S.B. 31

This document includes Senate Committee Amendments incorporated into the bill on Thu, Jan 24, 2008 at 9:22 AM by rday. -->

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Senate Committee Amendments 1-24-2008 rd/rlr 1

INCOME TAX AMENDMENTS
2 2008 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Wayne L. Niederhauser
5 House Sponsor: John Dougall
6
7 LONG TITLE
8 Committee Note:
9 The Revenue and Taxation Interim Committee recommended this bill.
10 The Utah Tax Review Commission recommended this bill.
11 Membership: 6 legislators 10 non-legislators
12 Legislative Vote: 5 voting for 0 voting against 1 absent
13 General Description:
14 This bill amends the Individual Income Tax Act and related provisions to address the
15 income taxation of individuals, estates, and trusts.
16 Highlighted Provisions:
17 This bill:
18 . repeals provisions imposing an individual income tax on the basis of graduated
19 brackets and rates;
20 . provides that an individual income tax is imposed on the basis of a single tax rate,
21 including:
22 . modifying and repealing definitions;
23 . modifying additions to and subtractions from adjusted gross income;
24 . addressing the taxation of a nonresident individual or part-year resident
25 individual; and
26 . addressing provisions relating to the determination and reporting of income tax
27 liability and information;
27a S. . addresses the apportionment of business income for purposes of the individual income
27b tax; .S

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- 2 - 28 . modifies the income taxation of estates and trusts, including:
29 . providing definitions;
30 . providing that the tax is calculated on the basis of unadjusted income;
31 . modifying additions to and subtractions from unadjusted income; and
32 . addressing provisions relating to the determination and reporting of income tax
33 liability and information;
34 . addresses the taxation of pass-through entities, including:
35 . providing definitions; and
36 . renumbering and amending provisions relating to pass-through entities;
37 . renumbers and amends provisions relating to tax credits, including tax credits for:
38 . a taxpayer;
39 . an investment in the Utah Educational Savings Plan Trust; or
40 . retirement income;
41 . provides nonrefundable tax credits for:
42 . a trust or estate; or
43 . a contribution to a medical care savings account;
44 . modifies the refundable renewable energy tax credit to clarify that an estate or trust
45 may claim the tax credit;
46 . addresses the apportionment of tax credits;
47 . addresses the following relating to a medical care savings account:
48 . taxation;
49 . penalties; and
50 . interest;
51 . amends provisions relating to the taxation of an investment in the Utah Educational
52 Savings Plan Trust;
53 . renumbers and amends the individual income tax contribution provisions;
54 . addresses the administration of income tax contributions; and
55 . makes technical changes.
56 Monies Appropriated in this Bill:
57 None
58 Other Special Clauses:

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- 3 - 59 This bill has retrospective operation for taxable years beginning on or after January 1,
60 2008.
61 Utah Code Sections Affected:
62 AMENDS:
63 9-4-802, as last amended by Laws of Utah 2003, Chapter 132
64 9-4-803, as last amended by Laws of Utah 2003, Chapter 132
65 23-14-13, as last amended by Laws of Utah 1995, Chapter 211
66 23-14-14.1, as enacted by Laws of Utah 2003, Chapter 162
67 26-18a-3, as last amended by Laws of Utah 1997, Chapter 1
68 26-18a-4, as last amended by Laws of Utah 1997, Chapter 1
69 26-48-102, as enacted by Laws of Utah 2006, Chapter 280
70 31A-32a-101, as enacted by Laws of Utah 1999, Chapter 131
71 31A-32a-103, as enacted by Laws of Utah 1999, Chapter 131
72 31A-32a-104, as enacted by Laws of Utah 1999, Chapter 131
73 31A-32a-105, as enacted by Laws of Utah 1999, Chapter 131
74 31A-32a-106, as last amended by Laws of Utah 2001, Chapter 53
75 31A-32a-107, as enacted by Laws of Utah 1999, Chapter 131
76 48-2c-117, as enacted by Laws of Utah 2001, Chapter 260
77 53B-8a-106, as last amended by Laws of Utah 2007, Chapter 100
78 59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
79 59-10-104, as last amended by Laws of Utah 2007, Chapter 288
80 59-10-104.1, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
81 59-10-110, as renumbered and amended by Laws of Utah 1987, Chapter 2
82 59-10-114, as last amended by Laws of Utah 2007, Chapter 100
83 59-10-115, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
84 59-10-116, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
85 59-10-117, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
86 59-10-118, as last amended by Laws of Utah 1995, Chapter 311
87 59-10-119, as renumbered and amended by Laws of Utah 1987, Chapter 2
88 59-10-120, as renumbered and amended by Laws of Utah 1987, Chapter 2
89 59-10-121, as renumbered and amended by Laws of Utah 1987, Chapter 2

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- 4 - 90 59-10-122, as renumbered and amended by Laws of Utah 1987, Chapter 2
91 59-10-123, as renumbered and amended by Laws of Utah 1987, Chapter 2
92 59-10-124, as renumbered and amended by Laws of Utah 1987, Chapter 2
93 59-10-125, as renumbered and amended by Laws of Utah 1987, Chapter 2
94 59-10-126, as last amended by Laws of Utah 1995, Chapter 311
95 59-10-201, as last amended by Laws of Utah 2007, Chapter 100
96 59-10-201.1, as last amended by Laws of Utah 2006, Chapter 223
97 59-10-202, as last amended by Laws of Utah 2007, Chapter 100
98 59-10-204, as last amended by Laws of Utah 2006, Chapter 223
99 59-10-205, as last amended by Laws of Utah 2006, Chapter 223
100 59-10-207, as last amended by Laws of Utah 2006, Chapter 223
101 59-10-209.1, as enacted by Laws of Utah 2006, Chapter 223
102 59-10-210, as last amended by Laws of Utah 2006, Chapter 223
103 59-10-507, as last amended by Laws of Utah 2003, Chapter 198
104 59-10-1106, as enacted by Laws of Utah 2007, Chapter 288
105 ENACTS:
106 59-10-1020, Utah Code Annotated 1953
107 59-10-1021, Utah Code Annotated 1953
108 59-10-1301, Utah Code Annotated 1953
109 59-10-1302, Utah Code Annotated 1953
110 59-10-1303, Utah Code Annotated 1953
111 59-10-1401, Utah Code Annotated 1953
112 59-10-1402, Utah Code Annotated 1953
113 RENUMBERS AND AMENDS:
114 59-10-1002.1, (Renumbered from 59-10-1016, as renumbered and amended by Laws of
115 Utah 2006, Chapter 223)
116 59-10-1002.2, (Renumbered from 59-10-1206.9, as enacted by Laws of Utah 2007,
117 Chapter 288)
118 59-10-1017, (Renumbered from 59-10-1206.1, as enacted by Laws of Utah 2007,
119 Chapter 100)
120 59-10-1018, (Renumbered from 59-10-1206.2, as enacted by Laws of Utah 2007,

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- 5 - 121 Chapter 288)
122 59-10-1019, (Renumbered from 59-10-1206.3, as enacted by Laws of Utah 2007,
123 Chapter 288)
124 59-10-1304, (Renumbered from 59-10-551, as last amended by Laws of Utah 2006,
125 Chapter 280)
126 59-10-1305, (Renumbered from 59-10-530, as last amended by Laws of Utah 1997,
127 Chapter 12)
128 59-10-1306, (Renumbered from 59-10-530.5, as last amended by Laws of Utah 2003,
129 Chapter 132)
130 59-10-1307, (Renumbered from 59-10-549, as last amended by Laws of Utah 2005,
131 Chapter 208)
132 59-10-1308, (Renumbered from 59-10-550, as last amended by Laws of Utah 1997,
133 Chapters 1, and 12)
134 59-10-1309, (Renumbered from 59-10-550.1, as enacted by Laws of Utah 2003,
135 Chapter 162)
136 59-10-1310, (Renumbered from 59-10-550.2, as enacted by Laws of Utah 2006,
137 Chapter 280)
138 59-10-1311, (Renumbered from 59-10-547, as last amended by Laws of Utah 1998,
139 Chapter 269)
140 59-10-1312, (Renumbered from 59-10-548, as last amended by Laws of Utah 2002,
141 Chapters 107, and 256)
142 59-10-1403, (Renumbered from 59-10-301, as renumbered and amended by Laws of
143 Utah 1987, Chapter 2)
144 59-10-1404, (Renumbered from 59-10-302, as renumbered and amended by Laws of
145 Utah 1987, Chapter 2)
146 59-10-1405, (Renumbered from 59-10-303, as last amended by Laws of Utah 2006,
147 Fourth Special Session, Chapter 2)
148 REPEALS:
149 59-10-206, as last amended by Laws of Utah 1995, Chapter 345
150 59-10-801, as last amended by Laws of Utah 1997, Chapter 159
151 59-10-1201, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2

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- 6 - 152 59-10-1202, as last amended by Laws of Utah 2007, Chapters 100, and 288
153 59-10-1203, as last amended by Laws of Utah 2007, Chapters 100, and 288
154 59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
155 59-10-1205, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
156 59-10-1206, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
157 59-10-1207, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
158
159 Be it enacted by the Legislature of the state of Utah:
160 Section 1. Section 9-4-802 is amended to read:
161 9-4-802. Purposes of Homeless Coordinating Committee -- Uses of Pamela
162 Atkinson Homeless Trust Account.
163 (1) (a) The Homeless Coordinating Committee shall work to ensure that services
164 provided to the homeless by state agencies, local governments, and private organizations are
165 provided in a cost-effective manner.
166 (b) Programs funded by the committee shall emphasize emergency housing and
167 self-sufficiency, including placement in meaningful employment or occupational training
168 activities and, where needed, special services to meet the unique needs of the homeless who
169 have families with children, or who are mentally ill, disabled, or suffer from other serious
170 challenges to employment and self-sufficiency.
171 (c) The committee may also fund treatment programs to ameliorate the effects of
172 substance abuse or a disability.
173 (2) The committee members designated in Subsection 9-4-801 (2) shall:
174 (a) award contracts funded by the Pamela Atkinson Homeless Trust Account with the
175 advice and input of those designated in Subsection 9-4-801 (3);
176 (b) consider need, diversity of geographic location, coordination with or enhancement
177 of existing services, and the extensive use of volunteers; and
178 (c) give priority for funding to programs that serve the homeless who are mentally ill
179 and who are in families with children.
180 (3) (a) In any fiscal year, no more than 80% of the funds in the Pamela Atkinson
181 Homeless Trust Account may be allocated to organizations that provide services only in Salt
182 Lake, Davis, Weber, and Utah Counties.

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- 7 - 183 (b) The committee may:
184 (i) expend up to 3% of its annual appropriation for administrative costs associated with
185 the allocation of funds from the Pamela Atkinson Homeless Trust Account, and up to 2% of its
186 annual appropriation for marketing the account and soliciting donations to the account; and
187 (ii) pay for the initial costs of the State Tax Commission in implementing Section
188 [ 59-10-530.5 ] 59-10-1306 from the account.
189 (4) (a) The committee may not expend, except as provided in Subsection (4)(b), an
190 amount equal to the greater of $50,000 or 20% of the amount donated to the Pamela Atkinson
191 Homeless Trust Account during fiscal year 1988-89.
192 (b) If there are decreases in contributions to the account, the committee may expend
193 funds held in reserve to provide program stability, but the committee shall reimburse the
194 amounts of those expenditures to the reserve fund.
195 (5) The committee shall make an annual report to the Economic Development and
196 Human Resources Appropriations Subcommittee regarding the programs and services funded
197 by contributions to the Pamela Atkinson Homeless Trust Account.
198 (6) The moneys in the Pamela Atkinson Homeless Trust Account shall be invested by
199 the state treasurer according to the procedures and requirements of Title 51, Chapter 7, State
200 Money Management Act, except that all interest or other earnings derived from the fund
201 moneys shall be deposited in the fund.
202 Section 2. Section 9-4-803 is amended to read:
203 9-4-803. Creation of Pamela Atkinson Homeless Trust Account.
204 (1) There is created a restricted account within the General Fund to be known as the
205 Pamela Atkinson Homeless Trust Account.
206 (2) Private contributions received under this section and Section [ 59-10-530.5 ]
207 59-10-1306 shall be deposited into the account to be used only for programs described in
208 Section 9-4-802 .
209 (3) Money shall be appropriated from the account to the State Homeless Coordinating
210 Committee in accordance with the Utah Budgetary Procedures Act.
211 (4) The State Homeless Coordinating Committee may accept transfers, grants, gifts,
212 bequests, or any money made available from any source to implement this part.
213 Section 3. Section 23-14-13 is amended to read:

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- 8 - 214 23-14-13. Wildlife Resources Account.
215 (1) The Wildlife Resources Account [within the General Fund] is established within
216 the General Fund.
217 (2) The following monies shall be deposited into the Wildlife Resources Account:
218 (a) revenue from the sale of licenses, permits, tags, and certificates of registration
219 issued under this title or a rule or proclamation of the Wildlife Board, except as otherwise
220 provided by this title;
221 (b) revenue from the sale, lease, rental, or other granting of rights of real or personal
222 property acquired with revenue specified in Subsection (a);
223 (c) revenue from fines and forfeitures for violations of this title or any rule,
224 proclamation, or order of the Wildlife Board, minus court costs not to exceed the schedule
225 adopted by the Judicial Council;
226 (d) funds appropriated from the General Fund by the Legislature pursuant to Section
227 23-19-39 ;
228 (e) other monies received by the division under any provision of this title, except as
229 otherwise provided by this title; [and]
230 (f) contributions made in accordance with Section 59-10-1305 ; and
231 [(f)] (g) interest, dividends, or other income earned on account monies.
232 (3) Monies in the Wildlife Resources Account shall be used for the administration of
233 this title.
234 Section 4. Section 23-14-14.1 is amended to read:
235 23-14-14.1. Wolf Depredation and Management Restricted Account -- Interest --
236 Use of contributions and interest.
237 (1) There is created within the General Fund the Wolf Depredation and Management
238 Restricted Account.
239 (2) The account shall be funded by contributions deposited into the Wolf Depredation
240 and Management Restricted Account in accordance with Section [ 59-10-550.1 ] 59-10-1309 .
241 (3) (a) The Wolf Depredation and Management Restricted Account shall earn interest.
242 (b) Interest earned on the Wolf Depredation and Management Restricted Account shall
243 be deposited into the Wolf Depredation and Management Restricted Account.
244 (4) (a) Subject to Subsection (4)(b), contributions and interest deposited into the Wolf

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- 9 - 245 Depredation and Management Restricted Account shall be used by the Division of Wildlife
246 Resources for:
247 (i) payments for livestock depredation by wolves; or
248 (ii) wolf management.
249 (b) Contributions and interest deposited into the Wolf Depredation and Management
250 Restricted Account may be used for the purposes described in Subsection (4)(a) only to the
251 extent permitted by federal law.
252 Section 5. Section 26-18a-3 is amended to read:
253 26-18a-3. Purpose of committee.
254 (1) The committee shall work to:
255 (a) provide financial assistance for initial medical expenses of children who need organ
256 transplants;
257 (b) obtain the assistance of volunteer and public service organizations; and
258 (c) fund activities as the committee designates for the purpose of educating the public
259 about the need for organ donors.
260 (2) (a) The committee is responsible for awarding financial assistance funded by the
261 trust account.
262 (b) The financial assistance awarded by the committee under Subsection (1)(a) shall be
263 in the form of interest free loans. The committee may establish terms for repayment of the
264 loans, including a waiver of the requirement to repay any awards if, in the committee's
265 judgment, repayment of the loan would impose an undue financial burden on the recipient.
266 (c) In making financial awards under Subsection (1)(a), the committee shall consider:
267 (i) need;
268 (ii) coordination with or enhancement of existing services or financial assistance,
269 including availability of insurance or other state aid;
270 (iii) the success rate of the particular organ transplant procedure needed by the child;
271 and
272 (iv) the extent of the threat to the child's life without the organ transplant.
273 (3) The committee may only provide the assistance described in this section to children
274 who have resided in Utah, or whose legal guardians have resided in Utah for at least six months
275 prior to the date of assistance under this section.

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- 10 - 276 (4) (a) The committee may expend up to 5% of its annual appropriation for
277 administrative costs associated with the allocation of funds from the trust account.
278 (b) The administrative costs shall be used for the costs associated with staffing the
279 committee and for State Tax Commission costs in implementing Section [ 59-10-550 ]
280 59-10-1308 .
281 (5) The committee shall make an annual report to the Health and Human Services
282 Appropriations Subcommittee regarding the programs and services funded by contributions to
283 the trust account.
284 Section 6. Section 26-18a-4 is amended to read:
285 26-18a-4. Creation of Kurt Oscarson Children's Organ Transplant Trust
286 Account.
287 (1) There is created a restricted account within the General Fund pursuant to Section
288 51-5-4 known as the Kurt Oscarson Children's Organ Transplant Trust Account. Private
289 contributions received under this section and Section [ 59-10-550 ] 59-10-1308 shall be
290 deposited into the trust account to be used only for the programs and purposes described in
291 Section 26-18a-3 .
292 (2) Money shall be appropriated from the trust account to the committee in accordance
293 with Title 63, Chapter 38, Budgetary Procedures Act.
294 (3) In addition to funds received under Section [ 59-10-550 ] 59-10-1308 , the committee
295 may accept transfers, grants, gifts, bequests, or any money made available from any source to
296 implement this chapter.
297 Section 7. Section 26-48-102 is amended to read:
298 26-48-102. Cat and Dog Community Spay and Neuter Program Restricted
299 Account -- Interest -- Use of contributions and interest.
300 (1) There is created within the General Fund the Cat and Dog Community Spay and
301 Neuter Program Restricted Account.
302 (2) The account shall be funded by contributions deposited into the Cat and Dog
303 Community Spay and Neuter Program Restricted Account in accordance with Section
304 [ 59-10-550.2 ] 59-10-1310 .
305 (3) (a) The Cat and Dog Community Spay and Neuter Program Restricted Account
306 shall earn interest.

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- 11 - 307 (b) Interest earned on the Cat and Dog Community Spay and Neuter Program
308 Restricted Account shall be deposited into the Cat and Dog Community Spay and Neuter
309 Program Restricted Account.
310 (4) The department shall distribute contributions and interest deposited into the Cat and
311 Dog Community Spay and Neuter Program Restricted Account to one or more organizations
312 that:
313 (a) are exempt from federal income taxation under Section 501(c)(3), Internal Revenue
314 Code;
315 (b) operate a mobile spay and neuter clinic for cats and dogs;
316 (c) provide annual spay and neuter services at the mobile spay and neuter clinic
317 described in Subsection (4)(b):
318 (i) to one or more communities in at least 20 counties in the state; and
319 (ii) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
320 and
321 (d) (i) spay and neuter cats and dogs owned by persons having low incomes; and
322 (ii) have established written guidelines for determining what constitutes a person
323 having a low income in accordance with any rules made by the department as authorized by
324 Subsection (5)(c).
325 (5) (a) An organization described in Subsection (4) may apply to the department to
326 receive a distribution in accordance with Subsection (4).
327 (b) An organization that receives a distribution from the department in accordance with
328 Subsection (4):
329 (i) shall expend the distribution only to spay or neuter dogs and cats:
330 (A) owned by persons having low incomes;
331 (B) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
332 (C) through a statewide voucher program; and
333 (D) at a location that:
334 (I) is not a mobile spay and neuter clinic; and
335 (II) does not receive any funding from a governmental entity; and
336 (ii) may not expend the distribution for any administrative cost relating to an
337 expenditure authorized by Subsection (5)(b)(i).

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- 12 - 338 (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
339 department may make rules:
340 (i) providing procedures and requirements for an organization to apply to the
341 department to receive a distribution in accordance with Subsection (4); and
342 (ii) to define what constitutes a person having a low income.
343 Section 8. Section 31A-32a-101 is amended to read:
344 31A-32a-101. Title and scope.
345 (1) This chapter is known as the "Medical Care Savings Account Act."
346 (2) (a) This chapter applies only to a medical care savings [accounts] account
347 established for the purpose of seeking a tax [deduction] credit under Section [ 59-10-114 ]
348 59-10-1021 .
349 (b) This chapter does not apply to a medical care savings [accounts that will not be
350 subject to tax deductions under Section 59-10-114 ] account with respect to which a tax credit is
351 not claimed under Section 59-10-1021 .
352 Section 9. Section 31A-32a-103 is amended to read:
353 31A-32a-103. Establishing medical care savings accounts.
354 [(1) For tax years beginning 1995, both of the following apply:]
355 (1) For a taxable year beginning on or after January 1, 1995:
356 (a) an employer, except as otherwise provided by contract or a collective bargaining
357 agreement, may offer a medical care savings account program to the employer's employees;
358 [and] or
359 (b) a resident individual may establish a medical care savings account program for the
360 individual or for the individual's dependents.
361 (2) (a) A contribution into an account made by an employer on behalf of an employee,
362 or made by an individual account holder may not exceed the greater of:
363 [(a)] (i) $2,000 in any [tax] taxable year; or
364 (ii) an amount of money equal to the sum of all eligible medical expenses paid by the
365 employee or account holder [in] for that [tax] taxable year on behalf of the employee, account
366 holder, or the employee's or account holder's spouse or dependents.
367 (b) For purposes of Subsection (2)(a)(ii), eligible medical expenses [as defined in
368 Subsection 31A-32a-102 (5),] are limited to expenses in [that tax year which] the taxable year

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- 13 - 369 that an insurance carrier has applied to the employee's or account holder's deductible.
370 (3) An employer that offers a medical care savings account program shall, before
371 making any contributions:
372 (a) inform all employees in writing of the fact that these contributions may not be
373 deductible under the federal tax laws; and
374 (b) obtain from the employee a written election to participate in the medical care
375 savings account program.
376 (4) Except as provided in Sections 31A-32a-105 and 59-10-114 ,