S.B. 223 Enrolled

1

TAX AMENDMENTS
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Wayne L. Niederhauser
5 House Sponsor: John Dougall
6
7 LONG TITLE
8 General Description:
9 This bill amends the Revenue and Taxation title and the Rural Health Services chapter.
10 Highlighted Provisions:
11 This bill:
12 . modifies the membership of the Utah Tax Review Commission to include the chairs
13 of the Revenue and Taxation Interim Committee;
14 . repeals a repeal date for tax credits for research activities in the state;
15 . increases the percentage of expenses or payments that serve as the basis for
16 calculating tax credits for research activities in the state;
17 . provides a nonrefundable tax credit equal to 5% of a taxpayer's qualified research
18 expenses for the current taxable year in addition to other tax credits for research
19 activities in the state allowed under current statute;
20 . provides that the tax credits for qualified research expenses may not be carried
21 forward;
22 . requires a review of the tax credits for research activities in the state by the Utah
23 Tax Review Commission;
24 . extends the availability of the renewable energy tax credit;
25 . provides for the Utah Tax Review Commission to review the renewable energy tax
26 credit;
27 . expands the renewable energy tax credit to include some geothermal sources;
28 . makes the renewable energy tax credit on commercial energy systems a refundable
29 tax credit;

30 . changes the calculation of the tax credit for commercial energy systems;
31 . removes language reimbursing the Uniform School Fund for renewable energy tax
32 credits taken;
33 . provides that a tax under the Individual Income Tax Act that is imposed on the basis
34 of graduated brackets and rates may not be imposed for taxable years beginning on
35 or after January 1, 2008;
36 . provides and modifies definitions;
37 . reduces the single rate individual income tax rate from 5.35% to 5%;
38 . enacts a nonrefundable tax credit under the Single Rate Individual Income Tax Act
39 allowed on the basis of:
40 . the deductions a person claims ; and
41 . personal exemptions;
42 . enacts nonrefundable retirement tax credits under the Single Rate Individual Income
43 Tax Act;
44 . phases out the above nonrefundable tax credits under the Single Rate Individual
45 Income Tax Act at certain income levels;
46 . requires the apportionment of the above nonrefundable tax credits under the Single
47 Rate Individual Income Tax Act for a nonresident individual or part-year resident
48 individual;
49 . modifies the definition of "prosthetic device," the sale of which is exempt from
50 sales and use taxation, to include a dental prosthesis;
51 . reduces the state sales and use tax rate from 4.75% to 4.65%;
52 . reduces the state sales and use tax rate imposed on food and food ingredients,
53 except with respect to certain bundled transactions;
54 . provides a sales and use tax exemption for certain machinery, equipment, or repair
55 or replacement parts purchased or leased by certain establishments relating to
56 mining that are listed under the North American Industry Classification System;
57 . modifies State Tax Commission rulemaking authority;

58 . authorizes certain counties, cities, or towns to increase certain tax rates from .25%
59 to .30% and exempts those tax rate increases from voter approval requirements;
60 . provides that food and food ingredients are not subject to certain local sales and use
61 taxes, except with respect to certain bundled transactions;
62 . addresses State Tax Commission notice requirements to enact, repeal, or change the
63 tax rate of certain local sales and use taxes;
64 . creates a restricted special revenue fund to distribute monies to fund rural health
65 care facilities and services that are impacted by providing that food and food
66 ingredients are not generally subject to local sales and use taxes for rural health care
67 facilities and services, including:
68 . addressing the distribution and expenditure of fund revenues; and
69 . providing that unexpended monies remaining in the fund at the end of a fiscal
70 year lapse into the General Fund;
71 . requires the State Tax Commission to provide data to the executive director of the
72 Department of Health;
73 . increases the maximum tax rate for the resort communities local sales and use tax
74 from 1% to 1.1%;
75 . enacts an additional state sales and use tax and provides that the revenues collected
76 from the tax shall be deposited into the General Fund;
77 . provides a nonrefundable tax credit under the Multi-Channel Video or Audio
78 Service Tax Act for a multi-channel video or audio service provider;
79 . requires a multi-channel video or audio service provider to pass through an amount
80 equal to the tax credit to purchasers located within the state;
81 . provides that a tax on amounts paid or charged for multi-channel video or audio
82 service may not be reduced as a result of the amount a multi-channel video or audio
83 service provider passes through to its customers within the state;
84 . requires a Revenue and Taxation Interim Committee study on repealing the state
85 individual income tax imposed on the basis of graduated brackets and rates; and

86 . makes technical changes.
87 Monies Appropriated in this Bill:
88 This bill appropriates:
89 . for fiscal year 2007-08 only, $277,500 from the General Fund to the Rural Health
90 Care Facilities Fund; and
91 . as an ongoing appropriation subject to future budget constraints, $555,000 from the
92 General Fund for fiscal year 2008-09 to the Rural Health Care Facilities Fund.
93 Other Special Clauses:
94 This bill provides effective dates and provides for retrospective operation.
95 This bill provides revisor instructions.
96 This bill coordinates with H.B. 27, Sales and Use Tax Modifications, by merging
97 substantive amendments.
98 Utah Code Sections Affected:
99 AMENDS:
100 59-1-210, as last amended by Chapter 271, Laws of Utah 1995
101 59-1-901, as last amended by Chapter 243, Laws of Utah 1996
102 59-7-612, as last amended by Chapter 9, Laws of Utah 2001
103 59-10-104, as last amended by Chapter 2, Laws of Utah 2006, Fourth Special Session
104 59-10-1012, as renumbered and amended by Chapter 223, Laws of Utah 2006
105 59-10-1014, as renumbered and amended by Chapter 223, Laws of Utah 2006
106 59-10-1202, as enacted by Chapter 2, Laws of Utah 2006, Fourth Special Session
107 59-10-1203, as enacted by Chapter 2, Laws of Utah 2006, Fourth Special Session
108 59-12-102, as last amended by Chapter 1, Laws of Utah 2006, Fourth Special Session
109 59-12-103, as last amended by Chapter 9, Laws of Utah 2006, Third Special Session
110 59-12-104, as last amended by Chapters 181, 182, 217, 218, 219, 220, 246, 268 and
111 346, Laws of Utah 2006
112 59-12-401, as last amended by Chapter 253, Laws of Utah 2006
113 59-12-402, as last amended by Chapter 253, Laws of Utah 2006

114 59-12-403, as last amended by Chapter 253, Laws of Utah 2006
115 59-12-501, as last amended by Chapter 253, Laws of Utah 2006
116 59-12-502, as last amended by Chapters 253 and 329, Laws of Utah 2006
117 59-12-504, as last amended by Chapter 253, Laws of Utah 2006
118 59-12-703, as last amended by Chapter 253, Laws of Utah 2006
119 59-12-802, as last amended by Chapters 253 and 302, Laws of Utah 2006
120 59-12-804, as last amended by Chapter 253, Laws of Utah 2006
121 59-12-1001, as last amended by Chapter 253, Laws of Utah 2006
122 59-12-1302, as last amended by Chapter 253, Laws of Utah 2006
123 59-12-1402, as last amended by Chapter 253, Laws of Utah 2006
124 59-12-1503, as last amended by Chapter 253, Laws of Utah 2006
125 59-12-1703, as enacted by Chapter 1, Laws of Utah 2006, Fourth Special Session
126 59-26-102, as enacted by Chapter 300, Laws of Utah 2004
127 59-26-103, as enacted by Chapter 300, Laws of Utah 2004
128 ENACTS:
129 26-9-4, Utah Code Annotated 1953
130 59-10-1106, Utah Code Annotated 1953
131 59-10-1206.1, Utah Code Annotated 1953
132 59-10-1206.2, Utah Code Annotated 1953
133 59-10-1206.9, Utah Code Annotated 1953
134 59-12-1801, Utah Code Annotated 1953
135 59-12-1802, Utah Code Annotated 1953
136 59-12-1803, Utah Code Annotated 1953
137 59-26-104.5, Utah Code Annotated 1953
138 REPEALS AND REENACTS:
139 59-7-614, as last amended by Chapter 223, Laws of Utah 2006
140 Uncodified Material Affected:
141 ENACTS UNCODIFIED MATERIAL

142
143 Be it enacted by the Legislature of the state of Utah:
144 Section 1. Section 26-9-4 is enacted to read:
145 26-9-4. Rural Health Care Facilities Fund -- Source of revenues -- Interest --
146 Distribution of revenues -- Expenditure of revenues -- Unexpended revenues lapse into
147 the General Fund.
148 (1) As used in this section:
149 (a) "Emergency medical services" is as defined in Section 26-8a-102 .
150 (b) "Federally qualified health center" is as defined in 42 U.S.C. Sec. 1395x.
151 (c) "Fiscal year" means a one-year period beginning on July 1 of each year.
152 (d) "Freestanding urgent care center" is as defined in Section 59-12-801 .
153 (e) "Fund" means the Rural Health Care Facilities Fund created by this section.
154 (f) "Nursing care facility" is as defined in Section 26-21-2 .
155 (g) "Rural city hospital" is as defined in Section 59-12-801 .
156 (h) "Rural county health care facility" is as defined in Section 59-12-801 .
157 (i) "Rural county hospital" is as defined in Section 59-12-801 .
158 (j) "Rural county nursing care facility" is as defined in Section 59-12-801 .
159 (k) "Rural emergency medical services" is as defined in Section 59-12-801 .
160 (l) "Rural health clinic" is as defined in 42 U.S.C. Sec. 1395x.
161 (2) There is created a restricted special revenue fund known as the Rural Health Care
162 Facilities Fund.
163 (3) (a) The fund shall be funded by amounts appropriated by the Legislature.
164 (b) Any interest earned on the fund shall be deposited into the General Fund.
165 (4) Subject to Subsection (5), the executive director shall for a fiscal year distribute
166 monies deposited into the fund to each:
167 (a) county legislative body of a county that, on January 1, 2007, imposes a tax in
168 accordance with Section 59-12-802 ; or
169 (b) city legislative body of a city that, on January 1, 2007, imposes a tax in accordance

170 with Section 59-12-804 .
171 (5) (a) For purposes of the distribution required by Subsection (4), the executive
172 director shall:
173 (i) estimate for each county and city described in Subsection (4) the amount by which
174 the revenues collected from the taxes imposed under Sections 59-12-802 and 59-12-804 for
175 fiscal year 2005-06 would have been reduced had:
176 (A) the amendments made by this bill to Sections 59-12-802 and 59-12-804 been in
177 effect for fiscal year 2005-06; and
178 (B) each county and city described in Subsection (4) imposed the tax under Sections
179 59-12-802 and 59-12-804 for the entire fiscal year 2005-06;
180 (ii) calculate a percentage for each county and city described in Subsection (4) by
181 dividing the amount estimated for each county and city in accordance with Subsection (5)(a)(i)
182 by $555,000; and
183 (iii) distribute to each county and city described in Subsection (4) an amount equal to
184 the product of:
185 (A) the percentage calculated in accordance with Subsection (5)(a)(ii); and
186 (B) the amount appropriated by the Legislature to the fund for the fiscal year.
187 (b) The executive director shall make the estimations, calculations, and distributions
188 required by Subsection (5)(a) on the basis of data provided to the executive director by the
189 State Tax Commission.
190 (6) (a) Subject to Subsection (6)(b), a county legislative body shall distribute the
191 monies the county legislative body receives in accordance with Subsection (5):
192 (i) for a county of the third, fourth, or fifth class, to fund rural county health care
193 facilities in that county; and
194 (ii) for a county of the sixth class, to fund:
195 (A) emergency medical services in that county;
196 (B) federally qualified health centers in that county;
197 (C) freestanding urgent care centers in that county;

198 (D) rural county health care facilities in that county;
199 (E) rural health clinics in that county; or
200 (F) a combination of Subsections (6)(a)(ii)(A) through (E).
201 (b) A county legislative body shall distribute a percentage of the monies the county
202 legislative body receives in accordance with Subsection (5) to each center, clinic, facility, or
203 service described in Subsection (6)(a) equal to the same percentage that the county legislative
204 body distributes to that center, clinic, facility, or service in accordance with Section 59-12-803
205 for the calendar year ending on the December 31 immediately preceding the first day of the
206 fiscal year for which the county legislative body receives the distribution in accordance with
207 Subsection (5).
208 (c) A center, clinic, facility, or service that receives a distribution in accordance with
209 this Subsection (6) shall expend that distribution for the same purposes for which monies
210 generated by a tax under Section 59-12-802 may be expended.
211 (7) (a) Subject to Subsection (7)(b), a city legislative body shall distribute the monies
212 the city legislative body receives in accordance with Subsection (5) to fund rural city hospitals
213 in that city.
214 (b) A city legislative body shall distribute a percentage of the monies the city
215 legislative body receives in accordance with Subsection (5) to each rural city hospital described
216 in Subsection (7)(a) equal to the same percentage that the city legislative body distributes to
217 that rural city hospital in accordance with Section 59-12-805 for the calendar year ending on
218 the December 31 immediately preceding the first day of the fiscal year for which the city
219 legislative body receives the distribution in accordance with Subsection (5).
220 (c) A rural city hospital that receives a distribution in accordance with this Subsection
221 (7) shall expend that distribution for the same purposes for which monies generated by a tax
222 under Section 59-12-804 may be expended.
223 (8) Any monies remaining in the Rural Health Care Facilities Fund at the end of a
224 fiscal year after the executive director makes the distributions required by this section shall
225 lapse into the General Fund.

226 Section 2. Section 59-1-210 is amended to read:
227 59-1-210. General powers and duties.
228 The powers and duties of the commission are as follows:
229 (1) to sue and be sued in its own name;
230 (2) to adopt rules and policies consistent with the Constitution and laws of this state to
231 govern the commission, executive director, division directors, and commission employees in
232 the performance of their duties;
233 (3) to adopt rules and policies consistent with the Constitution and laws of the state, to
234 govern county boards and officers in the performance of any duty relating to assessment,
235 equalization, and collection of taxes;
236 (4) to prescribe the use of forms relating to the assessment of property for state or local
237 taxation, the equalization of those assessments, the reporting of property or income for state or
238 local taxation purposes, or for the computation of those taxes and the reporting of any
239 information, statistics, or data required by the commission;
240 (5) to administer and supervise the tax laws of the state;
241 (6) to prepare and maintain from year to year a complete record of all lands subject to
242 taxation in this state, and all machinery used in mining and all property or surface
243 improvements upon or appurtenant to mines or mining claims;
244 (7) to exercise general supervision over assessors and county boards of equalization
245 including the authority to enforce Section 59-2-303.1 , and over other county officers in the
246 performance of their duties relating to the assessment of property and collection of taxes, so
247 that all assessments of property are just and equal, according to fair market value, and that the
248 tax burden is distributed without favor or discrimination;
249 (8) to reconvene any county board of equalization which, when reconvened, may only
250 address business approved by the commission and extend the time for which any county board
251 of equalization may sit for the equalization of assessments;
252 (9) to confer with, advise, and direct county treasurers, assessors, and other county
253 officers in matters relating to the assessment and equalization of property for taxation and the

254 collection of taxes;
255 (10) to provide for and hold annually at such time and place as may be convenient a
256 district or state convention of county assessors, auditors, and other county officers to consider
257 and discuss matters relative to taxation, uniformity of valuation, and changes in the law relative
258 to taxation and methods of assessment, to which county assessors and other officers called to
259 attend shall attend at county expense;
260 (11) to direct proceedings, actions, and prosecutions to enforce the laws relating to the
261 penalties, liabilities, and punishments of public officers, persons, and officers or agents of
262 corporations for failure or neglect to comply with the statutes governing the reporting,
263 assessment, and taxation of property;
264 (12) to cause complaints to be made in the proper court seeking removal from office of
265 assessors, auditors, members of county boards, and other assessing, taxing, or disbursing
266 officers, who are guilty of official misconduct or neglect of duty;
267 (13) to require county attorneys to immediately institute and prosecute actions and
268 proceedings in respect to penalties, forfeitures, removals, and punishments for violations of the
269 laws relating to the assessment and taxation of property in their respective counties;
270 (14) to require any person to furnish any information required by the commission to
271 ascertain the value and the relative burden borne by all kinds of property in the state, and to
272 require from all state and local officers any information necessary for the proper discharge of
273 the duties of the commission;
274 (15) to examine all records relating to the valuation of property of any person;
275 (16) to subpoena witnesses to appear and give testimony and produce records relating
276 to any matter before the commission;
277 (17) to cause depositions of witnesses to be taken as in civil actions at the request of
278 the commission or any party to any matter or proceeding before the commission;
279 (18) to authorize any member or employee of the commission to administer oaths and
280 affirmations in any matter or proceeding relating to the exercise of the powers and duties of the
281 commission;

282 (19) to visit periodically each county of the state, to investigate and direct the work and
283 methods of local assessors and other officials in the assessment, equalization, and taxation of
284 property, and to ascertain whether the law requiring the assessment of all property not exempt
285 from taxation, and the collection of taxes, have been properly administered and enforced;
286 (20) to carefully examine all cases where evasion or violation of the laws for
287 assessment and taxation of property is alleged, to ascertain whether existing laws are defective
288 or improperly administered;
289 (21) to furnish to the governor from time to time such assistance and information as the
290 governor requires;
291 (22) to transmit to the governor and to each member of the Legislature
292 recommendations as to legislation which will correct or eliminate defects in the operation of
293 the tax laws and will equalize the burden of taxation within the state;
294 (23) to correct any error in any assessment made by it at any time before the tax is due
295 and report the correction to the county auditor, who shall enter the corrected assessment upon
296 the assessment roll;
297 (24) to compile and publish statistics relating to taxation in the state and prepare and
298 submit an annual budget to the governor for inclusion in the state budget to be submitted to the
299 Legislature;
300 (25) to perform any further duties imposed by law, and exercise all powers necessary in
301 the performance of its duties;
302 (26) to adopt a schedule of fees assessed for services provided by the commission,
303 unless otherwise provided by statute. The fee shall be reasonable and fair, and shall reflect the
304 cost of services provided. Each fee established in this manner shall be submitted to and
305 approved by the Legislature as part of the commission's annual appropriations request. The
306 commission may not charge or collect any fee proposed in this manner without approval by the
307 Legislature; [and]
308 (27) to comply with the procedures and requirements of Title 63, Chapter 46b,
309 Administrative Procedures Act, in its adjudicative proceedings[.]; and

310 (28) to provide data to the executive director of the Department of Health for purposes
311 of the distributions required by Section 26-9-4 .
312 Section 3. Section 59-1-901 is amended to read:
313 59-1-901. Creation -- Members -- Terms.
314 (1) There is created a state commission to be known as the Utah Tax Review
315 Commission.
316 (2) (a) The [review commission] Utah Tax Review Commission shall be composed of
317 [14] 16 members as follows:
318 (i) [Two] two members shall be appointed by the speaker of the House of
319 Representatives from the House of Representatives, not more than one of whom may be from
320 the same political party[.];
321 (ii) [Two] two members shall be appointed by the president of the Senate from the
322 Senate, not more than one of whom may be from the same political party[.];
323 (iii) [Five] five members shall be appointed by the governor, not more than three of
324 whom may be from the same political party[.];
325 (iv) [A] one member who is a member of the State Tax Commission, appointed by the
326 State Tax Commission, shall be an ex officio member of the [review commission.] Utah Tax
327 Review Commission;
328 (v) one member who is the House of Representatives chair of the Revenue and
329 Taxation Interim Committee shall be an ex officio member of the Utah Tax Review
330 Commission; and
331 (vi) one member who is the Senate chair of the Revenue and Taxation Interim
332 Committee shall be an ex officio member of the Utah Tax Review Commission.
333 (b) The [ten] 12 members appointed under Subsection (2)(a) shall then select four
334 additional members with consideration to be given to achieving ethnic, cultural, and gender
335 diversity, representation from the major geographical areas of the state, and equal bipartisan
336 representation.
337 (3) (a) Except for members appointed under Subsections (2)(a)(i) [and], (ii), (v), and

338 (vi), and except as required by Subsection (3)(b), members shall be appointed to four-year
339 terms.
340 (b) Notwithstanding the requirements of Subsection (3)(a), the governor shall, at the
341 time of appointment or reappointment, adjust the length of terms to ensure that the terms of
342 commission members are staggered so that approximately half of the commission is appointed
343 every two years.
344 Section 4. Section 59-7-612 is amended to read:
345 59-7-612. Tax credits for research activities conducted in the state -- Carry
346 forward -- Commission to report modification or repeal of certain federal provisions --
347 Utah Tax Review Commission study.
348 (1) (a) [For taxable years beginning on or after January 1, 1999, but beginning before
349 December 31, 2010, a] A taxpayer meeting the requirements of this section [shall qualify for]
350 may claim the following nonrefundable tax credits [for increasing research activities in this
351 state]:
352 (i) a research tax credit of [6%] 7% of the taxpayer's qualified research expenses for
353 the current taxable year that exceed the base amount provided for under Subsection (4); [and]
354 (ii) a tax credit for payments to qualified organizations for basic research as provided
355 in Section 41(e), Internal Revenue Code, of [6%] 7% for the current taxable year that exceed
356 the base amount provided for under Subsection (4)[.]; and
357 (iii) a tax credit equal to 5% of the taxpayer's qualified research expenses for the
358 current taxable year.
359 [(b) If a taxpayer qualifying for a credit under Subsection (1)(a) seeks to claim the
360 credit, the taxpayer shall:]
361 (b) (i) Except as provided in Subsection (1)(b)(ii), a taxpayer may:
362 [(i)] (A) claim the tax credit or a portion of the tax credit for the taxable year
363 immediately following the taxable year for which the taxpayer qualifies for the tax credit;
364 [(ii)] (B) carry forward the tax credit or a portion of the tax credit [forward] as
365 provided in Subsection [(4)(f)] (5); or

366 [(iii)] (C) claim a portion of the tax credit and carry forward a portion of the tax credit
367 as provided in Subsections (1)(b)(i)(A) and [(ii)] (B).
368 (ii) A taxpayer may not carry forward the tax credit allowed by Subsection (1)(a)(iii).
369 (c) The tax credits provided for in this section do not include the alternative
370 incremental credit provided for in Section 41(c)(4), Internal Revenue Code.
371 (2) For purposes of claiming a tax credit under this section, a unitary group as defined
372 in Section 59-7-101 is considered to be one taxpayer.
373 (3) Except as specifically provided for in this section:
374 (a) the tax credits authorized under Subsection (1) shall be calculated as provided in
375 Section 41, Internal Revenue Code; and
376 (b