S.B. 137 Enrolled

1

MINERAL PRODUCTION TAX WITHHOLDING
2 AMENDMENTS
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Wayne L. Niederhauser
6 House Sponsor: John Dougall
7
8 LONG TITLE
9 General Description:
10 This bill amends the Mineral Production Tax Withholding Amendments chapter.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . exempts a business entity that files an exemption certificate with the mineral
15 producer and the State Tax Commission from the deduction and withholding
16 requirements of the Mineral Production Tax Withholding chapter;
17 . allows a business entity to file an exemption certificate if the business entity:
18 . files certain tax returns;
19 . expects to claim a refund on certain tax returns of at least 75% of the amount
20 that would otherwise be required to be deducted and withheld; and
21 . consents to the jurisdiction of the State Tax Commission to enforce certain
22 penalties or amounts required to be deducted and withheld;
23 . establishes procedures for filing an exemption certificate;
24 . addresses penalties;
25 . prohibits a business entity from filing an exemption certificate for five taxable years
26 under certain circumstances;
27 . addresses return filing requirements for a producer; and
28 . makes technical changes.
29 Monies Appropriated in this Bill:

30 None
31 Other Special Clauses:
32 This bill takes effect on July 1, 2008.
33 Utah Code Sections Affected:
34 AMENDS:
35 59-6-101, as last amended by Laws of Utah 2006, Chapter 223
36 59-6-102, as last amended by Laws of Utah 2006, Chapters 221 and 223
37 59-6-103, as last amended by Laws of Utah 1988, Chapter 3
38 ENACTS:
39 59-6-102.1, Utah Code Annotated 1953
40
41 Be it enacted by the Legislature of the state of Utah:
42 Section 1. Section 59-6-101 is amended to read:
43 59-6-101. Definitions.
44 As used in this chapter:
45 (1) "Business entity" means a claimant that is a:
46 (a) C corporation;
47 (b) S corporation;
48 (c) general partnership;
49 (d) limited liability company;
50 (e) limited liability partnership;
51 (f) limited partnership; or
52 (g) business entity similar to Subsections (1)(c) through (f):
53 (i) with respect to which the business entity's income or losses are divided among and
54 passed through to taxpayers; and
55 (ii) as defined by the commission by rule made in accordance with Title 63, Chapter
56 46a, Utah Administrative Rulemaking Act.
57 [(1)] (2) (a) Except as provided in Subsection [(1)] (2)(b), "claimant" means a resident

58 or nonresident person.
59 (b) "Claimant" does not include an estate or trust.
60 [(2)] (3) "Estate" means a nonresident estate or a resident estate.
61 [(3)] (4) "Minerals" means [either]:
62 (a) metalliferous minerals as defined in Section 59-2-102 [,];
63 (b) nonmetalliferous minerals as defined in Section 59-2-102 [,]; or [both.]
64 (c) a combination of Subsections (4)(a) and (b).
65 [(4)] (5) "Producer" means [any] a person [who] that:
66 (a) produces or extracts minerals from deposits in this state; or [who]
67 (b) is the first purchaser of minerals produced or extracted from deposits in this state.
68 [(5)] (6) "Refundable tax credit" or "tax credit" means a tax credit that a claimant,
69 estate, or trust may claim:
70 (a) as provided by statute; and
71 (b) regardless of whether the claimant, estate, or trust has a tax liability:
72 (i) for a tax [described in Subsection 59-6-102 (3)] imposed under:
73 (A) Chapter 7, Corporate Franchise and Income Taxes;
74 (B) Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay
75 Corporate Franchise or Income Tax Act; or
76 (C) Chapter 10, Individual Income Tax Act; and
77 (ii) for the taxable year for which the claimant, estate, or trust claims the tax credit.
78 (7) "Taxable year" means the taxable year of a claimant, estate, or trust under:
79 (a) Chapter 7, Corporate Franchise and Income Taxes;
80 (b) Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay
81 Corporate Franchise or Income Tax Act; or
82 (c) Chapter 10, Individual Income Tax Act.
83 (8) "Tax return" means a return required by:
84 (a) Chapter 7, Corporate Franchise and Income Taxes;
85 (b) Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay

86 Corporate Franchise or Income Tax Act; or
87 (c) Chapter 10, Individual Income Tax Act.
88 [(6)] (9) "Trust" means a nonresident trust or a resident trust.
89 (10) "Withholding return" means a return a producer is required to file under this
90 chapter.
91 Section 2. Section 59-6-102 is amended to read:
92 59-6-102. Producer's obligation to deduct and withhold payments -- Amount --
93 Exempt payments -- Credit against tax.
94 (1) Except as provided in Subsection (2), each producer shall deduct and withhold from
95 each payment being made to any person in respect to production of minerals in this state, but
96 not including that to which the producer is entitled, an amount equal to 5% of the amount which
97 would have otherwise been payable to the person entitled to the payment.
98 (2) [Notwithstanding Subsection (1), the] The obligation to deduct and withhold from
99 payments as provided in Subsection (1) does not apply to those payments which are payable to:
100 (a) the United States, this state, or an agency or political subdivision of the United
101 States or this state;
102 (b) an organization that is exempt from the taxes imposed by Chapter 7, Corporate
103 Franchise and Income Taxes, in accordance with Subsection 59-7-102 (1)(a); [or]
104 (c) an Indian or Indian tribe if the amounts accruing are subject to the supervision of the
105 United States or an agency of the United States[.]; or
106 (d) a business entity that files an exemption certificate in accordance with Section
107 59-6-102.1 .
108 (3) A claimant, estate, or trust that files a tax return with the [state in accordance with
109 the following is entitled to] commission may claim a refundable tax credit against the tax
110 reflected on the tax return for the amount withheld by the producer under Subsection (1)[:].
111 [(a) Chapter 7, Corporate Franchise and Income Taxes;]
112 [(b) Chapter 8, Gross Receipts Tax on Certain Corporations not Required to Pay
113 Corporate Franchise or Income Tax Act; or]

114 [(c) Chapter 10, Individual Income Tax Act.]
115 Section 3. Section 59-6-102.1 is enacted to read:
116 59-6-102.1. Exemption certificate -- Penalties -- Limit on filing exemption
117 certificate.
118 (1) For a taxable year, a business entity may file an exemption certificate claiming an
119 exemption from the deduction and withholding requirements of this chapter if:
120 (a) for that taxable year, the business entity is required to file a tax return with the
121 commission;
122 (b) for that taxable year, the business entity expects to claim a refund on a tax return of
123 at least 75% of the amount that would otherwise be required to be deducted and withheld under
124 this chapter; and
125 (c) regardless of whether the business entity sells or otherwise disposes of the business
126 entity's interest in the production of minerals, the business entity consents to the jurisdiction of
127 the commission to enforce:
128 (i) an amount required to be deducted and withheld under this chapter; or
129 (ii) a penalty imposed under this chapter.
130 (2) A business entity filing an exemption certificate in accordance with Subsection (1)
131 shall file the exemption certificate:
132 (a) with the:
133 (i) producer; and
134 (ii) commission; and
135 (b) on a form prescribed by the commission.
136 (3) (a) In addition to any other penalty provided by law, a business entity is subject to
137 the penalty described in Subsection (3)(b) if the business entity:
138 (i) files an exemption certificate in accordance with this section; and
139 (ii) does not file a tax return with the commission for the taxable year for which the
140 business entity files the exemption certificate described in Subsection (3)(a)(i).
141 (b) For purposes of Subsection (3)(a), the penalty is 100% of the amount that the

142 producer would have deducted and withheld under this chapter for the taxable year had the
143 business entity not filed an exemption certificate under this section for that taxable year.
144 (c) The commission shall collect the penalty described in Subsection (3)(b).
145 (4) If a business entity is subject to the penalty described in Subsection (3), the business
146 entity may not file an exemption certificate under this section for five taxable years beginning
147 with the taxable year that the business entity is subject to the penalty described in Subsection
148 (3).
149 (5) In addition to any other penalty provided by law, a business entity is subject to a
150 penalty of 5% of the amount that a producer would otherwise be required to deduct and
151 withhold under this chapter for the taxable year if:
152 (a) the business entity files an exemption certificate under this section for a taxable year;
153 and
154 (b) had the business entity not filed the exemption certificate under this section for the
155 taxable year, the business entity:
156 (i) would have been allowed to claim a refund on a tax return for the taxable year in an
157 amount less than 75% of the amount required to be deducted and withheld under this chapter
158 for the taxable year; or
159 (ii) would not have been allowed to claim a refundable tax credit under Section
160 59-6-102 for the taxable year.
161 Section 4. Section 59-6-103 is amended to read:
162 59-6-103. Returns and payments required of producers.
163 (1) [Any] (a) Subject to Subsection (1)(b), a producer required to deduct and withhold
164 [any tax under Section 59-6-102 shall pay to] an amount under this chapter shall file a
165 withholding return with the commission:
166 (i) for the amounts required to be deducted and withheld [from payments resulting from
167 the production of minerals which were made] under this chapter during the preceding calendar
168 quarter[. The withholding amounts are]; and
169 (ii) on a form prescribed by the commission.

170 (b) A withholding return described in Subsection (1)(a) is due on or before the last day
171 of April, July, October, and January.
172 [(2) The producer shall file a return with each payment to the commission. The return,
173 in a form prescribed by the commission, shall show:]
174 (c) A withholding return described in Subsection (1)(a) shall contain:
175 [(a)] (i) the name and address of each person receiving a payment subject to the
176 deduction and withholding requirements [during the quarter involved] of this chapter for the
177 calendar quarter for which the withholding return is filed;
178 [(b) the amount to which each person was entitled before deduction and withholding
179 and also the amount withheld and deducted;]
180 (ii) for each person described in Subsection (1)(c)(i), the amount of payment the person
181 would have received from the production of minerals:
182 (A) by the producer had the deduction and withholding required by this chapter not
183 been made; and
184 (B) for the calendar quarter for which the withholding return is filed;
185 (iii) for each person described in Subsection (1)(c)(i), the amount of deduction and
186 withholding under this chapter for the calendar quarter for which the withholding return is filed;
187 [(c)] (iv) the name or description of the property from which the [production was
188 obtained; and] production of minerals occurs that results in a payment subject to deduction and
189 withholding under this chapter; and
190 [(d)] (v) for each person described in Subsection (1)(c)(i), the interest of the person in
191 [this production.] the production of minerals that results in a payment subject to deduction and
192 withholding under this chapter.
193 (2) (a) If a producer receives an exemption certificate filed in accordance with Section
194 59-6-102.1 from a business entity, the producer shall file a withholding return with the
195 commission:
196 (i) on a form prescribed by the commission; and
197 (ii) on or before the January 31 following the last day of the taxable year for which the

198 producer receives the exemption certificate from the business entity.
199 (b) The withholding return required by Subsection (2)(a) shall contain:
200 (i) the name and address of the business entity that files the exemption certificate in
201 accordance with Section 59-6-102.1 ;
202 (ii) the amount of the payment made by the producer to the business entity that would
203 have been subject to deduction and withholding under this chapter had the business entity not
204 filed the exemption certificate in accordance with Section 59-6-102.1 ;
205 (iii) the name or description of the property from which the production of minerals
206 occurs that would have resulted in a payment subject to deduction and withholding under this
207 chapter had the business entity not filed the exemption certificate in accordance with Section
208 59-6-102.1 ; and
209 (iv) the interest of the business entity in the production of minerals that would have
210 resulted in a payment subject to deduction and withholding under this chapter had the business
211 entity not filed the exemption certificate in accordance with Section 59-6-102.1 .
212 Section 5. Effective date.
213 This bill takes effect on July 1, 2008.