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H.B. 359 Enrolled

             1     

TAX CHANGES

             2     
2008 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: John Dougall

             5     
Senate Sponsor: Wayne L. Niederhauser

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends the Corporate Franchise and Income Taxes chapter, the Individual
             10      Income Tax Act, the Sales and Use Tax Act, the Transportation Code, and related
             11      provisions to address the income taxation of individuals, estates, and trusts, including
             12      real estate investment trusts, a change in a state sales and use tax rate, a sales and use
             13      tax exemption, and the expenditure of certain state sales and use tax revenues.
             14      Highlighted Provisions:
             15          This bill:
             16          .    defines terms;
             17          .    addresses the income taxation of a real estate investment trust or income from a real
             18      estate investment trust;
             19          .    repeals provisions imposing an individual income tax on the basis of graduated
             20      brackets and rates;
             21          .    provides that an individual income tax is imposed on the basis of a single tax rate,
             22      including:
             23              .    modifying and repealing definitions;
             24              .    modifying additions to, subtractions from, and adjustments to adjusted gross
             25      income;
             26              .    addressing the taxation of a nonresident individual or part-year resident
             27      individual; and
             28              .    addressing provisions relating to the determination and reporting of income tax
             29      liability and information;


             30          .    addresses the apportionment of business income for purposes of the individual
             31      income tax;
             32          .    modifies the income taxation of estates and trusts, including:
             33              .    providing definitions;
             34              .    providing that the tax is calculated on the basis of unadjusted income;        
             35              .    modifying additions to, subtractions from, and adjustments to unadjusted
             36      income;
             37              .    addressing the taxation of a nonresident estate or trust; and
             38              .    addressing provisions relating to the determination and reporting of income tax
             39      liability and information;
             40          .    addresses the taxation of pass-through entities, including:
             41              .    providing definitions;    and
             42              .    renumbering and amending provisions relating to pass-through entities;
             43          .    renumbers and amends provisions relating to tax credits, including tax credits for:
             44              .    a taxpayer;
             45              .    an investment in the Utah Educational Savings Plan Trust; or
             46              .    retirement income;
             47          .    provides nonrefundable tax credits for:
             48              .    a trust or estate;
             49              .    a contribution to a medical care savings account;
             50              .    capital gain transactions;
             51              .    certain amounts paid for insurance under a health benefit plan; or
             52              .    certain solar projects;
             53          .    requires the Utah Tax Review Commission to study the solar projects tax credits;
             54          .    provides that a person may not claim a nonrefundable renewable energy systems tax
             55      credit for certain purchases for which the person claims a tax credit for certain solar
             56      projects;
             57          .    modifies the refundable renewable energy tax credit to clarify that an estate or trust


             58      may claim the tax credit;    
             59          .    addresses the apportionment of tax credits;    
             60          .    addresses the following relating to a medical care savings account:
             61              .    taxation;
             62              .    penalties; and
             63              .    interest;
             64          .    amends provisions relating to the taxation of an investment in the Utah Educational
             65      Savings Plan Trust;
             66          .    renumbers and amends the individual income tax contribution provisions;
             67          .    addresses the administration of income tax contributions;
             68          .    grants rulemaking authority to:
             69              .    the State Tax Commission; and
             70              .    the Insurance Department;
             71          .    increases a state sales and use tax rate from 4.65% to 4.70%;
             72          .    provides that a .025% tax rate on certain sales and use transactions shall be
             73      deposited into the Critical Highway Needs Fund and the Transportation Investment
             74      Fund of 2005;
             75          .    provides that a .025% tax rate on certain sales and use transactions shall be
             76      deposited into the Transportation Fund to be expended to address chokepoints in
             77      construction management;
             78          .    extends the expiration date for certain sales and use tax exemptions;
             79          .    provides a sales and use tax exemption for sales of fuel to a common carrier that is a
             80      railroad for use in a locomotive engine;
             81          .    provides that state sales and use tax revenues deposited into the Transportation Fund
             82      are not appropriated into the class B and class C roads account;
             83          .    modifies the statutes creating the Transportation Investment Fund of 2005 and the
             84      Critical Highway Needs Fund to address the sources of revenue that may be
             85      deposited into the funds; and


             86          .    makes technical changes.
             87      Monies Appropriated in this Bill:
             88          None
             89      Other Special Clauses:
             90          This bill provides effective dates.
             91      Utah Code Sections Affected:
             92      AMENDS:
             93          9-4-802, as last amended by Laws of Utah 2003, Chapter 132
             94          9-4-803, as last amended by Laws of Utah 2003, Chapter 132
             95          23-14-13, as last amended by Laws of Utah 1995, Chapter 211
             96          23-14-14.1, as enacted by Laws of Utah 2003, Chapter 162
             97          26-18a-3, as last amended by Laws of Utah 1997, Chapter 1
             98          26-18a-4, as last amended by Laws of Utah 1997, Chapter 1
             99          26-48-102, as enacted by Laws of Utah 2006, Chapter 280
             100          31A-32a-101, as enacted by Laws of Utah 1999, Chapter 131
             101          31A-32a-103, as enacted by Laws of Utah 1999, Chapter 131
             102          31A-32a-104, as enacted by Laws of Utah 1999, Chapter 131
             103          31A-32a-105, as enacted by Laws of Utah 1999, Chapter 131
             104          31A-32a-106, as last amended by Laws of Utah 2001, Chapter 53
             105          31A-32a-107, as enacted by Laws of Utah 1999, Chapter 131
             106          48-2c-117, as enacted by Laws of Utah 2001, Chapter 260
             107          53B-8a-106, as last amended by Laws of Utah 2007, Chapter 100
             108          59-7-101, as last amended by Laws of Utah 2004, Chapter 54
             109          59-7-105, as last amended by Laws of Utah 2007, Chapter 100
             110          59-7-106, as last amended by Laws of Utah 2007, Chapter 100
             111          59-7-116.5, as enacted by Laws of Utah 1995, Chapter 311
             112          59-7-402, as last amended by Laws of Utah 2004, Chapter 54
             113          59-7-614, as repealed and reenacted by Laws of Utah 2007, Chapter 288


             114          59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             115          59-10-104, as last amended by Laws of Utah 2007, Chapter 288
             116          59-10-104.1, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             117          59-10-110, as renumbered and amended by Laws of Utah 1987, Chapter 2
             118          59-10-114, as last amended by Laws of Utah 2007, Chapter 100
             119          59-10-115, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             120          59-10-116, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             121          59-10-117, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             122          59-10-118, as last amended by Laws of Utah 1995, Chapter 311
             123          59-10-119, as renumbered and amended by Laws of Utah 1987, Chapter 2
             124          59-10-120, as renumbered and amended by Laws of Utah 1987, Chapter 2
             125          59-10-121, as renumbered and amended by Laws of Utah 1987, Chapter 2
             126          59-10-122, as renumbered and amended by Laws of Utah 1987, Chapter 2
             127          59-10-123, as renumbered and amended by Laws of Utah 1987, Chapter 2
             128          59-10-124, as renumbered and amended by Laws of Utah 1987, Chapter 2
             129          59-10-125, as renumbered and amended by Laws of Utah 1987, Chapter 2
             130          59-10-126, as last amended by Laws of Utah 1995, Chapter 311
             131          59-10-201, as last amended by Laws of Utah 2007, Chapter 100
             132          59-10-201.1, as last amended by Laws of Utah 2006, Chapter 223
             133          59-10-202, as last amended by Laws of Utah 2007, Chapter 100
             134          59-10-204, as last amended by Laws of Utah 2006, Chapter 223
             135          59-10-205, as last amended by Laws of Utah 2006, Chapter 223
             136          59-10-207, as last amended by Laws of Utah 2006, Chapter 223
             137          59-10-209.1, as enacted by Laws of Utah 2006, Chapter 223
             138          59-10-210, as last amended by Laws of Utah 2006, Chapter 223
             139          59-10-507, as last amended by Laws of Utah 2003, Chapter 198
             140          59-10-1014, as last amended by Laws of Utah 2007, Chapters 122 and 288
             141          59-10-1106, as enacted by Laws of Utah 2007, Chapter 288


             142          59-12-103, as last amended by Laws of Utah 2007, Chapters 9, 101, 126, 206, and 288
             143          59-12-104, as last amended by Laws of Utah 2007, Chapters 76, 195, 214, 224, 288,
             144      295, and 329
             145          72-2-107, as last amended by Laws of Utah 2007, Chapter 126
             146          72-2-124, as last amended by Laws of Utah 2006, Chapters 11 and 135
             147          72-2-125, as enacted by Laws of Utah 2007, Chapter 206
             148      ENACTS:
             149          59-7-614.2, Utah Code Annotated 1953
             150          59-10-1020, Utah Code Annotated 1953
             151          59-10-1021, Utah Code Annotated 1953
             152          59-10-1022, Utah Code Annotated 1953
             153          59-10-1023, Utah Code Annotated 1953
             154          59-10-1024, Utah Code Annotated 1953
             155          59-10-1301, Utah Code Annotated 1953
             156          59-10-1302, Utah Code Annotated 1953
             157          59-10-1303, Utah Code Annotated 1953
             158          59-10-1401, Utah Code Annotated 1953
             159          59-10-1402, Utah Code Annotated 1953
             160      RENUMBERS AND AMENDS:
             161          59-10-1002.1, (Renumbered from 59-10-1016, as renumbered and amended by Laws of
             162      Utah 2006, Chapter 223)
             163          59-10-1002.2, (Renumbered from 59-10-1206.9, as enacted by Laws of Utah 2007,
             164      Chapter 288)
             165          59-10-1017, (Renumbered from 59-10-1206.1, as enacted by Laws of Utah 2007,
             166      Chapter 100)
             167          59-10-1018, (Renumbered from 59-10-1206.2, as enacted by Laws of Utah 2007,
             168      Chapter 288)
             169          59-10-1019, (Renumbered from 59-10-1206.3, as enacted by Laws of Utah 2007,


             170      Chapter 288)
             171          59-10-1304, (Renumbered from 59-10-551, as last amended by Laws of Utah 2006,
             172      Chapter 280)
             173          59-10-1305, (Renumbered from 59-10-530, as last amended by Laws of Utah 1997,
             174      Chapter 12)
             175          59-10-1306, (Renumbered from 59-10-530.5, as last amended by Laws of Utah 2003,
             176      Chapter 132)
             177          59-10-1307, (Renumbered from 59-10-549, as last amended by Laws of Utah 2005,
             178      Chapter 208)
             179          59-10-1308, (Renumbered from 59-10-550, as last amended by Laws of Utah 1997,
             180      Chapters 1 and 12)
             181          59-10-1309, (Renumbered from 59-10-550.1, as enacted by Laws of Utah 2003,
             182      Chapter 162)
             183          59-10-1310, (Renumbered from 59-10-550.2, as enacted by Laws of Utah 2006,
             184      Chapter 280)
             185          59-10-1311, (Renumbered from 59-10-547, as last amended by Laws of Utah 1998,
             186      Chapter 269)
             187          59-10-1312, (Renumbered from 59-10-548, as last amended by Laws of Utah 2002,
             188      Chapters 107 and 256)
             189          59-10-1403, (Renumbered from 59-10-301, as renumbered and amended by Laws of
             190      Utah 1987, Chapter 2)
             191          59-10-1404, (Renumbered from 59-10-302, as renumbered and amended by Laws of
             192      Utah 1987, Chapter 2)
             193          59-10-1405, (Renumbered from 59-10-303, as last amended by Laws of Utah 2006,
             194      Fourth Special Session, Chapter 2)
             195      REPEALS:
             196          59-10-206, as last amended by Laws of Utah 1995, Chapter 345
             197          59-10-801, as last amended by Laws of Utah 1997, Chapter 159


             198          59-10-1201, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             199          59-10-1202, as last amended by Laws of Utah 2007, Chapters 100 and 288
             200          59-10-1203, as last amended by Laws of Utah 2007, Chapters 100 and 288
             201          59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             202          59-10-1205, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             203          59-10-1206, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             204          59-10-1207, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             205     
             206      Be it enacted by the Legislature of the state of Utah:
             207          Section 1. Section 9-4-802 is amended to read:
             208           9-4-802. Purposes of Homeless Coordinating Committee -- Uses of Pamela
             209      Atkinson Homeless Trust Account.
             210          (1) (a) The Homeless Coordinating Committee shall work to ensure that services
             211      provided to the homeless by state agencies, local governments, and private organizations are
             212      provided in a cost-effective manner.
             213          (b) Programs funded by the committee shall emphasize emergency housing and
             214      self-sufficiency, including placement in meaningful employment or occupational training
             215      activities and, where needed, special services to meet the unique needs of the homeless who
             216      have families with children, or who are mentally ill, disabled, or suffer from other serious
             217      challenges to employment and self-sufficiency.
             218          (c) The committee may also fund treatment programs to ameliorate the effects of
             219      substance abuse or a disability.
             220          (2) The committee members designated in Subsection 9-4-801 (2) shall:
             221          (a) award contracts funded by the Pamela Atkinson Homeless Trust Account with the
             222      advice and input of those designated in Subsection 9-4-801 (3);
             223          (b) consider need, diversity of geographic location, coordination with or enhancement
             224      of existing services, and the extensive use of volunteers; and
             225          (c) give priority for funding to programs that serve the homeless who are mentally ill


             226      and who are in families with children.
             227          (3) (a) In any fiscal year, no more than 80% of the funds in the Pamela Atkinson
             228      Homeless Trust Account may be allocated to organizations that provide services only in Salt
             229      Lake, Davis, Weber, and Utah Counties.
             230          (b) The committee may:
             231          (i) expend up to 3% of its annual appropriation for administrative costs associated with
             232      the allocation of funds from the Pamela Atkinson Homeless Trust Account, and up to 2% of its
             233      annual appropriation for marketing the account and soliciting donations to the account; and
             234          (ii) pay for the initial costs of the State Tax Commission in implementing Section
             235      [ 59-10-530.5 ] 59-10-1306 from the account.
             236          (4) (a) The committee may not expend, except as provided in Subsection (4)(b), an
             237      amount equal to the greater of $50,000 or 20% of the amount donated to the Pamela Atkinson
             238      Homeless Trust Account during fiscal year 1988-89.
             239          (b) If there are decreases in contributions to the account, the committee may expend
             240      funds held in reserve to provide program stability, but the committee shall reimburse the
             241      amounts of those expenditures to the reserve fund.
             242          (5) The committee shall make an annual report to the Economic Development and
             243      Human Resources Appropriations Subcommittee regarding the programs and services funded
             244      by contributions to the Pamela Atkinson Homeless Trust Account.
             245          (6) The moneys in the Pamela Atkinson Homeless Trust Account shall be invested by
             246      the state treasurer according to the procedures and requirements of Title 51, Chapter 7, State
             247      Money Management Act, except that all interest or other earnings derived from the fund
             248      moneys shall be deposited in the fund.
             249          Section 2. Section 9-4-803 is amended to read:
             250           9-4-803. Creation of Pamela Atkinson Homeless Trust Account.
             251          (1) There is created a restricted account within the General Fund to be known as the
             252      Pamela Atkinson Homeless Trust Account.
             253          (2) Private contributions received under this section and Section [ 59-10-530.5 ]


             254      59-10-1306 shall be deposited into the account to be used only for programs described in
             255      Section 9-4-802 .
             256          (3) Money shall be appropriated from the account to the State Homeless Coordinating
             257      Committee in accordance with the Utah Budgetary Procedures Act.
             258          (4) The State Homeless Coordinating Committee may accept transfers, grants, gifts,
             259      bequests, or any money made available from any source to implement this part.
             260          Section 3. Section 23-14-13 is amended to read:
             261           23-14-13. Wildlife Resources Account.
             262          (1) The Wildlife Resources Account [within the General Fund] is established within the
             263      General Fund.
             264          (2) The following monies shall be deposited into the Wildlife Resources Account:
             265          (a) revenue from the sale of licenses, permits, tags, and certificates of registration issued
             266      under this title or a rule or proclamation of the Wildlife Board, except as otherwise provided by
             267      this title;
             268          (b) revenue from the sale, lease, rental, or other granting of rights of real or personal
             269      property acquired with revenue specified in Subsection (2)(a);
             270          (c) revenue from fines and forfeitures for violations of this title or any rule,
             271      proclamation, or order of the Wildlife Board, minus court costs not to exceed the schedule
             272      adopted by the Judicial Council;
             273          (d) funds appropriated from the General Fund by the Legislature pursuant to Section
             274      23-19-39 ;
             275          (e) other monies received by the division under any provision of this title, except as
             276      otherwise provided by this title; [and]
             277          (f) contributions made in accordance with Section 59-10-1305 ; and
             278          [(f)] (g) interest, dividends, or other income earned on account monies.
             279          (3) Monies in the Wildlife Resources Account shall be used for the administration of
             280      this title.
             281          Section 4. Section 23-14-14.1 is amended to read:


             282           23-14-14.1. Wolf Depredation and Management Restricted Account -- Interest --
             283      Use of contributions and interest.
             284          (1) There is created within the General Fund the Wolf Depredation and Management
             285      Restricted Account.
             286          (2) The account shall be funded by contributions deposited into the Wolf Depredation
             287      and Management Restricted Account in accordance with Section [ 59-10-550.1 ] 59-10-1309 .
             288          (3) (a) The Wolf Depredation and Management Restricted Account shall earn interest.
             289          (b) Interest earned on the Wolf Depredation and Management Restricted Account shall
             290      be deposited into the Wolf Depredation and Management Restricted Account.
             291          (4) (a) Subject to Subsection (4)(b), contributions and interest deposited into the Wolf
             292      Depredation and Management Restricted Account shall be used by the Division of Wildlife
             293      Resources for:
             294          (i) payments for livestock depredation by wolves; or
             295          (ii) wolf management.
             296          (b) Contributions and interest deposited into the Wolf Depredation and Management
             297      Restricted Account may be used for the purposes described in Subsection (4)(a) only to the
             298      extent permitted by federal law.
             299          Section 5. Section 26-18a-3 is amended to read:
             300           26-18a-3. Purpose of committee.
             301          (1) The committee shall work to:
             302          (a) provide financial assistance for initial medical expenses of children who need organ
             303      transplants;
             304          (b) obtain the assistance of volunteer and public service organizations; and
             305          (c) fund activities as the committee designates for the purpose of educating the public
             306      about the need for organ donors.
             307          (2) (a) The committee is responsible for awarding financial assistance funded by the
             308      trust account.
             309          (b) The financial assistance awarded by the committee under Subsection (1)(a) shall be


             310      in the form of interest free loans. The committee may establish terms for repayment of the
             311      loans, including a waiver of the requirement to repay any awards if, in the committee's
             312      judgment, repayment of the loan would impose an undue financial burden on the recipient.
             313          (c) In making financial awards under Subsection (1)(a), the committee shall consider:
             314          (i) need;
             315          (ii) coordination with or enhancement of existing services or financial assistance,
             316      including availability of insurance or other state aid;
             317          (iii) the success rate of the particular organ transplant procedure needed by the child;
             318      and
             319          (iv) the extent of the threat to the child's life without the organ transplant.
             320          (3) The committee may only provide the assistance described in this section to children
             321      who have resided in Utah, or whose legal guardians have resided in Utah for at least six months
             322      prior to the date of assistance under this section.
             323          (4) (a) The committee may expend up to 5% of its annual appropriation for
             324      administrative costs associated with the allocation of funds from the trust account.
             325          (b) The administrative costs shall be used for the costs associated with staffing the
             326      committee and for State Tax Commission costs in implementing Section [ 59-10-550 ]
             327      59-10-1308 .
             328          (5) The committee shall make an annual report to the Health and Human Services
             329      Appropriations Subcommittee regarding the programs and services funded by contributions to
             330      the trust account.
             331          Section 6. Section 26-18a-4 is amended to read:
             332           26-18a-4. Creation of Kurt Oscarson Children's Organ Transplant Trust
             333      Account.
             334          (1) There is created a restricted account within the General Fund pursuant to Section
             335      51-5-4 known as the Kurt Oscarson Children's Organ Transplant Trust Account. Private
             336      contributions received under this section and Section [ 59-10-550 ] 59-10-1308 shall be
             337      deposited into the trust account to be used only for the programs and purposes described in


             338      Section 26-18a-3 .
             339          (2) Money shall be appropriated from the trust account to the committee in accordance
             340      with Title 63, Chapter 38, Budgetary Procedures Act.
             341          (3) In addition to funds received under Section [ 59-10-550 ] 59-10-1308 , the committee
             342      may accept transfers, grants, gifts, bequests, or any money made available from any source to
             343      implement this chapter.
             344          Section 7. Section 26-48-102 is amended to read:
             345           26-48-102. Cat and Dog Community Spay and Neuter Program Restricted
             346      Account -- Interest -- Use of contributions and interest.
             347          (1) There is created within the General Fund the Cat and Dog Community Spay and
             348      Neuter Program Restricted Account.
             349          (2) The account shall be funded by contributions deposited into the Cat and Dog
             350      Community Spay and Neuter Program Restricted Account in accordance with Section
             351      [ 59-10-550.2 ] 59-10-1310 .
             352          (3) (a) The Cat and Dog Community Spay and Neuter Program Restricted Account
             353      shall earn interest.
             354          (b) Interest earned on the Cat and Dog Community Spay and Neuter Program
             355      Restricted Account shall be deposited into the Cat and Dog Community Spay and Neuter
             356      Program Restricted Account.
             357          (4) The department shall distribute contributions and interest deposited into the Cat and
             358      Dog Community Spay and Neuter Program Restricted Account to one or more organizations
             359      that:
             360          (a) are exempt from federal income taxation under Section 501(c)(3), Internal Revenue
             361      Code;
             362          (b) operate a mobile spay and neuter clinic for cats and dogs;
             363          (c) provide annual spay and neuter services at the mobile spay and neuter clinic
             364      described in Subsection (4)(b):
             365          (i) to one or more communities in at least 20 counties in the state; and


             366          (ii) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
             367      and
             368          (d) (i) spay and neuter cats and dogs owned by persons having low incomes; and
             369          (ii) have established written guidelines for determining what constitutes a person having
             370      a low income in accordance with any rules made by the department as authorized by Subsection
             371      (5)(c).
             372          (5) (a) An organization described in Subsection (4) may apply to the department to
             373      receive a distribution in accordance with Subsection (4).
             374          (b) An organization that receives a distribution from the department in accordance with
             375      Subsection (4):
             376          (i) shall expend the distribution only to spay or neuter dogs and cats:
             377          (A) owned by persons having low incomes;
             378          (B) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
             379          (C) through a statewide voucher program; and
             380          (D) at a location that:
             381          (I) is not a mobile spay and neuter clinic; and
             382          (II) does not receive any funding from a governmental entity; and
             383          (ii) may not expend the distribution for any administrative cost relating to an
             384      expenditure authorized by Subsection (5)(b)(i).
             385          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             386      department may make rules:
             387          (i) providing procedures and requirements for an organization to apply to the
             388      department to receive a distribution in accordance with Subsection (4); and
             389          (ii) to define what constitutes a person having a low income.
             390          Section 8. Section 31A-32a-101 is amended to read:
             391           31A-32a-101. Title and scope.
             392          (1) This chapter is known as the "Medical Care Savings Account Act."
             393          (2) (a) This chapter applies only to a medical care savings [accounts] account


             394      established for the purpose of seeking a tax [deduction] credit under Section [ 59-10-114 ]
             395      59-10-1021 .
             396          (b) This chapter does not apply to a medical care savings [accounts that will not be
             397      subject to tax deductions under Section 59-10-114 ] account with respect to which a tax credit is
             398      not claimed under Section 59-10-1021 .
             399          Section 9. Section 31A-32a-103 is amended to read:
             400           31A-32a-103. Establishing medical care savings accounts.
             401          [(1) For tax years beginning 1995, both of the following apply:]
             402          (1) For a taxable year beginning on or after January 1, 1995:
             403          (a) an employer, except as otherwise provided by contract or a collective bargaining
             404      agreement, may offer a medical care savings account program to the employer's employees;
             405      [and] or
             406          (b) a resident individual may establish a medical care savings account program for the
             407      individual or for the individual's dependents.
             408          (2) (a) A contribution into an account made by an employer on behalf of an employee,
             409      or made by an individual account holder may not exceed the greater of:
             410          [(a)] (i) $2,000 in any [tax] taxable year; or
             411          (ii) an amount of money equal to the sum of all eligible medical expenses paid by the
             412      employee or account holder [in] for that [tax] taxable year on behalf of the employee, account
             413      holder, or the employee's or account holder's spouse or dependents.
             414          (b) For purposes of Subsection (2)(a)(ii), eligible medical expenses [as defined in
             415      Subsection 31A-32a-102 (5),] are limited to expenses in [that tax year which] the taxable year
             416      that an insurance carrier has applied to the employee's or account holder's deductible.
             417          (3) An employer that offers a medical care savings account program shall, before
             418      making any contributions:
             419          (a) inform all employees in writing of the fact that these contributions may not be
             420      deductible under the federal tax laws; and
             421          (b) obtain from the employee a written election to participate in the medical care


             422      savings account program.
             423          (4) Except as provided in Sections 31A-32a-105 and 59-10-114 , principal contributed
             424      to and interest earned on a medical care savings account and money reimbursed to an employee
             425      or account holder for eligible medical expenses are exempt from taxation.
             426          (5) (a) An employer may select a single account administrator for all of the employer's
             427      employee's medical care savings accounts.
             428          (b) If a single account administrator is not selected, an employer may contribute directly
             429      to the account holder's individual medical care savings account.
             430          Section 10. Section 31A-32a-104 is amended to read:
             431           31A-32a-104. Administration of medical care savings account.
             432          (1) An account administrator shall administer the medical care savings account from
             433      which the payment of claims is made and has a fiduciary duty to the person for whose benefit
             434      the account administrator administers an account.
             435          (2) (a) Except as provided in Subsection 31A-32a-105 (1), the account administrator
             436      shall use the funds held in a medical care savings account solely for the purpose of paying or
             437      reimbursing the employee or account holder for eligible medical expenses of the employee or
             438      account holder or of the employee's or account holder's dependents.
             439          (b) The commissioner shall adopt rules concerning the coordination of benefits between
             440      a medical care savings account and medical expenses payable from automobile insurance
             441      policies, workers' compensation insurance policies, or other health care insurance policies or
             442      contracts.
             443          (3) The employee or account holder may submit documentation of eligible medical
             444      expenses paid by the employee or account holder in the [tax] taxable year to the account
             445      administrator, and the account administrator shall reimburse the employee or account holder
             446      from the employee's or account holder's account for eligible medical expenses.
             447          (4) If an employer makes contributions to a medical care savings account program on a
             448      periodic installment basis, the employer may advance to an employee an amount necessary to
             449      cover eligible medical expenses incurred that exceed the amount in the employee's medical care


             450      savings account at the time the expense is incurred if the employee agrees to repay the advance.
             451          Section 11. Section 31A-32a-105 is amended to read:
             452           31A-32a-105. Withdrawals -- Termination -- Transfers.
             453          (1) Subject to Subsection (3), if the employee or account holder withdraws money for
             454      any purpose other than a medical expense at any time in which the balance in the account is
             455      below $4,000 [all of the following apply]:
             456          (a) the amount of the withdrawal [is income for the purposes of Title 59, Chapter 10,
             457      Individual Income Tax Act] shall be added to adjusted gross income in accordance with Section
             458      59-10-114 ; and
             459          (b) the administrator shall withhold from the amount of the withdrawal, and on behalf
             460      of the employee or account holder shall pay a penalty to the State Tax Commission equal to
             461      10% of the amount of the withdrawal.
             462          (2) If an employee or account holder withdraws money from the employee's or account
             463      holder's medical care savings account for any purpose other than a medical expense, but the
             464      withdrawal occurs when the balance in the medical care savings account is over $4,000, and the
             465      withdrawal will not result in the account balance dropping below $4,000, the amount of the
             466      withdrawal:
             467          (a) is not subject to the penalties described in Subsection (1)(b); and
             468          [(b) is subject to taxation as provided in Subsection (1)(a).]
             469          (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
             470          (3) The amount of a disbursement of any assets of a medical care savings account
             471      pursuant to a filing for protection under [Title 11 of the United States Code,] 11 U.S.C. Sec.
             472      101 to 1330, by an employee, account holder, or person for whose benefit the account was
             473      established:
             474          (a) is not considered a withdrawal for purposes of this section; and
             475          [(b) is subject to taxation under Title 59, Chapter 10, Individual Income Tax Act.]
             476          (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
             477          (4) (a) Upon the death of the employee or account holder, the account administrator


             478      shall distribute the principal and accumulated interest of the medical care savings account to the
             479      estate of the employee or account holder.
             480          (b) A distribution under this Subsection (4) is not subject to the penalties described in
             481      Subsection (1)(b).
             482          (5) (a) If an employee is no longer employed by an employer that participates in a
             483      medical care savings account program, and if the employee's account is administered by the
             484      employer's account administrator, the money in the medical care savings account may be used
             485      for the benefit of the employee or the employee's dependents in accordance with this chapter,
             486      and [remains exempt from taxation] may not be added to adjusted gross income under Section
             487      59-10-114 if the employee, not more than 60 days after the employee's final day of employment:
             488          (i) transfers the account to a new account administrator; or
             489          (ii) (A) requests in writing to the former employer's account administrator that the
             490      account remain with that administrator; and
             491          (B) the account administrator agrees to retain the account.
             492          (b) Not more than 30 days after the expiration of the 60 days described in Subsection
             493      (5)(a), if an account administrator has not accepted the former employee's account, the
             494      employer shall mail a check to the former employee at the employee's last-known address equal
             495      to the amount in the account on that day.
             496          (c) The amount mailed to the employee [is subject to taxation pursuant to Subsection
             497      (1)(a)] under Subsection (5)(b) shall be added to adjusted gross income in accordance with
             498      Section 59-10-114 , but is not subject to the penalties under Subsection (1)(b).
             499          (d) If an employee becomes employed with a different employer that participates in a
             500      medical care savings account program, the employee may transfer the employee's medical care
             501      savings account to that new employer's account administrator.
             502          (e) If an account holder becomes an employee of an employer that participates in a
             503      medical care savings account program, the account holder may transfer the account holder's
             504      account to the employer's account administrator.
             505          Section 12. Section 31A-32a-106 is amended to read:


             506           31A-32a-106. Regulation of account administrators -- Administration of addition
             507      to adjusted gross income and tax credit -- Rulemaking authority.
             508          (1) The department shall regulate account administrators and may adopt rules necessary
             509      to administer this chapter.
             510          (2) The State Tax Commission may adopt rules necessary to monitor and implement the
             511      [tax deductions established by this chapter and Section 59-10-114 .]:
             512          (a) amounts required to be added to adjusted gross income in accordance with Sections
             513      31A-32a-105 and 59-10-114 ; or
             514          (b) amount claimed as a tax credit in accordance with Section 59-10-1021 .
             515          Section 13. Section 31A-32a-107 is amended to read:
             516           31A-32a-107. Penalties for noncompliance with tax provisions.
             517          (1) An account administrator who fails to comply with [the statutes and rules governing
             518      the tax deduction established by this chapter and Section 59-10-114 ] a provision described in
             519      Subsection (2) is subject to:
             520          [(1)] (a) the civil penalties provided in Section 59-1-401 ; and
             521          [(2)] (b) interest at the rate and in the manner provided in Section 59-1-402 .
             522          (2) The following provisions apply to Subsection (1):
             523          (a) a provision of this chapter relating to:
             524          (i) an addition to income made in accordance with Section 59-10-114 ; or
             525          (ii) a tax credit allowed by Section 59-10-1021 ; or
             526          (b) a provision of Title 59, Chapter 10, Individual Income Tax Act, relating to:
             527          (i) an addition to income made in accordance with Section 59-10-114 ; or
             528          (ii) a tax credit allowed by Section 59-10-1021 .
             529          Section 14. Section 48-2c-117 is amended to read:
             530           48-2c-117. Taxation of limited liability companies.
             531          A company established under this chapter or a foreign company transacting business in
             532      this state shall be taxed as provided in [Section 59-10-801 ] Subsection 59-10-1403 (4).
             533          Section 15. Section 53B-8a-106 is amended to read:


             534           53B-8a-106. Account agreements.
             535          The Utah Educational Savings Plan Trust may enter into account agreements with
             536      account owners on behalf of beneficiaries under the following terms and agreements:
             537          (1) (a) An account agreement may require an account owner to agree to invest a
             538      specific amount of money in the Utah Educational Savings Plan Trust for a specific period of
             539      time for the benefit of a specific beneficiary, not to exceed an amount determined by the
             540      program administrator.
             541          (b) Account agreements may be amended to provide for adjusted levels of payments
             542      based upon changed circumstances or changes in educational plans.
             543          (c) An account owner may make additional optional payments as long as the total
             544      payments for a specific beneficiary do not exceed the total estimated higher education costs as
             545      determined by the program administrator.
             546          (d) Subject to Subsection (1)(f), the maximum amount of a qualified investment that a
             547      corporation that is an account owner may subtract from unadjusted income for a taxable year in
             548      accordance with Title 59, Chapter 7, Corporate Franchise and Income Taxes, is [$1,560]
             549      $1,650 for each individual beneficiary for the taxable year beginning on or after January 1,
             550      [2006] 2008, but beginning on or before December 31, [2006] 2008.
             551          (e) Subject to Subsection (1)(f), the maximum amount of a qualified investment that
             552      may be [subtracted from federal taxable income of a resident or nonresident individual for a
             553      taxable year in accordance with Section 59-10-114 , a resident or nonresident estate or trust for
             554      a taxable year in accordance with Section 59-10-202 , or] used as the basis for claiming a tax
             555      credit [for a taxable year by a resident or nonresident individual] in accordance with Section
             556      [ 59-10-1206.1 ] 59-10-1017 , is:
             557          (i) for a resident or nonresident estate or trust that is an account owner, [$1,560]
             558      $1,650 for each individual beneficiary for the taxable year beginning on or after January 1,
             559      [2006] 2008, but beginning on or before December 31, [2006] 2008;
             560          (ii) for a resident or nonresident individual that is an account owner, other than a
             561      husband and wife who are account owners and file a single return jointly under Title 59,


             562      Chapter 10, Individual Income Tax Act, [$1,560] $1,650 for each individual beneficiary for the
             563      taxable year beginning on or after January 1, [2006] 2008, but beginning on or before December
             564      31, [2006] 2008; or
             565          (iii) for a husband and wife who are account owners and file a single return jointly
             566      under Title 59, Chapter 10, Individual Income Tax Act, [$3,120] $3,300 for each individual
             567      beneficiary:
             568          (A) for the taxable year beginning on or after January 1, [2006] 2008, but beginning on
             569      or before December 31, [2006] 2008; and
             570          (B) regardless of whether the Utah Educational Savings Plan Trust has entered into:
             571          (I) a separate account agreement with each spouse; or
             572          (II) a single account agreement with both spouses jointly.
             573          (f) (i) For taxable years beginning on or after January 1, [2007] 2009, the program
             574      administrator shall increase or decrease the maximum amount of a qualified investment
             575      described in Subsections (1)(d) and (1)(e)(i) and (ii), by a percentage equal to the percentage
             576      difference between the consumer price index for the preceding calendar year and the consumer
             577      price index for the calendar year [2005] 2007.
             578          (ii) After making an increase or decrease required by Subsection (1)(f)(i), the program
             579      administrator shall:
             580          (A) round the maximum amount of the qualified investments described in Subsections
             581      (1)(d) and (1)(e)(i) and (ii) increased or decreased under Subsection (1)(f)(i) to the nearest ten
             582      dollar increment; and
             583          (B) increase or decrease the maximum amount of the qualified investment described in
             584      Subsection (1)(e)(iii) so that the maximum amount of the qualified investment described in
             585      Subsection (1)(e)(iii) is equal to the product of:
             586          (I) the maximum amount of the qualified investment described in Subsection (1)(e)(ii)
             587      as rounded under Subsection (1)(f)(ii)(A); and
             588          (II) two.
             589          (iii) For purposes of Subsections (1)(f)(i) and (ii), the program administrator shall


             590      calculate the consumer price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue
             591      Code.
             592          (2) (a) (i) Beneficiaries designated in account agreements must be designated after birth
             593      and before age 19 for an account owner to:
             594          (A) subtract a qualified investment from income under[:(I)] Title 59, Chapter 7,
             595      Corporate Franchise and Income Taxes; or
             596          [(II) Section 59-10-114 ; or]
             597          [(III) Section 59-10-202 ; or]
             598          (B) use a qualified investment as the basis for claiming a tax credit in accordance with
             599      Section [ 59-10-1206.1 ] 59-10-1017 .
             600          (ii) If the beneficiary is designated after birth and before age 19, the payment of benefits
             601      provided under the account agreement must begin not later than the beneficiary's 27th birthday.
             602          (b) (i) Account owners may designate [beneficiaries] a beneficiary age 19 or older, but
             603      investments for [those beneficiaries] that beneficiary are not eligible [for subtraction from
             604      federal taxable income.] to be:
             605          (A) subtracted from income under Title 59, Chapter 7, Corporate Franchise and Income
             606      Taxes; or
             607          (B) used as the basis for claiming a tax credit in accordance with Section 59-10-1017 .
             608          (ii) If a beneficiary age 19 or older is designated, the payment of benefits provided
             609      under the account agreement must begin not later than ten years from the account agreement
             610      date.
             611          (3) Each account agreement shall state clearly that there are no guarantees regarding
             612      moneys in the Utah Educational Savings Plan Trust as to the return of principal and that losses
             613      could occur.
             614          (4) Each account agreement shall provide that:
             615          (a) [no] a contributor to, or designated beneficiary under, an account agreement may
             616      not direct the investment of any contributions or earnings on contributions;
             617          (b) [no] any part of the money in any account may not be used as security for a loan;


             618      and
             619          (c) [no] an account owner may not borrow from the Utah Educational Savings Plan
             620      Trust.
             621          (5) The execution of an account agreement by the trust may not guarantee in any way
             622      that higher education costs will be equal to projections and estimates provided by the Utah
             623      Educational Savings Plan Trust or that the beneficiary named in any participation agreement
             624      will:
             625          (a) be admitted to an institution of higher education;
             626          (b) if admitted, be determined a resident for tuition purposes by the institution of higher
             627      education, unless the account agreement is vested;
             628          (c) be allowed to continue attendance at the institution of higher education following
             629      admission; or
             630          (d) graduate from the institution of higher education.
             631          (6) [Beneficiaries] A beneficiary may be changed as permitted by the rules and
             632      regulations of the board upon written request of the account owner prior to the date of
             633      admission of any beneficiary under an account agreement by an institution of higher education
             634      so long as the substitute beneficiary is eligible for participation.
             635          (7) [Account agreements] An account agreement may be freely amended throughout
             636      [their terms] the term of the account agreement in order to enable [account owners] an account
             637      owner to increase or decrease the level of participation, change the designation of beneficiaries,
             638      and carry out similar matters as authorized by rule.
             639          (8) Each account agreement shall provide that:
             640          (a) the account agreement may be canceled upon the terms and conditions, and upon
             641      payment of the fees and costs set forth and contained in the board's rules and regulations; and
             642          (b) the program administrator may amend the agreement unilaterally and retroactively,
             643      if necessary, to maintain the Utah Educational Savings Plan Trust as a qualified tuition program
             644      under Section 529, Internal Revenue Code.
             645          Section 16. Section 59-7-101 is amended to read:


             646           59-7-101. Definitions.
             647          As used in this chapter:
             648          (1) "Adjusted income" means unadjusted income as modified by Sections 59-7-105 and
             649      59-7-106 .
             650          (2) (a) "Affiliated group" means one or more chains of corporations that are connected
             651      through stock ownership with a common parent corporation that meet the following
             652      requirements:
             653          (i) at least 80% of the stock of each of the corporations in the group, excluding the
             654      common parent corporation, is owned by one or more of the other corporations in the group;
             655      and
             656          (ii) the common parent directly owns at least 80% of the stock of at least one of the
             657      corporations in the group.
             658          (b) "Affiliated group" does not include corporations that are qualified to do business but
             659      are not otherwise doing business in this state.
             660          (c) For purposes of this Subsection (2), "stock" does not include nonvoting stock which
             661      is limited and preferred as to dividends.
             662          (3) "Apportionable income" means adjusted income less nonbusiness income net of
             663      related expenses, to the extent included in adjusted income.
             664          (4) "Apportioned income" means apportionable income multiplied by the apportionment
             665      fraction as determined in Section 59-7-311 .
             666          (5) "Business income" is as defined in Section 59-7-302 .
             667          (6) (a) "Captive real estate investment trust" means a real estate investment trust if:
             668          (i) the shares or beneficial interests of the real estate investment trust are not regularly
             669      traded on an established securities market; and
             670          (ii) more than 50% of the voting power or value of the shares or beneficial interests of
             671      the real estate investment trust are directly, indirectly, or constructively:
             672          (A) owned by a controlling entity of the real estate investment trust; or
             673          (B) controlled by a controlling entity of the real estate investment trust.


             674          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             675      commission may make rules defining "established securities market."
             676          (7) (a) "Controlling entity of a captive real estate investment trust" means an entity that:
             677          (i) is treated as an association taxable as a corporation under the Internal Revenue
             678      Code;
             679          (ii) is not exempt from federal income taxation under Section 501(a), Internal Revenue
             680      Code; and
             681          (iii) directly, indirectly, or constructively holds more than 50% of:
             682          (A) the voting power of a captive real estate investment trust; or
             683          (B) the value of the shares or beneficial interests of a captive real estate investment
             684      trust.
             685          (b) "Controlling entity of a captive real estate investment trust" does not include:
             686          (i) a real estate investment trust, except for a captive real estate investment trust;
             687          (ii) a qualified real estate investment subsidiary described in Section 856(i), Internal
             688      Revenue Code, except for a qualified real estate investment trust subsidiary of a captive real
             689      estate investment trust; or
             690          (iii) a foreign real estate investment trust.
             691          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             692      commission may make rules defining "established securities market."
             693          [(7)] (8) (a) "Common ownership" means the direct or indirect control or ownership of
             694      more than 50% of the outstanding voting stock of:
             695          (i) a parent-subsidiary controlled group as defined in Section 1563, Internal Revenue
             696      Code, except that 50% shall be substituted for 80%;
             697          (ii) a brother-sister controlled group as defined in Section 1563, Internal Revenue
             698      Code, except that 50% shall be substituted for 80%; or
             699          (iii) three or more corporations each of which is a member of a group of corporations
             700      described in Subsection (2)(a)(i) or (2)(a)(ii), and one of which is:
             701          (A) a common parent corporation included in a group of corporations described in


             702      Subsection (2)(a)(i); and
             703          (B) included in a group of corporations described in Subsection (2)(a)(ii).
             704          (b) Ownership of outstanding voting stock shall be determined by Section 1563,
             705      Internal Revenue Code.
             706          [(6)] (9) "Corporate return" or "return" includes a combined report.
             707          [(8)] (10) "Corporation" includes:
             708          (a) entities defined as corporations under Sections 7701(a) and 7704, Internal Revenue
             709      Code; and
             710          (b) other organizations that are taxed as corporations for federal income tax purposes
             711      under the Internal Revenue Code.
             712          [(9)] (11) "Dividend" means any distribution, including money or other type of
             713      property, made by a corporation to its shareholders out of its earnings or profits accumulated
             714      after December 31, 1930.
             715          [(10)] (12) (a) "Doing business" includes any transaction in the course of its business by
             716      a domestic corporation, or by a foreign corporation qualified to do or doing intrastate business
             717      in this state.
             718          (b) Except as provided in Subsection 59-7-102 (2), "doing business" includes:
             719          (i) the right to do business through incorporation or qualification;
             720          (ii) the owning, renting, or leasing of real or personal property within this state; and
             721          (iii) the participation in joint ventures, working and operating agreements, the
             722      performance of which takes place in this state.
             723          [(11)] (13) "Domestic corporation" means a corporation that is incorporated or
             724      organized under the laws of this state.
             725          [(12)] (14) (a) "Farmers' cooperative" means an association, corporation, or other
             726      organization that is:
             727          (i) (A) an association, corporation, or other organization of:
             728          (I) farmers; or
             729          (II) fruit growers; or


             730          (B) an association, corporation, or other organization that is similar to an association,
             731      corporation, or organization described in Subsection [(12)] (14)(a)(i)(A); and
             732          (ii) organized and operated on a cooperative basis to:
             733          (A) (I) market the products of members of the cooperative or the products of other
             734      producers; and
             735          (II) return to the members of the cooperative or other producers the proceeds of sales
             736      less necessary marketing expenses on the basis of the quantity of the products of a member or
             737      producer or the value of the products of a member or producer; or
             738          (B) (I) purchase supplies and equipment for the use of members of the cooperative or
             739      other persons; and
             740          (II) turn over the supplies and equipment described in Subsection [(12)]
             741      (14)(a)(ii)(B)(I) at actual costs plus necessary expenses to the members of the cooperative or
             742      other persons.
             743          (b) (i) Subject to Subsection [(12)] (14)(b)(ii), for purposes of this Subsection [(12)]
             744      (14), the commission by rule, made in accordance with Title 63, Chapter 46a, Utah
             745      Administrative Rulemaking Act, shall define:
             746          (A) the terms:
             747          (I) "member"; and
             748          (II) "producer"; and
             749          (B) what constitutes an association, corporation, or other organization that is similar to
             750      an association, corporation, or organization described in Subsection [(12)] (14)(a)(i)(A).
             751          (ii) The rules made under this Subsection [(12)] (14)(b) shall be consistent with the
             752      filing requirements under federal law for a farmers' cooperative.
             753          [(13)] (15) "Foreign corporation" means a corporation that is not incorporated or
             754      organized under the laws of this state.
             755          [(14)] (16) (a) "Foreign operating company" means a corporation that:
             756          (i) is incorporated in the United States; and
             757          (ii) 80% or more of whose business activity, as determined under Section 59-7-401 , is


             758      conducted outside the United States.
             759          (b) "Foreign operating company" does not include a corporation that qualifies for the
             760      Puerto Rico and Possession Tax Credit as provided in Section 936, Internal Revenue Code.
             761          (17) (a) "Foreign real estate investment trust" means:
             762          (i) a business entity organized outside the laws of the United States if:
             763          (A) at least 75% of the business entity's total asset value at the close of the business
             764      entity's taxable year is represented by:
             765          (I) real estate assets, as defined in Section 856(c)(5)(B), Internal Revenue Code;
             766          (II) cash or cash equivalents; or
             767          (III) one or more securities issued or guaranteed by the United States;
             768          (B) the business entity is:
             769          (I) not subject to income taxation:
             770          (Aa) on amounts distributed to the business entity's beneficial owners; and
             771          (Bb) in the jurisdiction in which the business entity is organized; or
             772          (II) exempt from income taxation on an entity level in the jurisdiction in which the
             773      business entity is organized;
             774          (C) the business entity distributes at least 85% of the business entity's taxable income,
             775      as computed in the jurisdiction in which the business entity is organized, to the holders of the
             776      business entity's:
             777          (I) shares or beneficial interests; and
             778          (II) on an annual basis;
             779          (D) (I) not more than 10% of the following is held directly, indirectly, or constructively
             780      by a single person:
             781          (Aa) the voting power of the business entity; or
             782          (Bb) the value of the shares or beneficial interests of the business entity; or
             783          (II) the shares of the business entity are regularly traded on an established securities
             784      market; and
             785          (E) the business entity is organized in a country that has a tax treaty with the United


             786      States; or
             787          (ii) a listed Australian property trust.
             788          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             789      commission may make rules defining:
             790          (i) "cash or cash equivalents";
             791          (ii) "established securities market"; or
             792          (iii) "listed Australian property trust."
             793          [(15)] (18) "Income" includes losses.
             794          [(16)] (19) "Internal Revenue Code" means Title 26 of the United States Code as
             795      effective during the year in which Utah taxable income is determined.
             796          [(17)] (20) "Nonbusiness income" is as defined in Section 59-7-302 .
             797          [(18)] (21) "Nonresident shareholder" means any shareholder of an S corporation who
             798      on the last day of the taxable year of the S corporation, is:
             799          (a) an individual not domiciled in Utah; or
             800          (b) a nonresident trust or nonresident estate, as defined in Section 59-10-103 .
             801          (22) "Real estate investment trust" is as defined in Section 856, Internal Revenue Code.
             802          [(19)] (23) "Related expenses" means:
             803          (a) expenses directly attributable to nonbusiness income; and
             804          (b) the portion of interest or other expense indirectly attributable to both nonbusiness
             805      and business income which bears the same ratio to the aggregate amount of such interest or
             806      other expense, determined without regard to this Subsection [(19)] (23), as the average amount
             807      of the asset producing the nonbusiness income bears to the average amount of all assets of the
             808      taxpayer within the taxable year.
             809          [(20)] (24) "Resident shareholder" means any shareholder of an S corporation who is
             810      not a nonresident shareholder.
             811          [(22)] (25) "Safe harbor lease" means a lease that qualified as a safe harbor lease under
             812      Section 168, Internal Revenue Code.
             813          [(21)] (26) "S corporation" means an S corporation as defined in Section 1361, Internal


             814      Revenue Code.
             815          [(23)] (27) "State of the United States" includes any of the 50 states or the District of
             816      Columbia [and "United States" includes the 50 states and the District of Columbia].
             817          [(24)] (28) (a) "Taxable year" means the calendar year or the fiscal year ending during
             818      such calendar year upon the basis of which the adjusted income is computed.
             819          (b) In the case of a return made for a fractional part of a year under this chapter or
             820      under rules prescribed by the commission, "taxable year" includes the period for which such
             821      return is made.
             822          [(25)] (29) "Taxpayer" means any corporation subject to the tax imposed by this
             823      chapter.
             824          [(26)] (30) "Threshold level of business activity" means business activity in the United
             825      States equal to or greater than 20% of the corporation's total business activity as determined
             826      under Section 59-7-401 .
             827          [(27)] (31) "Unadjusted income" means federal taxable income as determined on a
             828      separate return basis before intercompany eliminations as determined by the Internal Revenue
             829      Code, before the net operating loss deduction and special deductions for dividends received.
             830          [(28)] (32) (a) "Unitary group" means a group of corporations that:
             831          (i) are related through common ownership; and
             832          (ii) by a preponderance of the evidence as determined by a court of competent
             833      jurisdiction or the commission, are economically interdependent with one another as
             834      demonstrated by the following factors:
             835          (A) centralized management;
             836          (B) functional integration; and
             837          (C) economies of scale.
             838          (b) "Unitary group" includes a captive real estate investment trust.
             839          [(b)] (c) "Unitary group" does not include an S [corporations] corporation.
             840          (33) "United States" includes the 50 states and the District of Columbia.
             841          [(29)] (34) "Utah net loss" means the current year Utah taxable income before Utah net


             842      loss deduction, if determined to be less than zero.
             843          [(30)] (35) "Utah net loss deduction" means the amount of Utah net losses from other
             844      taxable years that may be carried back or carried forward to the current taxable year in
             845      accordance with Section 59-7-110 .
             846          [(31)] (36) (a) "Utah taxable income" means Utah taxable income before net loss
             847      deduction less Utah net loss deduction.
             848          (b) "Utah taxable income" includes income from tangible or intangible property located
             849      or having situs in this state, regardless of whether carried on in intrastate, interstate, or foreign
             850      commerce.
             851          [(32)] (37) "Utah taxable income before net loss deduction" means apportioned income
             852      plus nonbusiness income allocable to Utah net of related expenses.
             853          [(33)] (38) (a) "Water's edge combined report" means a report combining the income
             854      and activities of:
             855          (i) all members of a unitary group that are:
             856          (A) corporations organized or incorporated in the United States, including those
             857      corporations qualifying for the Puerto Rico and Possession Tax Credit as provided in Section
             858      936, Internal Revenue Code, in accordance with Subsection [(33)] (38)(b); and
             859          (B) corporations organized or incorporated outside of the United States meeting the
             860      threshold level of business activity; and
             861          (ii) an affiliated group electing to file a water's edge combined report under Subsection
             862      59-7-402 (2).
             863          (b) There is a rebuttable presumption that a corporation which qualifies for the Puerto
             864      Rico and Possession Tax Credit provided in Section 936, Internal Revenue Code, is part of a
             865      unitary group.
             866          [(34)] (39) "Worldwide combined report" means the combination of the income and
             867      activities of all members of a unitary group irrespective of the country in which the corporations
             868      are incorporated or conduct business activity.
             869          Section 17. Section 59-7-105 is amended to read:


             870           59-7-105. Additions to unadjusted income.
             871          In computing adjusted income the following amounts shall be added to unadjusted
             872      income:
             873          (1) interest from bonds, notes, and other evidences of indebtedness issued by any state
             874      of the United States, including any agency and instrumentality of a state of the United States;
             875          (2) the amount of any deduction taken on a corporation's federal return for taxes paid
             876      by a corporation:
             877          (a) to Utah for taxes imposed by this chapter; and
             878          (b) to another state of the United States, a foreign country, a United States possession,
             879      or the Commonwealth of Puerto Rico for taxes imposed for the privilege of doing business, or
             880      exercising its corporate franchise, including income, franchise, corporate stock and business and
             881      occupation taxes;
             882           (3) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(a) and
             883      (2)(a);
             884          (4) capital losses that have been deducted on a Utah corporate return in previous years;
             885          (5) any deduction on the federal return that has been previously deducted on the Utah
             886      return;
             887          (6) the amount of contributions claimed as a tax credit pursuant to Section 59-7-602 ;
             888          (7) the amount of the deduction taken pursuant to Section 59-7-603 for sophisticated
             889      technological equipment;
             890          (8) charitable contributions, to the extent deducted on the federal return when
             891      determining federal taxable income;
             892          (9) the amount of gain or loss determined under Section 59-7-114 relating to a target
             893      corporation under Section 338, Internal Revenue Code, unless such gain or loss has already
             894      been included in the unadjusted income of the target corporation;
             895          (10) the amount of gain or loss determined under Section 59-7-115 relating to
             896      corporations treated for federal purposes as having disposed of its assets under Section 336(e),
             897      Internal Revenue Code, unless such gain or loss has already been included in the unadjusted


             898      income of the target corporation;
             899          (11) adjustments to gains, losses, depreciation expense, amortization expense, and
             900      similar items due to a difference between basis for federal purposes and basis as computed
             901      under Section 59-7-107 ; [and]
             902          (12) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             903      Incentive Program, from the account of a corporation that is an account owner as defined in
             904      Section 53B-8a-102 , for the taxable year for which the amount is withdrawn, if that amount
             905      withdrawn from the account of the corporation that is the account owner:
             906          (a) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             907          (b) is subtracted by the corporation:
             908          (i) that is the account owner; and
             909          (ii) in accordance with Subsection 59-7-106 (18)[.]; and
             910          (13) the amount of the deduction for dividends paid, as defined in Section 561, Internal
             911      Revenue Code, that is allowed under Section 857(b)(2)(B), Internal Revenue Code, in
             912      computing the taxable income of a captive real estate investment trust, if that captive real estate
             913      investment trust is subject to federal income taxation.
             914          Section 18. Section 59-7-106 is amended to read:
             915           59-7-106. Subtractions from unadjusted income.
             916          In computing adjusted income the following amounts shall be subtracted from
             917      unadjusted income:
             918          (1) the foreign dividend gross-up included in gross income for federal income tax
             919      purposes under Section 78, Internal Revenue Code;
             920          (2) the net capital loss, as defined for federal purposes, if the taxpayer elects to deduct
             921      the loss on the current Utah return. The deduction shall be made by claiming the deduction on
             922      the current Utah return which shall be filed by the due date of the return, including extensions.
             923      For the purposes of this Subsection (2) all capital losses in a given year must be:
             924          (a) deducted in the year incurred; or
             925          (b) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue


             926      Code;
             927          (3) the decrease in salary expense deduction for federal income tax purposes due to
             928      claiming the federal jobs credit under Section 51, Internal Revenue Code;
             929          (4) the decrease in qualified research and basic research expense deduction for federal
             930      income tax purposes due to claiming the federal research and development credit under Section
             931      41, Internal Revenue Code;
             932          (5) the decrease in qualified clinical testing expense deduction for federal income tax
             933      purposes due to claiming the federal orphan drug credit under Section 28, Internal Revenue
             934      Code;
             935          (6) any decrease in any expense deduction for federal income tax purposes due to
             936      claiming any other federal credit;
             937          (7) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(b) and
             938      (2)(b);
             939          (8) any income on the federal corporate return that has been previously taxed by Utah;
             940          (9) amounts included in federal taxable income that are due to refunds of taxes imposed
             941      for the privilege of doing business, or exercising a corporate franchise, including income,
             942      franchise, corporate stock and business and occupation taxes paid by the corporation to Utah,
             943      another state of the United States, a foreign country, a United States possession, or the
             944      Commonwealth of Puerto Rico to the extent that the taxes were added to unadjusted income
             945      under Section 59-7-105 ;
             946          (10) charitable contributions, to the extent allowed as a subtraction under Section
             947      59-7-109 ;
             948          (11) (a) 50% of the dividends deemed received or received from subsidiaries which are
             949      members of the unitary group and are organized or incorporated outside of the United States
             950      unless such subsidiaries are included in a combined report under Section 59-7-402 or 59-7-403 .
             951      In arriving at the amount of the dividend exclusion, the taxpayer shall first deduct from the
             952      dividends deemed received or received, the expense directly attributable to those dividends.
             953      Interest expense attributable to excluded dividends shall be determined by multiplying interest


             954      expense by a fraction, the numerator of which is the taxpayer's average investment in such
             955      dividend paying subsidiaries, and the denominator of which is the taxpayer's average total
             956      investment in assets;
             957          (b) in determining income apportionable to this state, a portion of the factors of a
             958      foreign subsidiary whose dividends are partially excluded under Subsection (11)(a) shall be
             959      included in the combined report factors. The portion to be included shall be determined by
             960      multiplying each factor of the foreign subsidiary by a fraction, but not to exceed 100%, the
             961      numerator of which is the amount of the dividend paid by the foreign subsidiary which is
             962      included in adjusted income, and the denominator of which is the current year earnings and
             963      profits of the foreign subsidiary as determined under the Internal Revenue Code;
             964          (12) (a) 50% of the adjusted income of a foreign operating company unless the taxpayer
             965      has elected to file a worldwide combined report as provided in Section 59-7-403 . For purposes
             966      of this Subsection (12), when calculating the adjusted income of a foreign operating company, a
             967      foreign operating company may not deduct the subtractions allowable under this Subsection
             968      (12) and Subsection (11);
             969          (b) in determining income apportionable to this state, the factors for a foreign operating
             970      company shall be included in the combined report factors in the same percentage its adjusted
             971      income is included in the combined adjusted income;
             972          (13) the amount of gain or loss which is included in unadjusted income but not
             973      recognized for federal purposes on stock sold or exchanged by a member of a selling
             974      consolidated group as defined in Section 338, Internal Revenue Code, if an election has been
             975      made pursuant to Section 338(h)(10), Internal Revenue Code;
             976          (14) the amount of gain or loss which is included in unadjusted income but not
             977      recognized for federal purposes on stock sold, exchanged, or distributed by a corporation
             978      pursuant to Section 336(e), Internal Revenue Code, if an election under Section 336(e), Internal
             979      Revenue Code, has been made for federal purposes;
             980          (15) (a) adjustments to gains, losses, depreciation expense, amortization expense, and
             981      similar items due to a difference between basis for federal purposes and basis as computed


             982      under Section 59-7-107 ; and
             983          (b) if there has been a reduction in federal basis for a federal tax credit where there is no
             984      corresponding Utah tax credit, the amount of the reduction in basis shall be allowed as an
             985      expense in the year of the federal credit;
             986          (16) any interest expense not deducted on the federal corporate return under Section
             987      265(b) or 291(e), Internal Revenue Code;
             988          (17) 100% of the dividends received from subsidiaries which are insurance companies
             989      exempt from this chapter under Subsection 59-7-102 (1)(c) and are under "common ownership"
             990      as defined by Subsection 59-7-101 [(7)](8); [and]
             991          (18) subject to Subsection 59-7-105 (12), the amount of a qualified investment as
             992      defined in Section 53B-8a-102 that:
             993          (a) a corporation that is an account owner as defined in Section 53B-8a-102 makes
             994      during the taxable year;
             995          (b) the corporation described in Subsection (18)(a) does not deduct on a federal
             996      corporation income tax return; and
             997          (c) does not exceed the maximum amount of the qualified investment that may be
             998      subtracted from unadjusted income for a taxable year in accordance with Subsections
             999      53B-8a-106 (1)(d) and (f)[.]; and
             1000          (19) for purposes of income included in a combined report under Part 4, Combined
             1001      Reporting, the entire amount of the dividends a member of a unitary group receives or is
             1002      considered to receive from a captive real estate investment trust.
             1003          Section 19. Section 59-7-116.5 is amended to read:
             1004           59-7-116.5. Real estate investment trusts.
             1005          (1) A real estate investment trust[, as defined in Section 856, Internal Revenue Code,]
             1006      that is not a captive real estate investment trust shall be taxed on the same income taxed for
             1007      federal purposes under the Internal Revenue Code.
             1008          (2) Any income taxable under this section shall be taxed at the same rate and in the
             1009      same manner provided for in this chapter.


             1010          Section 20. Section 59-7-402 is amended to read:
             1011           59-7-402. Water's edge combined report.
             1012          (1) Except as provided in Section 59-7-403 , if any corporation listed in Subsection
             1013      59-7-101 [(33)](38)(a) is doing business in Utah, the unitary group shall file a water's edge
             1014      combined report.
             1015          (2) (a) A group of corporations that are not otherwise a unitary group may elect to file
             1016      a water's edge combined report if each member of the group is:
             1017          (i) doing business in Utah;
             1018          (ii) part of the same affiliated group; and
             1019          (iii) qualified, under Section 1501, Internal Revenue Code, to file a federal consolidated
             1020      return.
             1021          (b) Each corporation within the affiliated group that is doing business in Utah must
             1022      consent to filing a combined report. If an affiliated group elects to file a combined report, each
             1023      corporation within the affiliated group that is doing business in Utah must file a combined
             1024      report.
             1025          (c) Corporations that elect to file a water's edge combined report under this section may
             1026      not thereafter elect to file a separate return without the consent of the commission.
             1027          Section 21. Section 59-7-614 is amended to read:
             1028           59-7-614. Renewable energy systems tax credit -- Definitions -- Limitations --
             1029      Certification -- Rulemaking authority.
             1030          (1) As used in this section:
             1031          (a) "Active solar system":
             1032          (i) means a system of equipment capable of collecting and converting incident solar
             1033      radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
             1034      by a separate apparatus to storage or to the point of use; and
             1035          (ii) includes water heating, space heating or cooling, and electrical or mechanical energy
             1036      generation.
             1037          (b) "Biomass system" means any system of apparatus and equipment for use in


             1038      converting material into biomass energy, as defined in Section 59-12-102 , and transporting that
             1039      energy by separate apparatus to the point of use or storage.
             1040          (c) "Business entity" means any sole proprietorship, estate, trust, partnership,
             1041      association, corporation, cooperative, or other entity under which business is conducted or
             1042      transacted.
             1043          (d) "Commercial energy system" means any active solar, passive solar, geothermal
             1044      electricity, direct-use geothermal, geothermal heat-pump system, wind, hydroenergy, or biomass
             1045      system used to supply energy to a commercial unit or as a commercial enterprise.
             1046          (e) "Commercial enterprise" means a business entity whose purpose is to produce
             1047      electrical, mechanical, or thermal energy for sale from a commercial energy system.
             1048          (f) (i) "Commercial unit" means any building or structure that a business entity uses to
             1049      transact its business.
             1050          (ii) Notwithstanding Subsection (1)(f)(i):
             1051          (A) in the case of an active solar system used for agricultural water pumping or a wind
             1052      system, each individual energy generating device shall be a commercial unit; and
             1053          (B) if an energy system is the building or structure that a business entity uses to transact
             1054      its business, a commercial unit is the complete energy system itself.
             1055          (g) "Direct-use geothermal system" means a system of apparatus and equipment
             1056      enabling the direct use of thermal energy, generally between 100 and 300 degrees Fahrenheit,
             1057      that is contained in the earth to meet energy needs, including heating a building, an industrial
             1058      process, and aquaculture.
             1059          (h) "Geothermal electricity" means energy contained in heat that continuously flows
             1060      outward from the earth that is used as a sole source of energy to produce electricity.
             1061          (i) "Geothermal heat-pump system" means a system of apparatus and equipment
             1062      enabling the use of thermal properties contained in the earth at temperatures well below 100
             1063      degrees Fahrenheit to help meet heating and cooling needs of a structure.
             1064          (j) "Hydroenergy system" means a system of apparatus and equipment capable of
             1065      intercepting and converting kinetic water energy into electrical or mechanical energy and


             1066      transferring this form of energy by separate apparatus to the point of use or storage.
             1067          (k) "Individual taxpayer" means any person who is a taxpayer as defined in Section
             1068      59-10-103 and an individual as defined in Section 59-10-103 .
             1069          (l) "Passive solar system":
             1070          (i) means a direct thermal system that utilizes the structure of a building and its operable
             1071      components to provide for collection, storage, and distribution of heating or cooling during the
             1072      appropriate times of the year by utilizing the climate resources available at the site; and
             1073          (ii) includes those portions and components of a building that are expressly designed
             1074      and required for the collection, storage, and distribution of solar energy.
             1075          (m) "Residential energy system" means any active solar, passive solar, biomass,
             1076      direct-use geothermal, geothermal heat-pump system, wind, or hydroenergy system used to
             1077      supply energy to or for any residential unit.
             1078          (n) "Residential unit" means any house, condominium, apartment, or similar dwelling
             1079      unit that serves as a dwelling for a person, group of persons, or a family but does not include
             1080      property subject to a fee under:
             1081          (i) Section 59-2-404 ;
             1082          (ii) Section 59-2-405 ;
             1083          (iii) Section 59-2-405.1 ;
             1084          (iv) Section 59-2-405.2 ; or
             1085          (v) Section 59-2-405.3 .
             1086          (o) "Utah Geological Survey" means the Utah Geological Survey established in Section
             1087      63-73-5 .
             1088          (p) "Wind system" means a system of apparatus and equipment capable of intercepting
             1089      and converting wind energy into mechanical or electrical energy and transferring these forms of
             1090      energy by a separate apparatus to the point of use, sale, or storage.
             1091          (2) (a) (i) For taxable years beginning on or after January 1, 2007, a business entity that
             1092      purchases and completes or participates in the financing of a residential energy system to supply
             1093      all or part of the energy required for a residential unit owned or used by the business entity and


             1094      situated in Utah is entitled to a nonrefundable tax credit as provided in this Subsection (2)(a).
             1095          (ii) (A) A business entity is entitled to a tax credit equal to 25% of the reasonable costs
             1096      of each residential energy system installed with respect to each residential unit it owns or uses,
             1097      including installation costs, against any tax due under this chapter for the taxable year in which
             1098      the energy system is completed and placed in service.
             1099          (B) The total amount of each credit under this Subsection (2)(a) may not exceed $2,000
             1100      per residential unit.
             1101          (C) The credit under this Subsection (2)(a) is allowed for any residential energy system
             1102      completed and placed in service on or after January 1, 2007.
             1103          (iii) If a business entity sells a residential unit to an individual taxpayer before making a
             1104      claim for the tax credit under this Subsection (2)(a), the business entity may:
             1105          (A) assign its right to this tax credit to the individual taxpayer; and
             1106          (B) if the business entity assigns its right to the tax credit to an individual taxpayer
             1107      under Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the
             1108      individual taxpayer had completed or participated in the costs of the residential energy system
             1109      under Section 59-10-1014 .
             1110          (b) (i) For taxable years beginning on or after January 1, 2007, a business entity that
             1111      purchases or participates in the financing of a commercial energy system situated in Utah is
             1112      entitled to a refundable tax credit as provided in this Subsection (2)(b) if the commercial energy
             1113      system does not use wind, geothermal electricity, or biomass equipment capable of producing a
             1114      total of 660 or more kilowatts of electricity, and:
             1115          (A) the commercial energy system supplies all or part of the energy required by
             1116      commercial units owned or used by the business entity; or
             1117          (B) the business entity sells all or part of the energy produced by the commercial energy
             1118      system as a commercial enterprise.
             1119          (ii) (A) A business entity is entitled to a tax credit of up to 10% of the reasonable costs
             1120      of any commercial energy system installed, including installation costs, against any tax due
             1121      under this chapter for the taxable year in which the commercial energy system is completed and


             1122      placed in service.
             1123          (B) Notwithstanding Subsection (2)(b)(ii)(A), the total amount of the credit under this
             1124      Subsection (2)(b) may not exceed $50,000 per commercial unit.
             1125          (C) The credit under this Subsection (2)(b) is allowed for any commercial energy
             1126      system completed and placed in service on or after January 1, 2007.
             1127          (iii) A business entity that leases a commercial energy system installed on a commercial
             1128      unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can confirm that the
             1129      lessor irrevocably elects not to claim the credit.
             1130          (iv) Only the principal recovery portion of the lease payments, which is the cost
             1131      incurred by a business entity in acquiring a commercial energy system, excluding interest
             1132      charges and maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
             1133          (v) A business entity that leases a commercial energy system is eligible to use the tax
             1134      credit under this Subsection (2)(b) for a period no greater than seven years from the initiation of
             1135      the lease.
             1136          (vi) A tax credit allowed by this Subsection (2)(b) may not be carried forward or carried
             1137      back.
             1138          (c) (i) For taxable years beginning on or after January 1, 2007, a business entity that
             1139      owns a commercial energy system situated in Utah using wind, geothermal electricity, or
             1140      biomass equipment capable of producing a total of 660 or more kilowatts of electricity is
             1141      entitled to a refundable tax credit as provided in this Subsection (2)(c) if:
             1142          (A) the commercial energy system supplies all or part of the energy required by
             1143      commercial units owned or used by the business entity; or
             1144          (B) the business entity sells all or part of the energy produced by the commercial energy
             1145      system as a commercial enterprise.
             1146          (ii) (A) A business entity is entitled to a tax credit under this section equal to the
             1147      product of:
             1148          (I) 0.35 cents; and
             1149          (II) the kilowatt hours of electricity produced and either used or sold during the taxable


             1150      year.
             1151          (B) (I) The credit calculated under Subsection (2)(c)(ii)(A) may be claimed for
             1152      production occurring during a period of 48 months beginning with the month in which the
             1153      commercial energy system is placed in commercial service.
             1154          (II) The credit allowed by this Subsection (2)(c) for each year may not be carried
             1155      forward or carried back.
             1156          (C) The credit under this Subsection (2)(c) is allowed for any commercial energy
             1157      system completed and placed in service on or after January 1, 2007.
             1158          (iii) A business entity that leases a commercial energy system installed on a commercial
             1159      unit is eligible for the tax credit under this Subsection (2)(c) if the lessee can confirm that the
             1160      lessor irrevocably elects not to claim the credit.
             1161          (d) (i) A tax credit under Subsection (2)(a) or (b) may be claimed for the taxable year in
             1162      which the energy system is completed and placed in service.
             1163          (ii) Additional energy systems or parts of energy systems may be claimed for
             1164      subsequent years.
             1165          (iii) If the amount of a tax credit under Subsection (2)(a) exceeds a business entity's tax
             1166      liability under this chapter for a taxable year, the amount of the credit exceeding the liability may
             1167      be carried forward for a period which does not exceed the next four taxable years.
             1168          (3) (a) [The] Except as provided in Subsection (3)(b), the tax credits provided for under
             1169      Subsection (2) are in addition to any tax credits provided under the laws or rules and
             1170      regulations of the United States.
             1171          (b) A purchaser of one or more solar units that claims a tax credit under Section
             1172      59-7-614.2 for the purchase of the one or more solar units may not claim a tax credit under this
             1173      section for that purchase.
             1174          [(b)] (c) (i) The Utah Geological Survey may set standards for residential and
             1175      commercial energy systems claiming a credit under Subsections (2)(a) and (b) that cover the
             1176      safety, reliability, efficiency, leasing, and technical feasibility of the systems to ensure that the
             1177      systems eligible for the tax credit use the state's renewable and nonrenewable energy resources


             1178      in an appropriate and economic manner.
             1179          (ii) The Utah Geological Survey may set standards for residential and commercial
             1180      energy systems that establish the reasonable costs of an energy system, as used in Subsections
             1181      (2)(a)(ii)(A) and (2)(b)(ii)(A), as an amount per unit of energy production.
             1182          (iii) A tax credit may not be taken under Subsection (2) until the Utah Geological
             1183      Survey has certified that the energy system has been completely installed and is a viable system
             1184      for saving or production of energy from renewable resources.
             1185          [(c)] (d) The Utah Geological Survey and the commission may make rules in
             1186      accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, that are necessary
             1187      to implement this section.
             1188          (4) (a) On or before October 1, 2012, and every five years thereafter, the Utah Tax
             1189      Review Commission shall review each tax credit provided by this section and make
             1190      recommendations to the Revenue and Taxation Interim Committee concerning whether the
             1191      credit should be continued, modified, or repealed.
             1192          (b) The Utah Tax Review Commission's report under Subsection (4)(a) shall include
             1193      information concerning the cost of the credit, the purpose and effectiveness of the credit, and
             1194      the state's benefit from the credit.
             1195          Section 22. Section 59-7-614.2 is enacted to read:
             1196          59-7-614.2. Nonrefundable tax credit for qualifying solar projects.
             1197          (1) As used in this section:
             1198          (a) "Active solar system" is as defined in Section 59-7-614 .
             1199          (b) "Purchaser" means a taxpayer that purchases one or more solar units from a
             1200      qualifying political subdivision.
             1201          (c) "Qualifying political subdivision" means:
             1202          (i) a city or town in this state;
             1203          (ii) an interlocal entity created under Title 11, Chapter 13, Interlocal Cooperation Act;
             1204      or
             1205          (iii) a special service district created under Title 17A, Chapter 2, Part 13, Utah Special


             1206      Service District Act.
             1207          (d) "Qualifying solar project" means the portion of an active solar system:
             1208          (i) that a qualifying political subdivision:
             1209          (A) constructs;
             1210          (B) controls; or
             1211          (C) owns;
             1212          (ii) with respect to which the qualifying political subdivision described in Subsection
             1213      (1)(c)(i) sells one or more solar units; and
             1214          (iii) that generates electrical output that is furnished:
             1215          (A) to one or more residential units; or
             1216          (B) for the benefit of one or more residential units.
             1217          (e) "Residential unit" is as defined in Section 59-7-614 .
             1218          (f) "Solar unit" means a portion of the electrical output:
             1219          (i) of a qualifying solar project;
             1220          (ii) that a qualifying political subdivision sells to a purchaser; and
             1221          (iii) the purchase of which requires that the purchaser agree to bear a proportionate
             1222      share of the expense of the qualifying solar project:
             1223          (A) in accordance with a written agreement between the purchaser and the qualifying
             1224      political subdivision;
             1225          (B) in exchange for a credit on the purchaser's electrical bill; and
             1226          (C) as determined by a formula established by the qualifying political subdivision.
             1227          (2) Subject to Subsection (3), for taxable years beginning on or after January 1, 2008, a
             1228      purchaser may claim a nonrefundable tax credit equal to the product of:
             1229          (a) the amount the purchaser pays to purchase one or more solar units during the
             1230      taxable year; and
             1231          (b) 25%.
             1232          (3) For a taxable year, a tax credit under this section may not exceed $2,000 on a
             1233      return.


             1234          (4) A purchaser may carry forward a tax credit under this section for a period that does
             1235      not exceed the next four taxable years if:
             1236          (a) the purchaser is allowed to claim a tax credit under this section for a taxable year;
             1237      and
             1238          (b) the amount of the tax credit exceeds the purchaser's tax liability under this chapter
             1239      for that taxable year.
             1240          (5) Subject to Section 59-7-614 , a tax credit under this section is in addition to any
             1241      other tax credit allowed by this chapter.
             1242          (6) (a) On or before October 1, 2012, and every five years after October 1, 2012, the
             1243      Utah Tax Review Commission shall review the tax credit allowed by this section and make
             1244      recommendations to the Revenue and Taxation Interim Committee concerning whether the tax
             1245      credit should be continued, modified, or repealed.
             1246          (b) The Utah Tax Review Commission's report under Subsection (6)(a) shall include
             1247      information concerning the cost of the tax credit, the purpose and effectiveness of the tax credit,
             1248      and the state's benefit from the tax credit.
             1249          Section 23. Section 59-10-103 is amended to read:
             1250           59-10-103. Definitions.
             1251          (1) As used in this chapter:
             1252          (a) "Adjusted gross income":
             1253          (i) for a resident or nonresident individual, is as defined in Section 62, Internal Revenue
             1254      Code; or
             1255          (ii) for a resident or nonresident estate or trust, is as calculated in Section 67(e),
             1256      Internal Revenue Code.
             1257          [(b) "Adoption expenses" means:]
             1258          [(i) any actual medical and hospital expenses of the mother of the adopted child which
             1259      are incident to the child's birth;]
             1260          [(ii) any welfare agency fees or costs;]
             1261          [(iii) any child placement service fees or costs;]


             1262          [(iv) any legal fees or costs; or]
             1263          [(v) any other fees or costs relating to an adoption.]
             1264          [(c) "Adult with a disability" means an individual who:]
             1265          [(i) is 18 years of age or older;]
             1266          [(ii) is eligible for services under Title 62A, Chapter 5, Services for People with
             1267      Disabilities; and]
             1268          [(iii) is not enrolled in:]
             1269          [(A) an education program for students with disabilities that is authorized under Section
             1270      53A-15-301 ; or]
             1271          [(B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.]
             1272          [(d) (i) For purposes of Subsection 59-10-114 (2)(l), "capital gain transaction" means a
             1273      transaction that results in a:]
             1274          [(A) short-term capital gain; or]
             1275          [(B) long-term capital gain.]
             1276          [(ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1277      the commission may by rule define the term "transaction."]
             1278          [(e) "Commercial domicile" means the principal place from which the trade or business
             1279      of a Utah small business corporation is directed or managed.]
             1280          [(f)] (b) "Corporation" includes:
             1281          (i) [associations] an association;
             1282          (ii) a joint stock [companies] company; and
             1283          (iii) an insurance [companies] company.
             1284          [(g) "Dependent child with a disability" means an individual 21 years of age or younger
             1285      who:]
             1286          [(i) (A) is diagnosed by a school district representative under rules adopted by the State
             1287      Board of Education as having a disability classified as:]
             1288          [(I) autism;]
             1289          [(II) deafness;]


             1290          [(III) preschool developmental delay;]
             1291          [(IV) dual sensory impairment;]
             1292          [(V) hearing impairment;]
             1293          [(VI) intellectual disability;]
             1294          [(VII) multidisability;]
             1295          [(VIII) orthopedic impairment;]
             1296          [(IX) other health impairment;]
             1297          [(X) traumatic brain injury; or]
             1298          [(XI) visual impairment;]
             1299          [(B) is not receiving residential services from:]
             1300          [(I) the Division of Services for People with Disabilities created under Section
             1301      62A-5-102 ; or]
             1302          [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             1303      and]
             1304          [(C) is enrolled in:]
             1305          [(I) an education program for students with disabilities that is authorized under Section
             1306      53A-15-301 ; or]
             1307          [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             1308      or]
             1309          [(ii) is identified under guidelines of the Department of Health as qualified for:]
             1310          [(A) Early Intervention; or]
             1311          [(B) Infant Development Services.]
             1312          [(h)] (c) "Distributable net income" is as defined in Section 643, Internal Revenue
             1313      Code.
             1314          [(i)] (d) "Employee" is as defined in Section 59-10-401 .
             1315          [(j)] (e) "Employer" is as defined in Section 59-10-401 .
             1316          [(k)] (f) "Federal taxable income":
             1317          (i) for a resident or nonresident individual, means taxable income as defined by Section


             1318      63, Internal Revenue Code; or
             1319          (ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
             1320      (b), Internal Revenue Code.
             1321          [(l)] (g) "Fiduciary" means:
             1322          (i) a guardian;
             1323          (ii) a trustee;
             1324          (iii) an executor;
             1325          (iv) an administrator;
             1326          (v) a receiver;
             1327          (vi) a conservator; or
             1328          (vii) any person acting in any fiduciary capacity for any individual.
             1329          (h) "Guaranteed annuity interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
             1330          [(m)] (i) "Homesteaded land diminished from the Uintah and Ouray Reservation" means
             1331      the homesteaded land that was held to have been diminished from the Uintah and Ouray
             1332      Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
             1333          [(n)] (j) "Individual" means a natural person and includes aliens and minors.
             1334          [(o)] (k) "Irrevocable trust" means a trust in which the settlor may not revoke or
             1335      terminate all or part of the trust without the consent of a person who has a substantial beneficial
             1336      interest in the trust and the interest would be adversely affected by the exercise of the settlor's
             1337      power to revoke or terminate all or part of the trust.
             1338          [(p) For purposes of Subsection 59-10-114 (2)(l), "long-term capital gain" is as defined
             1339      in Section 1222, Internal Revenue Code.]
             1340          (l) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.
             1341          [(q)] (m) "Nonresident individual" means an individual who is not a resident of this
             1342      state.
             1343          [(r)] (n) "Nonresident trust" or "nonresident estate" means a trust or estate which is not
             1344      a resident estate or trust.
             1345          [(s)] (o) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other


             1346      unincorporated organization:
             1347          (A) through or by means of which any business, financial operation, or venture is
             1348      carried on; and
             1349          (B) which is not, within the meaning of this chapter:
             1350          (I) a trust;
             1351          (II) an estate; or
             1352          (III) a corporation.
             1353          (ii) "Partnership" does not include any organization not included under the definition of
             1354      "partnership" in Section 761, Internal Revenue Code.
             1355          (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
             1356      organization described in Subsection (1)[(s)](o)(i).
             1357          [(t) "Qualifying military servicemember" means a member of:]
             1358          [(i) The Utah Army National Guard;]
             1359          [(ii) The Utah Air National Guard; or]
             1360          [(iii) the following if the member is assigned to a unit that is located in the state:]
             1361          [(A) The Army Reserve;]
             1362          [(B) The Naval Reserve;]
             1363          [(C) The Air Force Reserve;]
             1364          [(D) The Marine Corps Reserve; or]
             1365          [(E) The Coast Guard Reserve.]
             1366          [(u) "Qualifying stock" means stock that is:]
             1367          [(i) (A) common; or]
             1368          [(B) preferred;]
             1369          [(ii) as defined by the commission by rule, originally issued to:]
             1370          [(A) a resident or nonresident individual; or]
             1371          [(B) a partnership if the resident or nonresident individual making a subtraction from
             1372      federal taxable income in accordance with Subsection 59-10-114 (2)(l):]
             1373          [(I) was a partner when the stock was issued; and]


             1374          [(II) remains a partner until the last day of the taxable year for which the resident or
             1375      nonresident individual makes the subtraction from federal taxable income in accordance with
             1376      Subsection 59-10-114 (2)(l); and]
             1377          [(iii) issued:]
             1378          [(A) by a Utah small business corporation;]
             1379          [(B) on or after January 1, 2003; and]
             1380          [(C) for:]
             1381          [(I) money; or]
             1382          [(II) other property, except for stock or securities.]
             1383          (p) "Qualified nongrantor charitable lead trust" means a trust:
             1384          (i) that is irrevocable;
             1385          (ii) that has a trust term measured by:
             1386          (A) a fixed term of years; or
             1387          (B) the life of a person living on the day on which the trust is created;
             1388          (iii) under which:
             1389          (A) a portion of the value of the trust assets is distributed during the trust term:
             1390          (I) to an organization described in Section 170(c), Internal Revenue Code; and
             1391          (II) as a:
             1392          (Aa) guaranteed annuity interest; or
             1393          (Bb) unitrust interest; and
             1394          (B) assets remaining in the trust at the termination of the trust term are distributed to a
             1395      beneficiary:
             1396          (I) designated in the trust; and
             1397          (II) that is not an organization described in Section 170(c), Internal Revenue Code;
             1398          (iv) for which the trust is allowed a deduction under Section 642(c), Internal Revenue
             1399      Code; and
             1400          (v) under which the grantor of the trust is not treated as the owner of any portion of the
             1401      trust for federal income tax purposes.


             1402          [(v)] (q) (i) "Resident individual" means:
             1403          (A) an individual who is domiciled in this state for any period of time during the taxable
             1404      year, but only for the duration of the period during which the individual is domiciled in this
             1405      state; or
             1406          (B) an individual who is not domiciled in this state but:
             1407          (I) maintains a permanent place of abode in this state; and
             1408          (II) spends in the aggregate 183 or more days of the taxable year in this state.
             1409          (ii) For purposes of Subsection (1)[(v)] (q)(i)(B), a fraction of a calendar day shall be
             1410      counted as a whole day.
             1411          [(w)] (r) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
             1412          [(x) For purposes of Subsection 59-10-114 (2)(l), "short-term capital gain" is as defined
             1413      in Section 1222, Internal Revenue Code.]
             1414          (s) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.
             1415          (t) "State income tax percentage for a nonresident estate or trust" means a percentage
             1416      equal to a nonresident estate's or trust's state taxable income for the taxable year divided by the
             1417      nonresident estate's or trust's total adjusted gross income for that taxable year after making the
             1418      adjustments required by:
             1419          (i) Section 59-10-202 ;
             1420          (ii) Section 59-10-207 ;
             1421          (iii) Section 59-10-209.1 ; or
             1422          (iv) Section 59-10-210 .
             1423          (u) "State income tax percentage for a nonresident individual" means a percentage equal
             1424      to a nonresident individual's state taxable income for the taxable year divided by the difference
             1425      between:
             1426          (i) the nonresident individual's total adjusted gross income for that taxable year, after
             1427      making the:
             1428          (A) additions and subtractions required by Section 59-10-114 ; and
             1429          (B) adjustments required by Section 59-10-115 ; and


             1430          (ii) if the nonresident individual described in Subsection (1)(u)(i) is a servicemember,
             1431      the compensation the servicemember receives for military service if the servicemember is
             1432      serving in compliance with military orders.
             1433          (v) "State income tax percentage for a part-year resident individual" means, for a
             1434      taxable year, a fraction:
             1435          (i) the numerator of which is the sum of:
             1436          (A) subject to Subsections 59-10-1404 (3) and (4), for the time period during the
             1437      taxable year that the part-year resident individual is a resident, the part-year resident individual's
             1438      total adjusted gross income for that time period, after making the:
             1439          (I) additions and subtractions required by Section 59-10-114 ; and
             1440          (II) adjustments required by Section 59-10-115 ; and
             1441          (B) for the time period during the taxable year that the part-year resident individual is a
             1442      nonresident, an amount calculated by:
             1443          (I) determining the part-year resident individual's adjusted gross income for that time
             1444      period, after making the:
             1445          (Aa) additions and subtractions required by Section 59-10-114 ; and
             1446          (Bb) adjustments required by Section 59-10-115 ; and
             1447          (II) calculating the portion of the amount determined under Subsection (1)(v)(i)(B)(I)
             1448      that is derived from Utah sources in accordance with Section 59-10-117 ; and
             1449          (ii) the denominator of which is the difference between:
             1450          (A) the part-year resident individual's total adjusted gross income for that taxable year,
             1451      after making the:
             1452          (I) additions and subtractions required by Section 59-10-114 ; and
             1453          (II) adjustments required by Section 59-10-115 ; and
             1454          (B) if the part-year resident individual is a servicemember, any compensation the
             1455      servicemember receives for military service during the portion of the taxable year that the
             1456      servicemember is a nonresident if the servicemember is serving in compliance with military
             1457      orders.


             1458          [(y)] (w) "Taxable income" or "state taxable income":
             1459          (i) subject to Subsection [ 59-10-302 (2)] 59-10-1404 (3), for a resident individual [other
             1460      than a resident individual described in Subsection (1)(y)(iii)], means the resident individual's
             1461      [federal taxable] adjusted gross income after making the:
             1462          (A) additions and subtractions required by Section 59-10-114 ; and
             1463          (B) adjustments required by Section 59-10-115 ;
             1464          (ii) for a nonresident individual [other than a nonresident individual described in
             1465      Subsection (1)(y)(iii), is as defined in Section 59-10-116 ;], is an amount calculated by:
             1466          (A) determining the nonresident individual's adjusted gross income for the taxable year,
             1467      after making the:
             1468          (I) additions and subtractions required by Section 59-10-114 ; and
             1469          (II) adjustments required by Section 59-10-115 ; and
             1470          (B) calculating the portion of the amount determined under Subsection (1)(w)(ii)(A)
             1471      that is derived from Utah sources in accordance with Section 59-10-117 ;
             1472          [(iii) for a resident or nonresident individual that collects and pays a tax described in
             1473      Part 12, Single Rate Individual Income Tax Act, is as defined in Section 59-10-1202 ;]
             1474          [(iv)] (iii) for a resident estate or trust, is as calculated under Section 59-10-201.1 ; and
             1475          [(v)] (iv) for a nonresident estate or trust, is as calculated under Section 59-10-204 .
             1476          [(z)] (x) "Taxpayer" means any individual, estate, [or] trust, or beneficiary of an estate
             1477      or trust, [whose income is] that has income subject in whole or part to the tax imposed by this
             1478      chapter.
             1479          (y) "Trust term" means a time period:
             1480          (i) beginning on the day on which a qualified nongrantor charitable lead trust is created;
             1481      and
             1482          (ii) ending on the day on which the qualified nongrantor charitable lead trust described
             1483      in Subsection (1)(y)(i) terminates.
             1484          [(aa)] (z) "Uintah and Ouray Reservation" means the lands recognized as being included
             1485      within the Uintah and Ouray Reservation in:


             1486          (i) Hagen v. Utah, 510 U.S. 399 (1994); and
             1487          (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
             1488          [(bb) (i) "Utah small business corporation" means a corporation that:]
             1489          [(A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
             1490      Code;]
             1491          [(B) except as provided in Subsection (1)(bb)(ii), meets the requirements of Section
             1492      1244(c)(1)(C), Internal Revenue Code; and]
             1493          [(C) has its commercial domicile in this state.]
             1494          [(ii) Notwithstanding Subsection (1)(bb)(i)(B), the time period described in Section
             1495      1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the source of a
             1496      corporation's aggregate gross receipts shall end on the last day of the taxable year for which the
             1497      resident or nonresident individual makes a subtraction from federal taxable income in
             1498      accordance with Subsection 59-10-114 (2)(l).]
             1499          (aa) "Unadjusted income" means an amount equal to the difference between:
             1500          (i) the total income required to be reported by a resident or nonresident estate or trust
             1501      on the resident or nonresident estate's or trust's federal income tax return for estates and trusts
             1502      for the taxable year; and
             1503          (ii) the sum of the following:
             1504          (A) fees paid or incurred to the fiduciary of a resident or nonresident estate or trust:
             1505          (I) for administering the resident or nonresident estate or trust; and
             1506          (II) that the resident or nonresident estate or trust deducts as allowed on the resident or
             1507      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             1508      year;
             1509          (B) the income distribution deduction that a resident or nonresident estate or trust
             1510      deducts under Section 651 or 661, Internal Revenue Code, as allowed on the resident or
             1511      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             1512      year;
             1513          (C) the amount that a resident or nonresident estate or trust deducts as a deduction for


             1514      estate tax or generation skipping transfer tax under