Second Substitute S.B. 18

Senator Lyle W. Hillyard proposes the following substitute bill:

1 USE OF SEVERANCE TAX REVENUES
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Lyle W. Hillyard
5 House Sponsor: ____________
6
7 LONG TITLE
8 General Description:
9 This bill provides for the disposition of certain revenues from severance taxes.
10 Highlighted Provisions:
11 This bill:
12 . creates the Infrastructure and Economic Diversification Investment Account;
13 . creates the Severance Tax Holding Account;
14 . provides that severance tax revenues that exceed a base amount are deposited in the
15 permanent state trust fund or the Severance Tax Holding Account;
16 . provides that certain earnings are credited to the Infrastructure and Economic
17 Diversification Investment Account; and
18 . makes technical changes.
19 Monies Appropriated in this Bill:
20 None
21 Other Special Clauses:
22 This bill takes effect on July 1, 2007.
23 Utah Code Sections Affected:
24 AMENDS:
25 59-5-115, as last amended by Chapter 135, Laws of Utah 1996

26 59-5-215, as enacted by Chapter 4, Laws of Utah 1988
27 63-97-301, as last amended by Chapter 275, Laws of Utah 2005
28 ENACTS:
29 63-97a-101, Utah Code Annotated 1953
30 63-97a-102, Utah Code Annotated 1953
31 63-97a-103, Utah Code Annotated 1953
32 63-97a-201, Utah Code Annotated 1953
33 63-97a-202, Utah Code Annotated 1953
34 63-97a-301, Utah Code Annotated 1953
35
36 Be it enacted by the Legislature of the state of Utah:
37 Section 1. Section 59-5-115 is amended to read:
38 59-5-115. Disposition of taxes collected -- Credit to General Fund.
39 [All] (1) Except as provided in Subsection (2), all taxes imposed and collected under
40 Section 59-5-102 shall be paid to the commission, and promptly remitted to the state treasurer,
41 and except those taxes otherwise allocated under Section 59-5-116 or 59-5-119 , credited to the
42 General Fund.
43 (2) Taxes imposed and collected under Section 59-5-102 shall not be credited to the
44 General Fund if those taxes are:
45 (a) otherwise allocated under Section 59-5-116 or 59-5-119 ;
46 (b) credited to the Severance Tax Holding Account under Section 63-97a-301 ; or
47 (c) credited to the permanent state trust fund under Section 63-97a-301 .
48 Section 2. Section 59-5-215 is amended to read:
49 59-5-215. Disposition of taxes collected -- Credit to General Fund.
50 [All] (1) Except as provided in Subsection (2), all taxes imposed and collected under
51 Section 59-5-202 shall be paid to the commission, and promptly remitted to the state treasurer,
52 to be credited to the General Fund.
53 (2) Taxes imposed and collected under Section 59-5-202 shall not be credited to the
54 General Fund if those taxes are credited to:
55 (a) the Severance Tax Holding Account under Section 63-97a-301 ; or
56 (b) the permanent state trust fund under Section 63-97a-301 .

57 Section 3. Section 63-97-301 is amended to read:
58 63-97-301. Permanent state trust fund.
59 (1) Until July 1, 2003, 50% of all funds of every kind that are received by the state that
60 are related to the settlement agreement that the state entered into with leading tobacco
61 manufacturers on November 23, 1998, shall be deposited into the permanent state trust fund
62 created by and operated under Utah Constitution Article XXII, Section 4.
63 (2) On and after July 1, 2003 and until July 1, 2004 20% of the funds of any kind
64 received by the state that are related to the settlement agreement that the state entered into with
65 leading tobacco manufacturers shall be deposited into the permanent state trust fund created by
66 and operated under Utah Constitution Article XXII, Section 4.
67 (3) On and after July 1, 2004 and until July 1, 2005, 30% of all funds of any kind
68 received by the state that are related to the settlement agreement that the state entered into with
69 leading tobacco manufacturers shall be deposited into the General Fund Budget Reserve
70 Account created in Section 63-38-2.5 .
71 (4) On and after July 1, 2005 and until July 1, 2007, 25% of all funds of any kind
72 received by the state that are related to the settlement agreement that the state entered into with
73 leading tobacco manufacturers shall be deposited into the permanent state trust fund created by
74 and operated under Utah Constitution Article XXII, Section 4.
75 (5) On and after July 1, 2007, 40% of all funds of every kind that are received by the
76 state that are related to the settlement agreement that the state entered into with leading tobacco
77 manufacturers on November 23, 1998, shall be deposited into the permanent state trust fund
78 created by and operated under Utah Constitution Article XXII, Section 4.
79 (6) Funds in the permanent state trust fund shall be deposited or invested pursuant to
80 Section 51-7-12.1 .
81 (7) (a) In accordance with Utah Constitution Article XXII, Section 4, the interest and
82 dividends earned annually from the permanent state trust fund shall be deposited in the General
83 Fund. There shall be transferred on an ongoing basis from the General Fund to the permanent
84 state trust fund created under Utah Constitution Article XXII, Section 4, an amount equal to
85 50% of the interest and dividends earned annually from the permanent state trust fund. The
86 amount transferred into the fund under this Subsection (7)(a) shall be treated as principal.
87 (b) Any annual interest or dividends earned from the permanent state trust fund that

88 remain in the General Fund after Subsection (7)(a) may be appropriated by the Legislature.
89 (c) Any realized or unrealized gains or losses on investments in the permanent state
90 trust fund shall remain in the permanent state trust fund.
91 (8) This section does not apply to funds deposited under Chapter 97a, Infrastructure
92 and Economic Diversification Investment Account and Severance Tax Holding Account into:
93 (a) the permanent state trust fund; or
94 (b) the Severance Tax Holding Account created under Chapter 97a, Infrastructure and
95 Economic Diversification Investment Account and Severance Tax Holding Account.
96 Section 4. Section 63-97a-101 is enacted to read:
97 CHAPTER 97a. INFRASTRUCTURE AND ECONOMIC DIVERSIFICATION
98 INVESTMENT ACCOUNT AND SEVERANCE TAX HOLDING ACCOUNT
99 Part 1. General Provisions
100 63-97a-101. Title.
101 This chapter is known as the "Infrastructure and Economic Diversification Investment
102 Account and Severance Tax Holding Account."
103 Section 5. Section 63-97a-102 is enacted to read:
104 63-97a-102. Definitions.
105 As used in this chapter:
106 (1) "Infrastructure and Economic Diversification Investment Account" means the
107 Infrastructure and Economic Diversification Investment Account created in Section
108 63-97a-201 .
109 (2) "Mining base amount" means:
110 (a) $9,000,000 for:
111 (i) fiscal year 2007-08; or
112 (ii) fiscal year 2008-09; and
113 (b) for each fiscal year beginning on or after July 1, 2009, the amount determined by
114 the Division of Finance as described in Section 63-97a-103 .
115 (3) "Oil and gas base amount" means:
116 (a) $41,000,000 for:
117 (i) fiscal year 2007-08; or
118 (ii) fiscal year 2008-09; and

119 (b) for each fiscal year beginning on or after July 1, 2009, the amount determined by
120 the Division of Finance as described in Section 63-97a-103 .
121 (4) "Permanent state trust fund" means the permanent state trust fund created under
122 Utah Constitution Article XXII, Section 4.
123 (5) "Severance Tax Holding Account" means the Severance Tax Holding Account
124 created in Section 63-97a-202 .
125 Section 6. Section 63-97a-103 is enacted to read:
126 63-97a-103. Base amount calculation using the consumer price index.
127 (1) For each fiscal year beginning on or after July 1, 2009, the Division of Finance
128 shall increase or decrease the base amounts described in Subsections 63-97a-102 (2) and (3) by
129 a percentage equal to the percentage difference between the consumer price index for the
130 preceding fiscal year and the consumer price index for fiscal year 2007-08.
131 (2) For purposes of Subsection (1), the Division of Finance shall calculate the
132 consumer price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.
133 Section 7. Section 63-97a-201 is enacted to read:
134 Part 2. Creation of Restricted Accounts
135 63-97a-201. Creation of Infrastructure and Economic Diversification Investment
136 Account.
137 (1) (a) There is created a restricted account within the General Fund known as the
138 "Infrastructure and Economic Diversification Investment Account."
139 (b) The Infrastructure and Economic Diversification Investment Account shall consist
140 of:
141 (i) all monies credited to the account under Section 63-97a-301 ;
142 (ii) appropriations from the Legislature;
143 (iii) grants from private foundations; and
144 (iv) interest and investment earnings on account monies.
145 (2) (a) The Infrastructure and Economic Diversification Investment Account shall earn
146 interest.
147 (b) All interest earned on monies in the Infrastructure and Economic Diversification
148 Investment Account shall be deposited into the Infrastructure and Economic Diversification
149 Investment Account.

150 (3) The Legislature may appropriate monies from the Infrastructure and Economic
151 Diversification Investment Account for infrastructure and economic diversification investment
152 projects.
153 Section 8. Section 63-97a-202 is enacted to read:
154 63-97a-202. Creation of Severance Tax Holding Account.
155 (1) (a) There is created a restricted account within the General Fund known as the
156 "Severance Tax Holding Account."
157 (b) The Severance Tax Holding Account shall consist of:
158 (i) all monies credited to the Severance Tax Holding Account under Section
159 63-97a-301 ;
160 (ii) appropriations from the Legislature;
161 (iii) grants from private foundations; and
162 (iv) interest and investment earnings on Severance Tax Holding Account monies.
163 (2) (a) The Severance Tax Holding Account shall earn interest.
164 (b) All interest earned on monies in the Severance Tax Holding Account shall be
165 deposited into the Severance Tax Holding Account.
166 (3) If authorized by law the Division of Finance shall deposit all of the monies in the
167 Severance Tax Holding Account as of July 1, 2009, into the permanent state trust fund.
168 Section 9. Section 63-97a-301 is enacted to read:
169 Part 3. Distribution of Certain Severance Tax Revenues
170 63-97a-301. Crediting of certain severance tax revenues to the permanent state
171 trust fund and the Severance Tax Holding Account.
172 (1) After making the distributions of oil and gas severance tax revenues as required
173 under Sections 59-5-116 and 59-5-119 , the Division of Finance shall make the distributions
174 required under Subsections (2) through (7).
175 (2) (a) Beginning on July 1, 2007 and ending on June 30, 2008, the Division of Finance
176 shall credit to the Severance Tax Holding Account all revenue from severance taxes on oil and
177 gas imposed under Title 59, Chapter 5, Severance Tax on Oil, Gas, and Mining, collected in
178 that fiscal year that exceed the oil and gas base amount.
179 (b) (i) Beginning on July 1, 2008 and ending on December 31, 2008, the Division of
180 Finance shall credit to the Severance Tax Holding Account all revenue from severance taxes on

181 oil and gas imposed under Title 59, Chapter 5, Severance Tax on Oil, Gas, and Mining,
182 collected during that time period that exceed the oil and gas base amount.
183 (ii) Beginning on January 1, 2009 and ending on June 30, 2009, if authorized by law,
184 the Division of Finance shall credit to the permanent state trust fund an amount equal to the
185 difference between:
186 (A) all revenue from severance taxes on oil and gas imposed under Title 59, Chapter 5,
187 Severance Tax on Oil, Gas, and Mining, collected in fiscal year 2008-09 that exceed the oil and
188 gas base amount; and
189 (B) the amount of revenue credited to the Severance Tax Holding Account under
190 Subsection (2)(b)(i).
191 (3) Beginning on July 1, 2009, if authorized by law, the Division of Finance shall
192 credit to the permanent state trust fund all revenue collected in a fiscal year from severance
193 taxes on oil and gas imposed under Title 59, Chapter 5, Severance Tax on Oil, Gas, and
194 Mining, that exceed the oil and gas base amount.
195 (4) (a) Beginning on July 1, 2007 and ending on June 30, 2008, the Division of Finance
196 shall credit to the Severance Tax Holding Account all revenue from severance taxes on mining
197 imposed under Title 59, Chapter 5, Severance Tax on Oil, Gas, and Mining, collected in that
198 fiscal year that exceed the mining base amount.
199 (b) (i) Beginning on July 1, 2008 and ending on December 31, 2008, the Division of
200 Finance shall credit to the Severance Tax Holding Account all revenue from severance taxes on
201 mining imposed under Title 59, Chapter 5, Severance Tax on Oil, Gas, and Mining, collected
202 during that time period that exceed the mining base amount.
203 (ii) Beginning on January 1, 2009 and ending on June 30, 2009, if authorized by law,
204 the Division of Finance shall credit to the permanent state trust fund an amount equal to the
205 difference between:
206 (A) all revenue from severance taxes on mining imposed under Title 59, Chapter 5,
207 Severance Tax on Oil, Gas, and Mining, collected in fiscal year 2008-09 that exceed the
208 mining base amount; and
209 (B) the amount of revenue credited to the Severance Tax Holding Account under
210 Subsection (4)(b)(i).
211 (5) Beginning on July 1, 2009, if authorized by law, the Division of Finance shall

212 credit to the permanent state trust fund all revenue collected in a fiscal year from severance
213 taxes on mining imposed under Title 59, Chapter 5, Severance Tax on Oil, Gas, and Mining,
214 that exceed the mining base amount.
215 (6) The state treasurer shall invest and separately account for the earnings on funds that
216 are deposited into the permanent state trust fund under this section.
217 (7) (a) In accordance with Utah Constitution Article XXII, Section 4, the interest and
218 dividends earned annually on revenue from severance taxes that are deposited into the
219 permanent state trust fund shall be deposited in the General Fund.
220 (b) Interest and dividends earned on revenue from severance taxes that are deposited in
221 the General Fund pursuant to Subsection (7)(a) shall be credited to the Infrastructure and
222 Economic Diversification Investment Account created in Section 63-97a-201 .
223 Section 10. Effective date.
224 This bill takes effect on July 1, 2007.