax rate
348 decrease shall take effect on the first day of the last billing period:
349 (A) that began before the effective date of the repeal of the tax or the tax rate decrease;
350 and
351 (B) if the billing period for the transaction begins before the effective date of the repeal
352 of the tax or the tax rate decrease imposed under:
353 (I) Subsection (2)(a)(i);
354 (II) Subsection (2)(b)(i)(A); or
355 (III) Subsection (2)(b)(ii)(A).
356 (iii) Subsections (2)(d)(i) and (ii) apply to transactions subject to a tax under:
357 (A) Subsection (1)(b);
358 (B) Subsection (1)(c);
359 (C) Subsection (1)(d);
360 (D) Subsection (1)(e);
361 (E) Subsection (1)(f);
362 (F) Subsection (1)(g);
363 (G) Subsection (1)(h);
364 (H) Subsection (1)(i);
365 (I) Subsection (1)(j); or
366 (J) Subsection (1)(k).
367 (e) (i) If a tax due under Subsection (2)(a)(i) or (2)(b)(ii)(A) on a catalogue sale is
368 computed on the basis of sales and use tax rates published in the catalogue, a tax rate repeal or

369 change in a tax rate imposed under Subsection (2)(a)(i) or (2)(b)(ii)(A) takes effect:
370 (A) on the first day of a calendar quarter; and
371 (B) beginning 60 days after the effective date of the tax rate repeal or tax rate change
372 under Subsection (2)(a)(i) or (2)(b)(ii)(A).
373 (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
374 the commission may by rule define the term "catalogue sale."
375 (f) If the price of a bundled transaction is attributable to food and food ingredients and
376 tangible personal property other than food and food ingredients, the tax imposed on the entire
377 bundled transaction is the sum of the tax rates described in Subsection (2)(a).
378 (3) (a) Except as provided in Subsections (4) through (9), the following state taxes
379