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H.B. 279

             1     

TAX INCENTIVES FOR MILITARY MEMBERS

             2     
2008 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Wayne A. Harper

             5     
Senate Sponsor: Curtis S. Bramble

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends the Individual Income Tax Act relating to tax incentives for military
             10      members.
             11      Highlighted Provisions:
             12          This bill:
             13          .    repeals obsolete language relating to income tax subtractions for military members;
             14          .    defines terms;
             15          .    enacts a nonrefundable tax credit for military members; and
             16          .    makes technical changes.
             17      Monies Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          This bill has retrospective operation for taxable years beginning on or after January 1,
             21      2008.
             22          This bill coordinates with S.B. 31, Income Tax Amendments, to provide for
             23      apportionment of a tax credit.
             24      Utah Code Sections Affected:
             25      AMENDS:
             26          59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             27          59-10-114, as last amended by Laws of Utah 2007, Chapter 100


             28          59-10-202, as last amended by Laws of Utah 2007, Chapter 100
             29          59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             30      ENACTS:
             31          59-10-1017, Utah Code Annotated 1953
             32     
             33      Be it enacted by the Legislature of the state of Utah:
             34          Section 1. Section 59-10-103 is amended to read:
             35           59-10-103. Definitions.
             36          (1) As used in this chapter:
             37          (a) "Adjusted gross income":
             38          (i) for a resident or nonresident individual, is as defined in Section 62, Internal
             39      Revenue Code; or
             40          (ii) for a resident or nonresident estate or trust, is as calculated in Section 67(e),
             41      Internal Revenue Code.
             42          (b) "Adoption expenses" means:
             43          (i) any actual medical and hospital expenses of the mother of the adopted child which
             44      are incident to the child's birth;
             45          (ii) any welfare agency fees or costs;
             46          (iii) any child placement service fees or costs;
             47          (iv) any legal fees or costs; or
             48          (v) any other fees or costs relating to an adoption.
             49          (c) "Adult with a disability" means an individual who:
             50          (i) is 18 years of age or older;
             51          (ii) is eligible for services under Title 62A, Chapter 5, Services for People with
             52      Disabilities; and
             53          (iii) is not enrolled in:
             54          (A) an education program for students with disabilities that is authorized under Section
             55      53A-15-301 ; or
             56          (B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.
             57          (d) (i) For purposes of Subsection 59-10-114 (2)(l), "capital gain transaction" means a
             58      transaction that results in a:


             59          (A) short-term capital gain; or
             60          (B) long-term capital gain.
             61          (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             62      the commission may by rule define the term "transaction."
             63          (e) "Commercial domicile" means the principal place from which the trade or business
             64      of a Utah small business corporation is directed or managed.
             65          (f) "Corporation" includes:
             66          (i) associations;
             67          (ii) joint stock companies; and
             68          (iii) insurance companies.
             69          (g) "Dependent child with a disability" means an individual 21 years of age or younger
             70      who:
             71          (i) (A) is diagnosed by a school district representative under rules adopted by the State
             72      Board of Education as having a disability classified as:
             73          (I) autism;
             74          (II) deafness;
             75          (III) preschool developmental delay;
             76          (IV) dual sensory impairment;
             77          (V) hearing impairment;
             78          (VI) intellectual disability;
             79          (VII) multidisability;
             80          (VIII) orthopedic impairment;
             81          (IX) other health impairment;
             82          (X) traumatic brain injury; or
             83          (XI) visual impairment;
             84          (B) is not receiving residential services from:
             85          (I) the Division of Services for People with Disabilities created under Section
             86      62A-5-102 ; or
             87          (II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             88      and
             89          (C) is enrolled in:


             90          (I) an education program for students with disabilities that is authorized under Section
             91      53A-15-301 ; or
             92          (II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             93      or
             94          (ii) is identified under guidelines of the Department of Health as qualified for:
             95          (A) Early Intervention; or
             96          (B) Infant Development Services.
             97          (h) "Distributable net income" is as defined in Section 643, Internal Revenue Code.
             98          (i) "Employee" is as defined in Section 59-10-401 .
             99          (j) "Employer" is as defined in Section 59-10-401 .
             100          (k) "Federal taxable income":
             101          (i) for a resident or nonresident individual, means taxable income as defined by Section
             102      63, Internal Revenue Code; or
             103          (ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
             104      (b), Internal Revenue Code.
             105          (l) "Fiduciary" means:
             106          (i) a guardian;
             107          (ii) a trustee;
             108          (iii) an executor;
             109          (iv) an administrator;
             110          (v) a receiver;
             111          (vi) a conservator; or
             112          (vii) any person acting in any fiduciary capacity for any individual.
             113          (m) "Homesteaded land diminished from the Uintah and Ouray Reservation" means the
             114      homesteaded land that was held to have been diminished from the Uintah and Ouray
             115      Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
             116          (n) "Individual" means a natural person and includes aliens and minors.
             117          (o) "Irrevocable trust" means a trust in which the settlor may not revoke or terminate
             118      all or part of the trust without the consent of a person who has a substantial beneficial interest
             119      in the trust and the interest would be adversely affected by the exercise of the settlor's power to
             120      revoke or terminate all or part of the trust.


             121          (p) For purposes of Subsection 59-10-114 (2)(l), "long-term capital gain" is as defined
             122      in Section 1222, Internal Revenue Code.
             123          (q) "Nonresident individual" means an individual who is not a resident of this state.
             124          (r) "Nonresident trust" or "nonresident estate" means a trust or estate which is not a
             125      resident estate or trust.
             126          (s) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
             127      unincorporated organization:
             128          (A) through or by means of which any business, financial operation, or venture is
             129      carried on; and
             130          (B) which is not, within the meaning of this chapter:
             131          (I) a trust;
             132          (II) an estate; or
             133          (III) a corporation.
             134          (ii) "Partnership" does not include any organization not included under the definition of
             135      "partnership" in Section 761, Internal Revenue Code.
             136          (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
             137      organization described in Subsection (1)(s)(i).
             138          [(t) "Qualifying military servicemember" means a member of:]
             139          [(i) The Utah Army National Guard;]
             140          [(ii) The Utah Air National Guard; or]
             141          [(iii) the following if the member is assigned to a unit that is located in the state:]
             142          [(A) The Army Reserve;]
             143          [(B) The Naval Reserve;]
             144          [(C) The Air Force Reserve;]
             145          [(D) The Marine Corps Reserve; or]
             146          [(E) The Coast Guard Reserve.]
             147          [(u)] (t) "Qualifying stock" means stock that is:
             148          (i) (A) common; or
             149          (B) preferred;
             150          (ii) as defined by the commission by rule, originally issued to:
             151          (A) a resident or nonresident individual; or


             152          (B) a partnership if the resident or nonresident individual making a subtraction from
             153      federal taxable income in accordance with Subsection 59-10-114 (2)(l):
             154          (I) was a partner when the stock was issued; and
             155          (II) remains a partner until the last day of the taxable year for which the resident or
             156      nonresident individual makes the subtraction from federal taxable income in accordance with
             157      Subsection 59-10-114 (2)(l); and
             158          (iii) issued:
             159          (A) by a Utah small business corporation;
             160          (B) on or after January 1, 2003; and
             161          (C) for:
             162          (I) money; or
             163          (II) other property, except for stock or securities.
             164          [(v)] (u) (i) "Resident individual" means:
             165          (A) an individual who is domiciled in this state for any period of time during the
             166      taxable year, but only for the duration of the period during which the individual is domiciled in
             167      this state; or
             168          (B) an individual who is not domiciled in this state but:
             169          (I) maintains a permanent place of abode in this state; and
             170          (II) spends in the aggregate 183 or more days of the taxable year in this state.
             171          (ii) For purposes of Subsection (1)[(v)](u)(i)(B), a fraction of a calendar day shall be
             172      counted as a whole day.
             173          [(w)] (v) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
             174          [(x)] (w) For purposes of Subsection 59-10-114 (2)(l), "short-term capital gain" is as
             175      defined in Section 1222, Internal Revenue Code.
             176          [(y)] (x) "Taxable income" or "state taxable income":
             177          (i) subject to Subsection 59-10-302 (2), for a resident individual other than a resident
             178      individual described in Subsection (1)[(y)](x)(iii), means the resident individual's federal
             179      taxable income after making the:
             180          (A) additions and subtractions required by Section 59-10-114 ; and
             181          (B) adjustments required by Section 59-10-115 ;
             182          (ii) for a nonresident individual other than a nonresident individual described in


             183      Subsection (1)[(y)](x)(iii), is as defined in Section 59-10-116 ;
             184          (iii) for a resident or nonresident individual that collects and pays a tax described in
             185      Part 12, Single Rate Individual Income Tax Act, is as defined in Section 59-10-1202 ;
             186          (iv) for a resident estate or trust, is as calculated under Section 59-10-201.1 ; and
             187          (v) for a nonresident estate or trust, is as calculated under Section 59-10-204 .
             188          [(z)] (y) "Taxpayer" means any individual, estate, or trust or beneficiary of an estate or
             189      trust, whose income is subject in whole or part to the tax imposed by this chapter.
             190          [(aa)] (z) "Uintah and Ouray Reservation" means the lands recognized as being
             191      included within the Uintah and Ouray Reservation in:
             192          (i) Hagen v. Utah, 510 U.S. 399 (1994); and
             193          (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
             194          [(bb)] (aa) (i) "Utah small business corporation" means a corporation that:
             195          (A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
             196      Code;
             197          (B) except as provided in Subsection (1)[(bb)](aa)(ii), meets the requirements of
             198      Section 1244(c)(1)(C), Internal Revenue Code; and
             199          (C) has its commercial domicile in this state.
             200          (ii) Notwithstanding Subsection (1)[(bb)](aa)(i)(B), the time period described in
             201      Section 1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the
             202      source of a corporation's aggregate gross receipts shall end on the last day of the taxable year
             203      for which the resident or nonresident individual makes a subtraction from federal taxable
             204      income in accordance with Subsection 59-10-114 (2)(l).
             205          [(cc)] (bb) "Ute tribal member" means a person who is enrolled as a member of the Ute
             206      Indian Tribe of the Uintah and Ouray Reservation.
             207          [(dd)] (cc) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray
             208      Reservation.
             209          [(ee)] (dd) "Wages" is as defined in Section 59-10-401 .
             210          (2) (a) Any term used in this chapter has the same meaning as when used in
             211      comparable context in the laws of the United States relating to federal income taxes unless a
             212      different meaning is clearly required.
             213          (b) Any reference to the Internal Revenue Code or to the laws of the United States shall


             214      mean the Internal Revenue Code or other provisions of the laws of the United States relating to
             215      federal income taxes that are in effect for the taxable year.
             216          (c) Any reference to a specific section of the Internal Revenue Code or other provision
             217      of the laws of the United States relating to federal income taxes shall include any
             218      corresponding or comparable provisions of the Internal Revenue Code as hereafter amended,
             219      redesignated, or reenacted.
             220          Section 2. Section 59-10-114 is amended to read:
             221           59-10-114. Additions to and subtractions from federal taxable income of an
             222      individual.
             223          (1) There shall be added to federal taxable income of a resident or nonresident
             224      individual:
             225          (a) the amount of any income tax imposed by this or any predecessor Utah individual
             226      income tax law and the amount of any income tax imposed by the laws of another state, the
             227      District of Columbia, or a possession of the United States, to the extent deducted from adjusted
             228      gross income in determining federal taxable income;
             229          (b) a lump sum distribution that the taxpayer does not include in adjusted gross income
             230      on the taxpayer's federal individual income tax return for the taxable year;
             231          (c) for taxable years beginning on or after January 1, 2002, the amount of a child's
             232      income calculated under Subsection (5) that:
             233          (i) a parent elects to report on the parent's federal individual income tax return for the
             234      taxable year; and
             235          (ii) the parent does not include in adjusted gross income on the parent's federal
             236      individual income tax return for the taxable year;
             237          (d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
             238      Code;
             239          (e) a withdrawal from a medical care savings account and any penalty imposed in the
             240      taxable year if:
             241          (i) the resident or nonresident individual did not deduct or include the amounts on the
             242      resident or nonresident individual's federal individual income tax return pursuant to Section
             243      220, Internal Revenue Code;
             244          (ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2); and


             245          (iii) the withdrawal is deducted by the resident or nonresident individual under
             246      Subsection (2)(h);
             247          (f) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             248      Incentive Program, from the account of a resident or nonresident individual who is an account
             249      owner as defined in Section 53B-8a-102 , for the taxable year for which the amount is
             250      withdrawn, if that amount withdrawn from the account of the resident or nonresident individual
             251      who is the account owner:
             252          (i) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             253          (ii) is:
             254          (A) subtracted by the resident or nonresident individual:
             255          (I) who is the account owner; and
             256          (II) in accordance with Subsection (2)(i); or
             257          (B) used as the basis for the resident or nonresident individual who is the account
             258      owner to claim a tax credit under Section 59-10-1206.1 ;
             259          (g) except as provided in Subsection (6), for taxable years beginning on or after
             260      January 1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after
             261      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             262      one or more of the following entities:
             263          (i) a state other than this state;
             264          (ii) the District of Columbia;
             265          (iii) a political subdivision of a state other than this state; or
             266          (iv) an agency or instrumentality of an entity described in Subsections (1)(g)(i) through
             267      (iii);
             268          (h) subject to Subsection (2)(n), any distribution received by a resident beneficiary of a
             269      resident trust of income that was taxed at the trust level for federal tax purposes, but was
             270      subtracted from state taxable income of the trust pursuant to Subsection 59-10-202 (2)(c);
             271          (i) any distribution received by a resident beneficiary of a nonresident trust of
             272      undistributed distributable net income realized by the trust on or after January 1, 2004, if that
             273      undistributed distributable net income was taxed at the trust level for federal tax purposes, but
             274      was not taxed at the trust level by any state, with undistributed distributable net income
             275      considered to be distributed from the most recently accumulated undistributed distributable net


             276      income; and
             277          (j) any adoption expense:
             278          (i) for which a resident or nonresident individual receives reimbursement from another
             279      person; and
             280          (ii) to the extent to which the resident or nonresident individual deducts that adoption
             281      expense:
             282          (A) under Subsection (2)(c); or
             283          (B) from federal taxable income on a federal individual income tax return.
             284          (2) There shall be subtracted from federal taxable income of a resident or nonresident
             285      individual:
             286          (a) the interest or a dividend on obligations or securities of the United States and its
             287      possessions or of any authority, commission, or instrumentality of the United States, to the
             288      extent that interest or dividend is included in gross income for federal income tax purposes for
             289      the taxable year but exempt from state income taxes under the laws of the United States, but
             290      the amount subtracted under this Subsection (2)(a) shall be reduced by any interest on
             291      indebtedness incurred or continued to purchase or carry the obligations or securities described
             292      in this Subsection (2)(a), and by any expenses incurred in the production of interest or dividend
             293      income described in this Subsection (2)(a) to the extent that such expenses, including
             294      amortizable bond premiums, are deductible in determining federal taxable income;
             295          (b) 1/2 of the net amount of any income tax paid or payable to the United States after all
             296      allowable credits, as reported on the United States individual income tax return of the taxpayer
             297      for the same taxable year;
             298          (c) the amount of adoption expenses for one of the following taxable years as elected
             299      by the resident or nonresident individual:
             300          (i) regardless of whether a court issues an order granting the adoption, the taxable year
             301      in which the adoption expenses are:
             302          (A) paid; or
             303          (B) incurred;
             304          (ii) the taxable year in which a court issues an order granting the adoption; or
             305          (iii) any year in which the resident or nonresident individual may claim the federal
             306      adoption expenses credit under Section 23, Internal Revenue Code;


             307          (d) amounts received by taxpayers under age 65 as retirement income which, for
             308      purposes of this section, means pensions and annuities, paid from an annuity contract
             309      purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
             310      Internal Revenue Code, or purchased by an employee under a plan which meets the
             311      requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
             312      political subdivision thereof, or the District of Columbia, to the employee involved or the
             313      surviving spouse;
             314          (e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
             315      personal retirement exemption;
             316          (f) 75% of the amount of the personal exemption, as defined and calculated in the
             317      Internal Revenue Code, for each dependent child with a disability and adult with a disability
             318      who is claimed as a dependent on a taxpayer's return;
             319          (g) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
             320      taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
             321          (i) for:
             322          (A) the taxpayer;
             323          (B) the taxpayer's spouse; and
             324          (C) the taxpayer's dependents; and
             325          (ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
             326      213, Internal Revenue Code, in determining federal taxable income for the taxable year;
             327          (h) (i) except as provided in this Subsection (2)(h), the amount of a contribution made
             328      during the taxable year on behalf of the taxpayer to a medical care savings account and interest
             329      earned on a contribution to a medical care savings account established pursuant to Title 31A,
             330      Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is accepted by
             331      the account administrator as provided in the Medical Care Savings Account Act, and if the
             332      taxpayer did not deduct or include amounts on the taxpayer's federal individual income tax
             333      return pursuant to Section 220, Internal Revenue Code; and
             334          (ii) a contribution deductible under this Subsection (2)(h) may not exceed either of the
             335      following:
             336          (A) the maximum contribution allowed under the Medical Care Savings Account Act
             337      for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is


             338      covered by health care insurance as defined in Section 31A-1-301 or self-funded plan that
             339      covers the other spouse, and each spouse has a medical care savings account; or
             340          (B) the maximum contribution allowed under the Medical Care Savings Account Act
             341      for the tax year for taxpayers:
             342          (I) who do not file a joint return; or
             343          (II) who file a joint return, but do not qualify under Subsection (2)(h)(ii)(A);
             344          (i) subject to Subsection (1)(f), the amount of a qualified investment as defined in
             345      Section 53B-8a-102 that:
             346          (i) a resident or nonresident individual who is an account owner as defined in Section
             347      53B-8a-102 makes during the taxable year;
             348          (ii) the resident or nonresident individual described in Subsection (2)(i)(i) does not
             349      deduct on a federal individual income tax return; and
             350          (iii) does not exceed the maximum amount of the qualified investment that may be
             351      subtracted from federal taxable income for a taxable year in accordance with Subsections
             352      53B-8a-106 (1)(e) and (f);
             353          (j) for taxable years beginning on or after January 1, 2000, any amounts paid for
             354      premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
             355      amounts paid for long-term care insurance were not deducted under Section 213, Internal
             356      Revenue Code, in determining federal taxable income;
             357          (k) for taxable years beginning on or after January 1, 2000, if the conditions of
             358      Subsection (4)(a) are met, the amount of income derived by a Ute tribal member:
             359          (i) during a time period that the Ute tribal member resides on homesteaded land
             360      diminished from the Uintah and Ouray Reservation; and
             361          (ii) from a source within the Uintah and Ouray Reservation;
             362          (l) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
             363      resident or nonresident individual's short-term capital gain or long-term capital gain on a
             364      capital gain transaction:
             365          (A) that occurs on or after January 1, 2003;
             366          (B) if 70% or more of the gross proceeds of the capital gain transaction are expended:
             367          (I) to purchase qualifying stock in a Utah small business corporation; and
             368          (II) within a 12-month period after the day on which the capital gain transaction occurs;


             369      and
             370          (C) if, prior to the purchase of the qualifying stock described in Subsection
             371      (2)(l)(i)(B)(I), the resident or nonresident individual did not have an ownership interest in the
             372      Utah small business corporation that issued the qualifying stock; and
             373          (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             374      commission may make rules:
             375          (A) defining the term "gross proceeds"; and
             376          (B) for purposes of Subsection (2)(l)(i)(C), prescribing the circumstances under which
             377      a resident or nonresident individual has an ownership interest in a Utah small business
             378      corporation;
             379          [(m) for the taxable year beginning on or after January 1, 2005, but beginning on or
             380      before December 31, 2005, the first $2,200 of income a qualifying military servicemember
             381      receives:]
             382          [(i) for service:]
             383          [(A) as a qualifying military servicemember; or]
             384          [(B) under an order into active service in accordance with Section 39-1-5 ; and]
             385          [(ii) to the extent that income is included in adjusted gross income on that resident or
             386      nonresident individual's federal individual income tax return for that taxable year;]
             387          [(n)] (m) an amount received by a resident or nonresident individual or distribution
             388      received by a resident or nonresident beneficiary of a resident trust:
             389          (i) if that amount or distribution constitutes a refund of taxes imposed by:
             390          (A) a state; or
             391          (B) the District of Columbia; and
             392          (ii) to the extent that amount or distribution is included in adjusted gross income for
             393      that taxable year on the federal individual income tax return of the resident or nonresident
             394      individual or resident or nonresident beneficiary of a resident trust;
             395          [(o)] (n) the amount of a railroad retirement benefit:
             396          (i) paid:
             397          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
             398      seq.;
             399          (B) to a resident or nonresident individual; and


             400          (C) for the taxable year; and
             401          (ii) to the extent that railroad retirement benefit is included in adjusted gross income on
             402      that resident or nonresident individual's federal individual income tax return for that taxable
             403      year; and
             404          [(p)] (o) an amount:
             405          (i) received by an enrolled member of an American Indian tribe; and
             406          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
             407      part on that amount in accordance with:
             408          (A) federal law;
             409          (B) a treaty; or
             410          (C) a final decision issued by a court of competent jurisdiction.
             411          (3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted
             412      for taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
             413      $4,800, except that:
             414          (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             415      earned over $32,000, the amount of the retirement income exemption that may be subtracted
             416      shall be reduced by 50 cents;
             417          (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             418      earned over $16,000, the amount of the retirement income exemption that may be subtracted
             419      shall be reduced by 50 cents; and
             420          (iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             421      $25,000, the amount of the retirement income exemption that may be subtracted shall be
             422      reduced by 50 cents.
             423          (b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
             424      shall be further reduced according to the following schedule:
             425          (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             426      earned over $32,000, the amount of the personal retirement exemption shall be reduced by 50
             427      cents;
             428          (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             429      earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
             430      cents; and


             431          (iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             432      $25,000, the amount of the personal retirement exemption shall be reduced by 50 cents.
             433          (c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be
             434      calculated by adding to adjusted gross income any interest income not otherwise included in
             435      adjusted gross income.
             436          (d) For purposes of determining ownership of items of retirement income common law
             437      doctrine will be applied in all cases even though some items may have originated from service
             438      or investments in a community property state. Amounts received by the spouse of a living
             439      retiree because of the retiree's having been employed in a community property state are not
             440      deductible as retirement income of such spouse.
             441          (e) For purposes of Subsection (2)(g), a subtraction for an amount paid for health care
             442      insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:
             443          (i) for an amount that is reimbursed or funded in whole or in part by the federal
             444      government, the state, or an agency or instrumentality of the federal government or the state;
             445      and
             446          (ii) for a taxpayer who is eligible to participate in a health plan maintained and funded
             447      in whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
             448          (4) (a) A subtraction for an amount described in Subsection (2)(k) is allowed only if:
             449          (i) the taxpayer is a Ute tribal member; and
             450          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             451      requirements of this Subsection (4).
             452          (b) The agreement described in Subsection (4)(a):
             453          (i) may not:
             454          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             455          (B) provide a subtraction under this section greater than or different from the
             456      subtraction described in Subsection (2)(k); or
             457          (C) affect the power of the state to establish rates of taxation; and
             458          (ii) shall:
             459          (A) provide for the implementation of the subtraction described in Subsection (2)(k);
             460          (B) be in writing;
             461          (C) be signed by:


             462          (I) the governor; and
             463          (II) the chair of the Business Committee of the Ute tribe;
             464          (D) be conditioned on obtaining any approval required by federal law; and
             465          (E) state the effective date of the agreement.
             466          (c) (i) The governor shall report to the commission by no later than February 1 of each
             467      year regarding whether or not an agreement meeting the requirements of this Subsection (4) is
             468      in effect.
             469          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
             470      subtraction permitted under Subsection (2)(k) is not allowed for taxable years beginning on or
             471      after the January 1 following the termination of the agreement.
             472          (d) For purposes of Subsection (2)(k) and in accordance with Title 63, Chapter 46a,
             473      Utah Administrative Rulemaking Act, the commission may make rules:
             474          (i) for determining whether income is derived from a source within the Uintah and
             475      Ouray Reservation; and
             476          (ii) that are substantially similar to how adjusted gross income derived from Utah
             477      sources is determined under Section 59-10-117 .
             478          (5) (a) For purposes of this Subsection (5), "Form 8814" means:
             479          (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
             480      Interest and Dividends; or
             481          (ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by
             482      the commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to
             483      2000 Form 8814 if for purposes of federal individual income taxes the information contained
             484      on 2000 Form 8814 is reported on a form other than Form 8814; and
             485          (B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter
             486      46a, Utah Administrative Rulemaking Act, the commission may make rules designating a form
             487      as being substantially similar to 2000 Form 8814 if for purposes of federal individual income
             488      taxes the information contained on 2000 Form 8814 is reported on a form other than Form
             489      8814.
             490          (b) The amount of a child's income added to adjusted gross income under Subsection
             491      (1)(c) is equal to the difference between:
             492          (i) the lesser of:


             493          (A) the base amount specified on Form 8814; and
             494          (B) the sum of the following reported on Form 8814:
             495          (I) the child's taxable interest;
             496          (II) the child's ordinary dividends; and
             497          (III) the child's capital gain distributions; and
             498          (ii) the amount not taxed that is specified on Form 8814.
             499          (6) Notwithstanding Subsection (1)(g), interest from bonds, notes, and other evidences
             500      of indebtedness issued by an entity described in Subsections (1)(g)(i) through (iv) may not be
             501      added to federal taxable income of a resident or nonresident individual if, as annually
             502      determined by the commission:
             503          (a) for an entity described in Subsection (1)(g)(i) or (ii), the entity and all of the
             504      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             505      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
             506          (b) for an entity described in Subsection (1)(g)(iii) or (iv), the following do not impose
             507      a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
             508      this state:
             509          (i) the entity; or
             510          (ii) (A) the state in which the entity is located; or
             511          (B) the District of Columbia, if the entity is located within the District of Columbia.
             512          Section 3. Section 59-10-202 is amended to read:
             513           59-10-202. Additions to and subtractions from federal taxable income of a
             514      resident or nonresident estate or trust.
             515          (1) There shall be added to federal taxable income of a resident or nonresident estate or
             516      trust:
             517          (a) the amount of any income tax imposed by this or any predecessor Utah individual
             518      income tax law and the amount of any income tax imposed by the laws of another state, the
             519      District of Columbia, or a possession of the United States, to the extent deducted from federal
             520      adjusted total income as defined in Section 62, Internal Revenue Code, in determining federal
             521      taxable income;
             522          (b) a lump sum distribution allowable as a deduction under Section 402(d)(3) of the
             523      Internal Revenue Code, to the extent deductible under Section 62(a)(8) of the Internal Revenue


             524      Code in determining adjusted gross income;
             525          (c) except as provided in Subsection (3), for taxable years beginning on or after
             526      January 1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after
             527      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             528      one or more of the following entities:
             529          (i) a state other than this state;
             530          (ii) the District of Columbia;
             531          (iii) a political subdivision of a state other than this state; or
             532          (iv) an agency or instrumentality of an entity described in Subsections (1)(c)(i) through
             533      (iii);
             534          (d) any portion of federal taxable income for a taxable year if that federal taxable
             535      income is derived from stock:
             536          (i) in an S corporation; and
             537          (ii) that is held by an electing small business trust;
             538          (e) (i) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             539      Incentive Program, from the account of a resident or nonresident estate or trust that is an
             540      account owner as defined in Section 53B-8a-102 , for the taxable year for which the amount is
             541      withdrawn, if that amount withdrawn from the account of the resident or nonresident estate or
             542      trust that is the account owner:
             543          (A) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             544          (B) is subtracted by the resident or nonresident estate or trust:
             545          (I) that is the account owner; and
             546          (II) in accordance with Subsection (2)[(j)](i)(i); and
             547          (ii) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             548      Incentive Program, from the account of a resident or nonresident estate or trust that is an
             549      account owner as defined in Section 53B-8a-102 , for the taxable year beginning on or after
             550      January 1, 2007, but beginning on or before December 31, 2007, if that amount withdrawn
             551      from the account of the resident or nonresident estate or trust that is the account owner:
             552          (A) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             553          (B) is subtracted by the resident or nonresident estate or trust:
             554          (I) that is the account owner; and


             555          (II) in accordance with Subsection (2)[(j)](i)(ii); and
             556          (f) any fiduciary adjustments required by Section 59-10-210 .
             557          (2) There shall be subtracted from federal taxable income of a resident or nonresident
             558      estate or trust:
             559          (a) the interest or a dividend on obligations or securities of the United States and its
             560      possessions or of any authority, commission, or instrumentality of the United States, to the
             561      extent that interest or dividend is included in gross income for federal income tax purposes for
             562      the taxable year but exempt from state income taxes under the laws of the United States, but
             563      the amount subtracted under this Subsection (2) shall be reduced by any interest on
             564      indebtedness incurred or continued to purchase or carry the obligations or securities described
             565      in this Subsection (2), and by any expenses incurred in the production of interest or dividend
             566      income described in this Subsection (2) to the extent that such expenses, including amortizable
             567      bond premiums, are deductible in determining federal taxable income;
             568          (b) 1/2 of the net amount of any income tax paid or payable to the United States after
             569      all allowable credits, as per the United States fiduciary income tax return of the taxpayer for the
             570      same taxable year;
             571          (c) income of an irrevocable resident trust if:
             572          (i) the income would not be treated as state taxable income derived from Utah sources
             573      under Section 59-10-204 if received by a nonresident trust;
             574          (ii) the trust first became a resident trust on or after January 1, 2004;
             575          (iii) no assets of the trust were held, at any time after January 1, 2003, in another
             576      resident irrevocable trust created by the same settlor or the spouse of the same settlor;
             577          (iv) the trustee of the trust is a trust company as defined in Subsection 7-5-1 (1)(d);
             578          (v) the amount subtracted under this Subsection (2) is reduced to the extent the settlor
             579      or any other person is treated as an owner of any portion of the trust under Subtitle A,
             580      Subchapter J, Subpart E of the Internal Revenue Code; and
             581          (vi) the amount subtracted under this Subsection (2) is reduced by any interest on
             582      indebtedness incurred or continued to purchase or carry the assets generating the income
             583      described in this Subsection (2), and by any expenses incurred in the production of income
             584      described in this Subsection (2), to the extent that those expenses, including amortizable bond
             585      premiums, are deductible in determining federal taxable income;


             586          (d) if the conditions of Subsection (4)(a) are met, the amount of income of a resident or
             587      nonresident estate or trust derived from a deceased Ute tribal member:
             588          (i) during a time period that the Ute tribal member resided on homesteaded land
             589      diminished from the Uintah and Ouray Reservation; and
             590          (ii) from a source within the Uintah and Ouray Reservation;
             591          (e) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
             592      resident or nonresident estate's or trust's short-term capital gain or long-term capital gain on a
             593      capital gain transaction:
             594          (A) that occurs on or after January 1, 2003;
             595          (B) if 70% or more of the gross proceeds of the capital gain transaction are expended:
             596          (I) to purchase qualifying stock in a Utah small business corporation; and
             597          (II) within a 12-month period after the day on which the capital gain transaction occurs;
             598      and
             599          (C) if, prior to the purchase of the qualifying stock described in Subsection
             600      (2)(e)(i)(B)(I), the resident or nonresident estate or trust did not have an ownership interest in
             601      the Utah small business corporation that issued the qualifying stock; and
             602          (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             603      commission may make rules:
             604          (A) defining the term "gross proceeds"; and
             605          (B) for purposes of Subsection (2)(e)(i)(C), prescribing the circumstances under which
             606      a resident or nonresident estate or trust has an ownership interest in a Utah small business
             607      corporation;
             608          [(f) for the taxable year beginning on or after January 1, 2005, but beginning on or
             609      before December 31, 2005, the first $2,200 of income of a resident or nonresident estate or
             610      trust that is derived from a deceased qualifying military servicemember:]
             611          [(i) for service:]
             612          [(A) as a qualifying military servicemember; or]
             613          [(B) under an order into active service in accordance with Section 39-1-5 ; and]
             614          [(ii) to the extent that income is included in total income on that resident or nonresident
             615      estate's or trust's federal income tax return for estates and trusts for that taxable year;]
             616          [(g)] (f) any amount:


             617          (i) received by a resident or nonresident estate or trust;
             618          (ii) that constitutes a refund of taxes imposed by:
             619          (A) a state; or
             620          (B) the District of Columbia; and
             621          (iii) to the extent that amount is included in total income on that resident or nonresident
             622      estate's or trust's federal tax return for estates and trusts for that taxable year;
             623          [(h)] (g) the amount of a railroad retirement benefit:
             624          (i) paid:
             625          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
             626      seq.;
             627          (B) to a resident or nonresident estate or trust derived from a deceased resident or
             628      nonresident individual; and
             629          (C) for the taxable year; and
             630          (ii) to the extent that railroad retirement benefit is included in total income on that
             631      resident or nonresident estate's or trust's federal tax return for estates and trusts;
             632          [(i)] (h) an amount:
             633          (i) received by a resident or nonresident estate or trust if that amount is derived from a
             634      deceased enrolled member of an American Indian tribe; and
             635          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
             636      part on that amount in accordance with:
             637          (A) federal law;
             638          (B) a treaty; or
             639          (C) a final decision issued by a court of competent jurisdiction;
             640          [(j)] (i) (i) subject to Subsection (1)(e)(i), for taxable years beginning on or after
             641      January 1, 2007, the amount of a qualified investment as defined in Section 53B-8a-102 that:
             642          (A) a resident or nonresident estate or trust that is an account owner as defined in
             643      Section 53B-8a-102 makes during the taxable year;
             644          (B) the resident or nonresident estate or trust described in Subsection (2)[(j)](i)(i)(A)
             645      does not deduct on a federal tax return for estates and trusts; and
             646          (C) does not exceed the maximum amount of the qualified investment that may be
             647      subtracted from federal taxable income for a taxable year in accordance with Subsections


             648      53B-8a-106 (1)(e) and (f); and
             649          (ii) subject to Subsection (1)(e)(ii), for the taxable year beginning on or after January 1,
             650      2007, but beginning on or before December 31, 2007 only, and in addition to any subtraction a
             651      resident or nonresident estate or trust that is an account owner as defined in Section
             652      53B-8a-102 makes in accordance with Subsection (2)[(j)](i)(i), the amount of a qualified
             653      investment as defined in Section 53B-8a-102 that:
             654          (A) a resident or nonresident estate or trust that is an account owner as defined in
             655      Section 53B-8a-102 could have subtracted under Subsection (2)[(j)](i)(i) for the taxable year
             656      beginning on or after January 1, 2006, but beginning on or before December 31, 2006, had the
             657      subtraction under Subsection (2)[(j)](i)(i) been in effect for the taxable year beginning on or
             658      after January 1, 2006, but beginning on or before December 31, 2006;
             659          (B) the resident or nonresident estate or trust described in Subsection (2)[(j)](i)(ii)(A)
             660      makes during the taxable year beginning on or after January 1, 2006, but beginning on or
             661      before December 31, 2006;
             662          (C) the resident or nonresident estate or trust described in Subsection (2)[(j)](i)(ii)(A)
             663      does not deduct on a federal tax return for estates and trusts; and
             664          (D) does not exceed the maximum amount of the qualified investment that may be
             665      subtracted from federal taxable income:
             666          (I) for the taxable year beginning on or after January 1, 2006, but beginning on or
             667      before December 31, 2006; and
             668          (II) in accordance with Subsections 53B-8a-106 (1)(e) and (f); and
             669          [(k)] (j) any fiduciary adjustments required by Section 59-10-210 .
             670          (3) Notwithstanding Subsection (1)(c), interest from bonds, notes, and other evidences
             671      of indebtedness issued by an entity described in Subsections (1)(c)(i) through (iv) may not be
             672      added to federal taxable income of a resident or nonresident estate or trust if, as annually
             673      determined by the commission:
             674          (a) for an entity described in Subsection (1)(c)(i) or (ii), the entity and all of the
             675      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             676      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
             677          (b) for an entity described in Subsection (1)(c)(iii) or (iv), the following do not impose
             678      a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of


             679      this state:
             680          (i) the entity; or
             681          (ii) (A) the state in which the entity is located; or
             682          (B) the District of Columbia, if the entity is located within the District of Columbia.
             683          (4) (a) A subtraction for an amount described in Subsection (2)(d) is allowed only if:
             684          (i) the income is derived from a deceased Ute tribal member; and
             685          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             686      requirements of this Subsection (4).
             687          (b) The agreement described in Subsection (4)(a):
             688          (i) may not:
             689          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             690          (B) provide a subtraction under this section greater than or different from the
             691      subtraction described in Subsection (2)(d); or
             692          (C) affect the power of the state to establish rates of taxation; and
             693          (ii) shall:
             694          (A) provide for the implementation of the subtraction described in Subsection (2)(d);
             695          (B) be in writing;
             696          (C) be signed by:
             697          (I) the governor; and
             698          (II) the chair of the Business Committee of the Ute tribe;
             699          (D) be conditioned on obtaining any approval required by federal law; and
             700          (E) state the effective date of the agreement.
             701          (c) (i) The governor shall report to the commission by no later than February 1 of each
             702      year regarding whether or not an agreement meeting the requirements of this Subsection (4) is
             703      in effect.
             704          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
             705      subtraction permitted under Subsection (2)(d) is not allowed for taxable years beginning on or
             706      after the January 1 following the termination of the agreement.
             707          (d) For purposes of Subsection (2)(d) and in accordance with Title 63, Chapter 46a,
             708      Utah Administrative Rulemaking Act, the commission may make rules:
             709          (i) for determining whether income is derived from a source within the Uintah and


             710      Ouray Reservation; and
             711          (ii) that are substantially similar to how adjusted gross income derived from Utah
             712      sources is determined under Section 59-10-117 .
             713          Section 4. Section 59-10-1017 is enacted to read:
             714          59-10-1017. Nonrefundable tax credit for qualifying military member.
             715          (1) "Qualifying military member" means a member of:
             716          (a) The Utah Army National Guard;
             717          (b) The Utah Air National Guard; or
             718          (c) the following if the member is assigned to a unit that is located in the state:
             719          (i) The Army Reserve;
             720          (ii) The Naval Reserve;
             721          (iii) The Air Force Reserve;
             722          (iv) The Marine Corps Reserve; or
             723          (v) The Coast Guard Reserve.
             724          (2) For taxable years beginning on or after January 1, 2008, a claimant who is a
             725      qualifying military member may claim a nonrefundable tax credit equal to the product of:
             726          (a) the income the qualifying military member receives during the taxable year:
             727          (i) in an amount that does not exceed $2,200;
             728          (ii) for service:
             729          (A) as a qualifying military member; or
             730          (B) under an order into active service in accordance with Section 39-1-5 ; and
             731          (iii) to the extent that income is included in adjusted gross income on that qualifying
             732      military member's federal individual income tax return for that taxable year; and
             733          (b) 5%.
             734          (3) For taxable years beginning on or after January 1, 2008, an estate or trust that
             735      receives income that is derived from a deceased qualifying military member may claim a
             736      nonrefundable tax credit equal to the product of:
             737          (a) the income the estate or trust receives that is derived from the deceased qualifying
             738      military member:
             739          (i) in an amount that does not exceed $2,200;
             740          (ii) for the deceased qualifying military member's service:


             741          (A) as a qualifying military member; or
             742          (B) under an order into active service in accordance with Section 39-1-5 ; and
             743          (iii) to the extent that income is included in total income on that estate's or trust's
             744      federal tax return for estates and trusts for that taxable year; and
             745          (b) 5%.
             746          (4) A claimant, estate, or trust may not carry forward or carry back a tax credit under
             747      this section.
             748          Section 5. Section 59-10-1204 is amended to read:
             749           59-10-1204. Additions to and subtractions from adjusted gross income of a
             750      resident or nonresident individual.
             751          (1) In calculating state taxable income for purposes of this part, the following amounts
             752      shall be added to the adjusted gross income of a resident or nonresident individual:
             753          (a) the amount described in Subsection 59-10-114 (1)(a), if that amount is deducted by
             754      a resident or nonresident estate or trust in determining federal taxable income;
             755          (b) the lump sum distribution described in Subsection 59-10-114 (1)(b);
             756          (c) subject to Subsection 59-10-114 (5), the amount described in Subsection
             757      59-10-114 (1)(c);
             758          (d) a withdrawal described in Subsection 59-10-114 (1)(e);
             759          (e) the amount described in Subsection 59-10-114 (1)(f);
             760          (f) subject to Subsection 59-10-114 (6), the interest described in Subsection
             761      59-10-114 (1)(g);
             762          (g) a distribution described in Subsection 59-10-114 (1)(h);
             763          (h) a distribution described in Subsection 59-10-114 (1)(i); or
             764          (i) an expense described in Subsection 59-10-114 (1)(j).
             765          (2) In calculating state taxable income for purposes of this part, the following amounts
             766      shall be subtracted from the adjusted gross income of a resident or nonresident individual:
             767          (a) the interest or dividends described in Subsection 59-10-114 (2)(a);
             768          (b) subject to Subsection 59-10-114 (4), the amount described in Subsection
             769      59-10-114 (2)(k);
             770          (c) an amount described in Subsection 59-10-114 (2)[(n)] (m);
             771          (d) the amount described in Subsection 59-10-114 (2)[(o)] (n); and


             772          (e) an amount described in Subsection 59-10-114 (2)[(p)] (o).
             773          Section 6. Retrospective operation.
             774          This bill has retrospective operation for taxable years beginning on or after January 1,
             775      2008.
             776          Section 7. Coordinating H.B. 279 with S.B. 31 -- Modifying substantive language.
             777          If this H.B. 279 and S.B. 31, Income Tax Amendments, both pass, it is the intent of the
             778      Legislature that the Office of Legislative Research and General Counsel, in preparing the Utah
             779      Code database for publication, modify Section 59-10-1002.2 , which is renumbered and
             780      amended in S.B. 31, so that a citation to the statutory section enacted in Section 4 in this H.B.
             781      279 is included in the list of sections in:
             782          (1) Subsection 59-10-1002.2 (1); and
             783          (2) Subsection 59-10-1002.2 (2).




Legislative Review Note
    as of 1-9-08 11:05 AM


Office of Legislative Research and General Counsel


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