Second Substitute S.B. 204

Senator Wayne L. Niederhauser proposes the following substitute bill:

1 INCOME TAXATION 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 General Description:
9 This bill amends the Corporate Franchise and Income Taxes chapter, the Individual
10 Income Tax Act, and related provisions to address the income taxation of individuals,
11 estates, and trusts, including real estate investment trusts.
12 Highlighted Provisions:
13 This bill:
14 . defines terms;
15 . addresses the income taxation of a real estate investment trust or income from a real
16 estate investment trust;
17 . repeals provisions imposing an individual income tax on the basis of graduated
18 brackets and rates;
19 . provides that an individual income tax is imposed on the basis of a single tax rate,
20 including:
21 . modifying and repealing definitions;
22 . modifying additions to and subtractions from adjusted gross income;
23 . addressing the taxation of a nonresident individual or part-year resident
24 individual; and
25 . addressing provisions relating to the determination and reporting of income tax

26 liability and information;
27 . addresses the apportionment of business income for purposes of the individual
28 income tax;
29 . modifies the income taxation of estates and trusts, including:
30 . providing definitions;
31 . providing that the tax is calculated on the basis of unadjusted income;
32 . modifying additions to and subtractions from unadjusted income; and
33 . addressing provisions relating to the determination and reporting of income tax
34 liability and information;
35 . addresses the taxation of pass-through entities, including:
36 . providing definitions; and
37 . renumbering and amending provisions relating to pass-through entities;
38 . renumbers and amends provisions relating to tax credits, including tax credits for:
39 . a taxpayer;
40 . an investment in the Utah Educational Savings Plan Trust; or
41 . retirement income;
42 . provides nonrefundable tax credits for:
43 . a trust or estate;
44 . a contribution to a medical care savings account; or
45 . capital gain transactions;
46 . modifies the refundable renewable energy tax credit to clarify that an estate or trust
47 may claim the tax credit;
48 . addresses the apportionment of tax credits;
49 . addresses the following relating to a medical care savings account:
50 . taxation;
51 . penalties; and
52 . interest;
53 . amends provisions relating to the taxation of an investment in the Utah Educational
54 Savings Plan Trust;
55 . renumbers and amends the individual income tax contribution provisions;
56 . addresses the administration of income tax contributions;

57 . grants rulemaking authority to the State Tax Commission; and
58 . makes technical changes.
59 Monies Appropriated in this Bill:
60 None
61 Other Special Clauses:
62 This bill has retrospective operation for taxable years beginning on or after January 1,
63 2008.
64 Utah Code Sections Affected:
65 AMENDS:
66 9-4-802, as last amended by Laws of Utah 2003, Chapter 132
67 9-4-803, as last amended by Laws of Utah 2003, Chapter 132
68 23-14-13, as last amended by Laws of Utah 1995, Chapter 211
69 23-14-14.1, as enacted by Laws of Utah 2003, Chapter 162
70 26-18a-3, as last amended by Laws of Utah 1997, Chapter 1
71 26-18a-4, as last amended by Laws of Utah 1997, Chapter 1
72 26-48-102, as enacted by Laws of Utah 2006, Chapter 280
73 31A-32a-101, as enacted by Laws of Utah 1999, Chapter 131
74 31A-32a-103, as enacted by Laws of Utah 1999, Chapter 131
75 31A-32a-104, as enacted by Laws of Utah 1999, Chapter 131
76 31A-32a-105, as enacted by Laws of Utah 1999, Chapter 131
77 31A-32a-106, as last amended by Laws of Utah 2001, Chapter 53
78 31A-32a-107, as enacted by Laws of Utah 1999, Chapter 131
79 48-2c-117, as enacted by Laws of Utah 2001, Chapter 260
80 53B-8a-106, as last amended by Laws of Utah 2007, Chapter 100
81 59-7-101, as last amended by Laws of Utah 2004, Chapter 54
82 59-7-105, as last amended by Laws of Utah 2007, Chapter 100
83 59-7-106, as last amended by Laws of Utah 2007, Chapter 100
84 59-7-116.5, as enacted by Laws of Utah 1995, Chapter 311
85 59-7-402, as last amended by Laws of Utah 2004, Chapter 54
86 59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
87 59-10-104, as last amended by Laws of Utah 2007, Chapter 288

88 59-10-104.1, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
89 59-10-110, as renumbered and amended by Laws of Utah 1987, Chapter 2
90 59-10-114, as last amended by Laws of Utah 2007, Chapter 100
91 59-10-115, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
92 59-10-116, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
93 59-10-117, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
94 59-10-118, as last amended by Laws of Utah 1995, Chapter 311
95 59-10-119, as renumbered and amended by Laws of Utah 1987, Chapter 2
96 59-10-120, as renumbered and amended by Laws of Utah 1987, Chapter 2
97 59-10-121, as renumbered and amended by Laws of Utah 1987, Chapter 2
98 59-10-122, as renumbered and amended by Laws of Utah 1987, Chapter 2
99 59-10-123, as renumbered and amended by Laws of Utah 1987, Chapter 2
100 59-10-124, as renumbered and amended by Laws of Utah 1987, Chapter 2
101 59-10-125, as renumbered and amended by Laws of Utah 1987, Chapter 2
102 59-10-126, as last amended by Laws of Utah 1995, Chapter 311
103 59-10-201, as last amended by Laws of Utah 2007, Chapter 100
104 59-10-201.1, as last amended by Laws of Utah 2006, Chapter 223
105 59-10-202, as last amended by Laws of Utah 2007, Chapter 100
106 59-10-204, as last amended by Laws of Utah 2006, Chapter 223
107 59-10-205, as last amended by Laws of Utah 2006, Chapter 223
108 59-10-207, as last amended by Laws of Utah 2006, Chapter 223
109 59-10-209.1, as enacted by Laws of Utah 2006, Chapter 223
110 59-10-210, as last amended by Laws of Utah 2006, Chapter 223
111 59-10-507, as last amended by Laws of Utah 2003, Chapter 198
112 59-10-1106, as enacted by Laws of Utah 2007, Chapter 288
113 ENACTS:
114 59-10-1020, Utah Code Annotated 1953
115 59-10-1021, Utah Code Annotated 1953
116 59-10-1022, Utah Code Annotated 1953
117 59-10-1301, Utah Code Annotated 1953
118 59-10-1302, Utah Code Annotated 1953

119 59-10-1303, Utah Code Annotated 1953
120 59-10-1401, Utah Code Annotated 1953
121 59-10-1402, Utah Code Annotated 1953
122 RENUMBERS AND AMENDS:
123 59-10-1002.1, (Renumbered from 59-10-1016, as renumbered and amended by Laws of
124 Utah 2006, Chapter 223)
125 59-10-1002.2, (Renumbered from 59-10-1206.9, as enacted by Laws of Utah 2007,
126 Chapter 288)
127 59-10-1017, (Renumbered from 59-10-1206.1, as enacted by Laws of Utah 2007,
128 Chapter 100)
129 59-10-1018, (Renumbered from 59-10-1206.2, as enacted by Laws of Utah 2007,
130 Chapter 288)
131 59-10-1019, (Renumbered from 59-10-1206.3, as enacted by Laws of Utah 2007,
132 Chapter 288)
133 59-10-1304, (Renumbered from 59-10-551, as last amended by Laws of Utah 2006,
134 Chapter 280)
135 59-10-1305, (Renumbered from 59-10-530, as last amended by Laws of Utah 1997,
136 Chapter 12)
137 59-10-1306, (Renumbered from 59-10-530.5, as last amended by Laws of Utah 2003,
138 Chapter 132)
139 59-10-1307, (Renumbered from 59-10-549, as last amended by Laws of Utah 2005,
140 Chapter 208)
141 59-10-1308, (Renumbered from 59-10-550, as last amended by Laws of Utah 1997,
142 Chapters 1 and 12)
143 59-10-1309, (Renumbered from 59-10-550.1, as enacted by Laws of Utah 2003,
144 Chapter 162)
145 59-10-1310, (Renumbered from 59-10-550.2, as enacted by Laws of Utah 2006,
146 Chapter 280)
147 59-10-1311, (Renumbered from 59-10-547, as last amended by Laws of Utah 1998,
148 Chapter 269)
149 59-10-1312, (Renumbered from 59-10-548, as last amended by Laws of Utah 2002,

150 Chapters 107 and 256)
151 59-10-1403, (Renumbered from 59-10-301, as renumbered and amended by Laws of
152 Utah 1987, Chapter 2)
153 59-10-1404, (Renumbered from 59-10-302, as renumbered and amended by Laws of
154 Utah 1987, Chapter 2)
155 59-10-1405, (Renumbered from 59-10-303, as last amended by Laws of Utah 2006,
156 Fourth Special Session, Chapter 2)
157 REPEALS:
158 59-10-206, as last amended by Laws of Utah 1995, Chapter 345
159 59-10-801, as last amended by Laws of Utah 1997, Chapter 159
160 59-10-1201, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
161 59-10-1202, as last amended by Laws of Utah 2007, Chapters 100 and 288
162 59-10-1203, as last amended by Laws of Utah 2007, Chapters 100 and 288
163 59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
164 59-10-1205, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
165 59-10-1206, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
166 59-10-1207, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
167
168 Be it enacted by the Legislature of the state of Utah:
169 Section 1. Section 9-4-802 is amended to read:
170 9-4-802. Purposes of Homeless Coordinating Committee -- Uses of Pamela
171 Atkinson Homeless Trust Account.
172 (1) (a) The Homeless Coordinating Committee shall work to ensure that services
173 provided to the homeless by state agencies, local governments, and private organizations are
174 provided in a cost-effective manner.
175 (b) Programs funded by the committee shall emphasize emergency housing and
176 self-sufficiency, including placement in meaningful employment or occupational training
177 activities and, where needed, special services to meet the unique needs of the homeless who
178 have families with children, or who are mentally ill, disabled, or suffer from other serious
179 challenges to employment and self-sufficiency.
180 (c) The committee may also fund treatment programs to ameliorate the effects of

181 substance abuse or a disability.
182 (2) The committee members designated in Subsection 9-4-801 (2) shall:
183 (a) award contracts funded by the Pamela Atkinson Homeless Trust Account with the
184 advice and input of those designated in Subsection 9-4-801 (3);
185 (b) consider need, diversity of geographic location, coordination with or enhancement
186 of existing services, and the extensive use of volunteers; and
187 (c) give priority for funding to programs that serve the homeless who are mentally ill
188 and who are in families with children.
189 (3) (a) In any fiscal year, no more than 80% of the funds in the Pamela Atkinson
190 Homeless Trust Account may be allocated to organizations that provide services only in Salt
191 Lake, Davis, Weber, and Utah Counties.
192 (b) The committee may:
193 (i) expend up to 3% of its annual appropriation for administrative costs associated with
194 the allocation of funds from the Pamela Atkinson Homeless Trust Account, and up to 2% of its
195 annual appropriation for marketing the account and soliciting donations to the account; and
196 (ii) pay for the initial costs of the State Tax Commission in implementing Section
197 [ 59-10-530.5 ] 59-10-1306 from the account.
198 (4) (a) The committee may not expend, except as provided in Subsection (4)(b), an
199 amount equal to the greater of $50,000 or 20% of the amount donated to the Pamela Atkinson
200 Homeless Trust Account during fiscal year 1988-89.
201 (b) If there are decreases in contributions to the account, the committee may expend
202 funds held in reserve to provide program stability, but the committee shall reimburse the
203 amounts of those expenditures to the reserve fund.
204 (5) The committee shall make an annual report to the Economic Development and
205 Human Resources Appropriations Subcommittee regarding the programs and services funded
206 by contributions to the Pamela Atkinson Homeless Trust Account.
207 (6) The moneys in the Pamela Atkinson Homeless Trust Account shall be invested by
208 the state treasurer according to the procedures and requirements of Title 51, Chapter 7, State
209 Money Management Act, except that all interest or other earnings derived from the fund
210 moneys shall be deposited in the fund.
211 Section 2. Section 9-4-803 is amended to read:

212 9-4-803. Creation of Pamela Atkinson Homeless Trust Account.
213 (1) There is created a restricted account within the General Fund to be known as the
214 Pamela Atkinson Homeless Trust Account.
215 (2) Private contributions received under this section and Section [ 59-10-530.5 ]
216 59-10-1306 shall be deposited into the account to be used only for programs described in
217 Section 9-4-802 .
218 (3) Money shall be appropriated from the account to the State Homeless Coordinating
219 Committee in accordance with the Utah Budgetary Procedures Act.
220 (4) The State Homeless Coordinating Committee may accept transfers, grants, gifts,
221 bequests, or any money made available from any source to implement this part.
222 Section 3. Section 23-14-13 is amended to read:
223 23-14-13. Wildlife Resources Account.
224 (1) The Wildlife Resources Account [within the General Fund] is established within
225 the General Fund.
226 (2) The following monies shall be deposited into the Wildlife Resources Account:
227 (a) revenue from the sale of licenses, permits, tags, and certificates of registration
228 issued under this title or a rule or proclamation of the Wildlife Board, except as otherwise
229 provided by this title;
230 (b) revenue from the sale, lease, rental, or other granting of rights of real or personal
231 property acquired with revenue specified in Subsection (a);
232 (c) revenue from fines and forfeitures for violations of this title or any rule,
233 proclamation, or order of the Wildlife Board, minus court costs not to exceed the schedule
234 adopted by the Judicial Council;
235 (d) funds appropriated from the General Fund by the Legislature pursuant to Section
236 23-19-39 ;
237 (e) other monies received by the division under any provision of this title, except as
238 otherwise provided by this title; [and]
239 (f) contributions made in accordance with Section 59-10-1305 ; and
240 [(f)] (g) interest, dividends, or other income earned on account monies.
241 (3) Monies in the Wildlife Resources Account shall be used for the administration of
242 this title.

243 Section 4. Section 23-14-14.1 is amended to read:
244 23-14-14.1. Wolf Depredation and Management Restricted Account -- Interest --
245 Use of contributions and interest.
246 (1) There is created within the General Fund the Wolf Depredation and Management
247 Restricted Account.
248 (2) The account shall be funded by contributions deposited into the Wolf Depredation
249 and Management Restricted Account in accordance with Section [ 59-10-550.1 ] 59-10-1309 .
250 (3) (a) The Wolf Depredation and Management Restricted Account shall earn interest.
251 (b) Interest earned on the Wolf Depredation and Management Restricted Account shall
252 be deposited into the Wolf Depredation and Management Restricted Account.
253 (4) (a) Subject to Subsection (4)(b), contributions and interest deposited into the Wolf
254 Depredation and Management Restricted Account shall be used by the Division of Wildlife
255 Resources for:
256 (i) payments for livestock depredation by wolves; or
257 (ii) wolf management.
258 (b) Contributions and interest deposited into the Wolf Depredation and Management
259 Restricted Account may be used for the purposes described in Subsection (4)(a) only to the
260 extent permitted by federal law.
261 Section 5. Section 26-18a-3 is amended to read:
262 26-18a-3. Purpose of committee.
263 (1) The committee shall work to:
264 (a) provide financial assistance for initial medical expenses of children who need organ
265 transplants;
266 (b) obtain the assistance of volunteer and public service organizations; and
267 (c) fund activities as the committee designates for the purpose of educating the public
268 about the need for organ donors.
269 (2) (a) The committee is responsible for awarding financial assistance funded by the
270 trust account.
271 (b) The financial assistance awarded by the committee under Subsection (1)(a) shall be
272 in the form of interest free loans. The committee may establish terms for repayment of the
273 loans, including a waiver of the requirement to repay any awards if, in the committee's

274 judgment, repayment of the loan would impose an undue financial burden on the recipient.
275 (c) In making financial awards under Subsection (1)(a), the committee shall consider:
276 (i) need;
277 (ii) coordination with or enhancement of existing services or financial assistance,
278 including availability of insurance or other state aid;
279 (iii) the success rate of the particular organ transplant procedure needed by the child;
280 and
281 (iv) the extent of the threat to the child's life without the organ transplant.
282 (3) The committee may only provide the assistance described in this section to children
283 who have resided in Utah, or whose legal guardians have resided in Utah for at least six months
284 prior to the date of assistance under this section.
285 (4) (a) The committee may expend up to 5% of its annual appropriation for
286 administrative costs associated with the allocation of funds from the trust account.
287 (b) The administrative costs shall be used for the costs associated with staffing the
288 committee and for State Tax Commission costs in implementing Section [ 59-10-550 ]
289 59-10-1308 .
290 (5) The committee shall make an annual report to the Health and Human Services
291 Appropriations Subcommittee regarding the programs and services funded by contributions to
292 the trust account.
293 Section 6. Section 26-18a-4 is amended to read:
294 26-18a-4. Creation of Kurt Oscarson Children's Organ Transplant Trust
295 Account.
296 (1) There is created a restricted account within the General Fund pursuant to Section
297 51-5-4 known as the Kurt Oscarson Children's Organ Transplant Trust Account. Private
298 contributions received under this section and Section [ 59-10-550 ] 59-10-1308 shall be
299 deposited into the trust account to be used only for the programs and purposes described in
300 Section 26-18a-3 .
301 (2) Money shall be appropriated from the trust account to the committee in accordance
302 with Title 63, Chapter 38, Budgetary Procedures Act.
303 (3) In addition to funds received under Section [ 59-10-550 ] 59-10-1308 , the committee
304 may accept transfers, grants, gifts, bequests, or any money made available from any source to

305 implement this chapter.
306 Section 7. Section 26-48-102 is amended to read:
307 26-48-102. Cat and Dog Community Spay and Neuter Program Restricted
308 Account -- Interest -- Use of contributions and interest.
309 (1) There is created within the General Fund the Cat and Dog Community Spay and
310 Neuter Program Restricted Account.
311 (2) The account shall be funded by contributions deposited into the Cat and Dog
312 Community Spay and Neuter Program Restricted Account in accordance with Section
313 [ 59-10-550.2 ] 59-10-1310 .
314 (3) (a) The Cat and Dog Community Spay and Neuter Program Restricted Account
315 shall earn interest.
316 (b) Interest earned on the Cat and Dog Community Spay and Neuter Program
317 Restricted Account shall be deposited into the Cat and Dog Community Spay and Neuter
318 Program Restricted Account.
319 (4) The department shall distribute contributions and interest deposited into the Cat and
320 Dog Community Spay and Neuter Program Restricted Account to one or more organizations
321 that:
322 (a) are exempt from federal income taxation under Section 501(c)(3), Internal Revenue
323 Code;
324 (b) operate a mobile spay and neuter clinic for cats and dogs;
325 (c) provide annual spay and neuter services at the mobile spay and neuter clinic
326 described in Subsection (4)(b):
327 (i) to one or more communities in at least 20 counties in the state; and
328 (ii) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
329 and
330 (d) (i) spay and neuter cats and dogs owned by persons having low incomes; and
331 (ii) have established written guidelines for determining what constitutes a person
332 having a low income in accordance with any rules made by the department as authorized by
333 Subsection (5)(c).
334 (5) (a) An organization described in Subsection (4) may apply to the department to
335 receive a distribution in accordance with Subsection (4).

336 (b) An organization that receives a distribution from the department in accordance with
337 Subsection (4):
338 (i) shall expend the distribution only to spay or neuter dogs and cats:
339 (A) owned by persons having low incomes;
340 (B) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
341 (C) through a statewide voucher program; and
342 (D) at a location that:
343 (I) is not a mobile spay and neuter clinic; and
344 (II) does not receive any funding from a governmental entity; and
345 (ii) may not expend the distribution for any administrative cost relating to an
346 expenditure authorized by Subsection (5)(b)(i).
347 (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
348 department may make rules:
349 (i) providing procedures and requirements for an organization to apply to the
350 department to receive a distribution in accordance with Subsection (4); and
351 (ii) to define what constitutes a person having a low income.
352 Section 8. Section 31A-32a-101 is amended to read:
353 31A-32a-101. Title and scope.
354 (1) This chapter is known as the "Medical Care Savings Account Act."
355 (2) (a) This chapter applies only to a medical care savings [accounts] account
356 established for the purpose of seeking a tax [deduction] credit under Section [ 59-10-114 ]
357 59-10-1021 .
358 (b) This chapter does not apply to a medical care savings [accounts that will not be
359 subject to tax deductions under Section 59-10-114 ] account with respect to which a tax credit is
360 not claimed under Section 59-10-1021 .
361 Section 9. Section 31A-32a-103 is amended to read:
362 31A-32a-103. Establishing medical care savings accounts.
363 [(1) For tax years beginning 1995, both of the following apply:]
364 (1) For a taxable year beginning on or after January 1, 1995:
365 (a) an employer, except as otherwise provided by contract or a collective bargaining
366 agreement, may offer a medical care savings account program to the employer's employees;

367 [and] or
368 (b) a resident individual may establish a medical care savings account program for the
369 individual or for the individual's dependents.
370 (2) (a) A contribution into an account made by an employer on behalf of an employee,
371 or made by an individual account holder may not exceed the greater of:
372 [(a)] (i) $2,000 in any [tax] taxable year; or
373 (ii) an amount of money equal to the sum of all eligible medical expenses paid by the
374 employee or account holder [in] for that [tax] taxable year on behalf of the employee, account
375 holder, or the employee's or account holder's spouse or dependents.
376 (b) For purposes of Subsection (2)(a)(ii), eligible medical expenses [as defined in
377 Subsection 31A-32a-102 (5),] are limited to expenses in [that tax year which] the taxable year
378 that an insurance carrier has applied to the employee's or account holder's deductible.
379 (3) An employer that offers a medical care savings account program shall, before
380 making any contributions:
381 (a) inform all employees in writing of the fact that these contributions may not be