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
382 deductible under the federal tax laws; and
383 (b) obtain from the employee a written election to participate in the medical care
384 savings account program.
385 (4) Except as provided in Sections 31A-32a-105 and 59-10-114 , principal contributed
386 to and interest earned on a medical care savings account and money reimbursed to an employee
387 or account holder for eligible medical expenses are exempt from taxation.
388 (5) (a) An employer may select a single account administrator for all of the employer's
389 employee's medical care savings accounts.
390 (b) If a single account administrator is not selected, an employer may contribute
391 directly to the account holder's individual medical care savings account.
392 Section 10. Section 31A-32a-104 is amended to read:
393 31A-32a-104. Administration of medical care savings account.
394 (1) An account administrator shall administer the medical care savings account from
395 which the payment of claims is made and has a fiduciary duty to the person for whose benefit
396 the account administrator administers an account.
397 (2) (a) Except as provided in Subsection 31A-32a-105 (1), the account administrator

398 shall use the funds held in a medical care savings account solely for the purpose of paying or
399 reimbursing the employee or account holder for eligible medical expenses of the employee or
400 account holder or of the employee's or account holder's dependents.
401 (b) The commissioner shall adopt rules concerning the coordination of benefits
402 between a medical care savings account and medical expenses payable from automobile
403 insurance policies, workers' compensation insurance policies, or other health care insurance
404 policies or contracts.
405 (3) The employee or account holder may submit documentation of eligible medical
406 expenses paid by the employee or account holder in the [tax] taxable year to the account
407 administrator, and the account administrator shall reimburse the employee or account holder
408 from the employee's or account holder's account for eligible medical expenses.
409 (4) If an employer makes contributions to a medical care savings account program on a
410 periodic installment basis, the employer may advance to an employee an amount necessary to
411 cover eligible medical expenses incurred that exceed the amount in the employee's medical
412 care savings account at the time the expense is incurred if the employee agrees to repay the
413 advance.
414 Section 11. Section 31A-32a-105 is amended to read:
415 31A-32a-105. Withdrawals -- Termination -- Transfers.
416 (1) Subject to Subsection (3), if the employee or account holder withdraws money for
417 any purpose other than a medical expense at any time in which the balance in the account is
418 below $4,000 [all of the following apply]:
419 (a) the amount of the withdrawal [is income for the purposes of Title 59, Chapter 10,
420 Individual Income Tax Act] shall be added to adjusted gross income in accordance with
421 Section 59-10-114 ; and
422 (b) the administrator shall withhold from the amount of the withdrawal, and on behalf
423 of the employee or account holder shall pay a penalty to the State Tax Commission equal to
424 10% of the amount of the withdrawal.
425 (2) If an employee or account holder withdraws money from the employee's or account
426 holder's medical care savings account for any purpose other than a medical expense, but the
427 withdrawal occurs when the balance in the medical care savings account is over $4,000, and
428 the withdrawal will not result in the account balance dropping below $4,000, the amount of the

429 withdrawal:
430 (a) is not subject to the penalties described in Subsection (1)(b); and
431 [(b) is subject to taxation as provided in Subsection (1)(a).]
432 (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
433 (3) The amount of a disbursement of any assets of a medical care savings account
434 pursuant to a filing for protection under [Title 11 of the United States Code,] 11 U.S.C. Sec.
435 101 to 1330, by an employee, account holder, or person for whose benefit the account was
436 established:
437 (a) is not considered a withdrawal for purposes of this section; and
438 [(b) is subject to taxation under Title 59, Chapter 10, Individual Income Tax Act.]
439 (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
440 (4) (a) Upon the death of the employee or account holder, the account administrator
441 shall distribute the principal and accumulated interest of the medical care savings account to
442 the estate of the employee or account holder.
443 (b) A distribution under this Subsection (4) is not subject to the penalties described in
444 Subsection (1)(b).
445 (5) (a) If an employee is no longer employed by an employer that participates in a
446 medical care savings account program, and if the employee's account is administered by the
447 employer's account administrator, the money in the medical care savings account may be used
448 for the benefit of the employee or the employee's dependents in accordance with this chapter,
449 and [remains exempt from taxation] may not be added to adjusted gross income under Section
450 59-10-114 if the employee, not more than 60 days after the employee's final day of
451 employment:
452 (i) transfers the account to a new account administrator; or
453 (ii) (A) requests in writing to the former employer's account administrator that the
454 account remain with that administrator; and
455 (B) the account administrator agrees to retain the account.
456 (b) Not more than 30 days after the expiration of the 60 days described in Subsection
457 (5)(a), if an account administrator has not accepted the former employee's account, the
458 employer shall mail a check to the former employee at the employee's last-known address equal
459 to the amount in the account on that day.

460 (c) The amount mailed to the employee [is subject to taxation pursuant to Subsection
461 (1)(a)] under Subsection (5)(b) shall be added to adjusted gross income in accordance with
462 Section 59-10-114 , but is not subject to the penalties under Subsection (1)(b).
463 (d) If an employee becomes employed with a different employer that participates in a
464 medical care savings account program, the employee may transfer the employee's medical care
465 savings account to that new employer's account administrator.
466 (e) If an account holder becomes an employee of an employer that participates in a
467 medical care savings account program, the account holder may transfer the account holder's
468 account to the employer's account administrator.
469 Section 12. Section 31A-32a-106 is amended to read:
470 31A-32a-106. Regulation of account administrators -- Administration of addition
471 to adjusted gross income and tax credit -- Rulemaking authority.
472 (1) The department shall regulate account administrators and may adopt rules
473 necessary to administer this chapter.
474 (2) The State Tax Commission may adopt rules necessary to monitor and implement
475 the [tax deductions established by this chapter and Section 59-10-114 .]:
476 (a) amounts required to be added to adjusted gross income in accordance with Sections
477 31A-32a-105 and 59-10-114 ; or
478 (b) amount claimed as a tax credit in accordance with Section 59-10-1021 .
479 Section 13. Section 31A-32a-107 is amended to read:
480 31A-32a-107. Penalties for noncompliance with tax provisions.
481 (1) An account administrator who fails to comply with [the statutes and rules
482 governing the tax deduction established by this chapter and Section 59-10-114 ] a provision
483 described in Subsection (2) is subject to:
484 [(1)] (a) the civil penalties provided in Section 59-1-401 ; and
485 [(2)] (b) interest at the rate and in the manner provided in Section 59-1-402 .
486 (2) The following provisions apply to Subsection (1):
487 (a) a provision of this chapter relating to:
488 (i) an addition to income made in accordance with Section 59-10-114 ; or
489 (ii) a tax credit allowed by Section 59-10-1021 ; or
490 (b) a provision of Title 59, Chapter 10, Individual Income Tax Act, relating to:

491 (i) an addition to income made in accordance with Section 59-10-114 ; or
492 (ii) a tax credit allowed by Section 59-10-1021 .
493 Section 14. Section 48-2c-117 is amended to read:
494 48-2c-117. Taxation of limited liability companies.
495 A company established under this chapter or a foreign company transacting business in
496 this state shall be taxed as provided in [Section 59-10-801 ] Subsection 59-10-1403 (4).
497 Section 15. Section 53B-8a-106 is amended to read:
498 53B-8a-106. Account agreements.
499 The Utah Educational Savings Plan Trust may enter into account agreements with
500 account owners on behalf of beneficiaries under the following terms and agreements:
501 (1) (a) An account agreement may require an account owner to agree to invest a
502 specific amount of money in the Utah Educational Savings Plan Trust for a specific period of
503 time for the benefit of a specific beneficiary, not to exceed an amount determined by the
504 program administrator.
505 (b) Account agreements may be amended to provide for adjusted levels of payments
506 based upon changed circumstances or changes in educational plans.
507 (c) An account owner may make additional optional payments as long as the total
508 payments for a specific beneficiary do not exceed the total estimated higher education costs as
509 determined by the program administrator.
510 (d) Subject to Subsection (1)(f), the maximum amount of a qualified investment that a
511 corporation that is an account owner may subtract from unadjusted income for a taxable year in
512 accordance with Title 59, Chapter 7, Corporate Franchise and Income Taxes, is [$1,560]
513 $1,650 for each individual beneficiary for the taxable year beginning on or after January 1,
514 [2006] 2008, but beginning on or before December 31, [2006] 2008.
515 (e) Subject to Subsection (1)(f), the maximum amount of a qualified investment that
516 may be [subtracted from federal taxable income of a resident or nonresident individual for a
517 taxable year in accordance with Section 59-10-114 , a resident or nonresident estate or trust for
518 a taxable year in accordance with Section 59-10-202 , or] used as the basis for claiming a tax
519 credit [for a taxable year by a resident or nonresident individual] in accordance with Section
520 [ 59-10-1206.1 ] 59-10-1017 , is:
521 (i) for a resident or nonresident estate or trust that is an account owner, [$1,560] $1,650

522 for each individual beneficiary for the taxable year beginning on or after January 1, [2006]
523 2008, but beginning on or before December 31, [2006] 2008;
524 (ii) for a resident or nonresident individual that is an account owner, other than a
525 husband and wife who are account owners and file a single return jointly, [$1,560] $1,650 for
526 each individual beneficiary for the taxable year beginning on or after January 1, [2006] 2008,
527 but beginning on or before December 31, [2006] 2008; or
528 (iii) for a husband and wife who are account owners and file a single return jointly,
529 [$3,120] $3,300 for each individual beneficiary:
530 (A) for the taxable year beginning on or after January 1, [2006] 2008, but beginning on
531 or before December 31, [2006] 2008; and
532 (B) regardless of whether the Utah Educational Savings Plan Trust has entered into:
533 (I) a separate account agreement with each spouse; or
534 (II) a single account agreement with both spouses jointly.
535 (f) (i) For taxable years beginning on or after January 1, [2007] 2009, the program
536 administrator shall increase or decrease the maximum amount of a qualified investment
537 described in Subsections (1)(d) and (1)(e)(i) and (ii), by a percentage equal to the percentage
538 difference between the consumer price index for the preceding calendar year and the consumer
539 price index for the calendar year [2005] 2007.
540 (ii) After making an increase or decrease required by Subsection (1)(f)(i), the program
541 administrator shall:
542 (A) round the maximum amount of the qualified investments described in Subsections
543 (1)(d) and (1)(e)(i) and (ii) increased or decreased under Subsection (1)(f)(i) to the nearest ten
544 dollar increment; and
545 (B) increase or decrease the maximum amount of the qualified investment described in
546 Subsection (1)(e)(iii) so that the maximum amount of the qualified investment described in
547 Subsection (1)(e)(iii) is equal to the product of:
548 (I) the maximum amount of the qualified investment described in Subsection (1)(e)(ii)
549 as rounded under Subsection (1)(f)(ii)(A); and
550 (II) two.
551 (iii) For purposes of Subsections (1)(f)(i) and (ii), the program administrator shall
552 calculate the consumer price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue

553 Code.
554 (2) (a) (i) Beneficiaries designated in account agreements must be designated after
555 birth and before age 19 for an account owner to:
556 (A) subtract a qualified investment from income under[:(I)] Title 59, Chapter 7,
557 Corporate Franchise and Income Taxes; or
558 [(II) Section 59-10-114 ; or]
559 [(III) Section 59-10-202 ; or]
560 (B) use a qualified investment as the basis for claiming a tax credit in accordance with
561 Section [ 59-10-1206.1 ] 59-10-1017 .
562 (ii) If the beneficiary is designated after birth and before age 19, the payment of
563 benefits provided under the account agreement must begin not later than the beneficiary's 27th
564 birthday.
565 (b) (i) Account owners may designate [beneficiaries] a beneficiary age 19 or older, but
566 investments for [those beneficiaries] that beneficiary are not eligible [for subtraction from
567 federal taxable income.] to be:
568 (A) subtracted from income under Title 59, Chapter 7, Corporate Franchise and Income
569 Taxes; or
570 (B) used as the basis for claiming a tax credit in accordance with Section 59-10-1017 .
571 (ii) If a beneficiary age 19 or older is designated, the payment of benefits provided
572 under the account agreement must begin not later than ten years from the account agreement
573 date.
574 (3) Each account agreement shall state clearly that there are no guarantees regarding
575 moneys in the Utah Educational Savings Plan Trust as to the return of principal and that losses
576 could occur.
577 (4) Each account agreement shall provide that:
578 (a) [no] a contributor to, or designated beneficiary under, an account agreement may
579 not direct the investment of any contributions or earnings on contributions;
580 (b) [no] any part of the money in any account may not be used as security for a loan;
581 and
582 (c) [no] an account owner may not borrow from the Utah Educational Savings Plan
583 Trust.

584 (5) The execution of an account agreement by the trust may not guarantee in any way
585 that higher education costs will be equal to projections and estimates provided by the Utah
586 Educational Savings Plan Trust or that the beneficiary named in any participation agreement
587 will:
588 (a) be admitted to an institution of higher education;
589 (b) if admitted, be determined a resident for tuition purposes by the institution of
590 higher education, unless the account agreement is vested;
591 (c) be allowed to continue attendance at the institution of higher education following
592 admission; or
593 (d) graduate from the institution of higher education.
594 (6) [Beneficiaries] A beneficiary may be changed as permitted by the rules and
595 regulations of the board upon written request of the account owner prior to the date of
596 admission of any beneficiary under an account agreement by an institution of higher education
597 so long as the substitute beneficiary is eligible for participation.
598 (7) [Account agreements] An account agreement may be freely amended throughout
599 [their terms] the term of the account agreement in order to enable [account owners] an account
600 owner to increase or decrease the level of participation, change the designation of beneficiaries,
601 and carry out similar matters as authorized by rule.
602 (8) Each account agreement shall provide that:
603 (a) the account agreement may be canceled upon the terms and conditions, and upon
604 payment of the fees and costs set forth and contained in the board's rules and regulations; and
605 (b) the program administrator may amend the agreement unilaterally and retroactively,
606 if necessary, to maintain the Utah Educational Savings Plan Trust as a qualified tuition
607 program under Section 529, Internal Revenue Code.
608 Section 16. Section 59-7-101 is amended to read:
609 59-7-101. Definitions.
610 As used in this chapter:
611 (1) "Adjusted income" means unadjusted income as modified by Sections 59-7-105
612 and 59-7-106 .
613 (2) (a) "Affiliated group" means one or more chains of corporations that are connected
614 through stock ownership with a common parent corporation that meet the following

615 requirements:
616 (i) at least 80% of the stock of each of the corporations in the group, excluding the
617 common parent corporation, is owned by one or more of the other corporations in the group;
618 and
619 (ii) the common parent directly owns at least 80% of the stock of at least one of the
620 corporations in the group.
621 (b) "Affiliated group" does not include corporations that are qualified to do business
622 but are not otherwise doing business in this state.
623 (c) For purposes of this Subsection (2), "stock" does not include nonvoting stock which
624 is limited and preferred as to dividends.
625 (3) "Apportionable income" means adjusted income less nonbusiness income net of
626 related expenses, to the extent included in adjusted income.
627 (4) "Apportioned income" means apportionable income multiplied by the
628 apportionment fraction as determined in Section 59-7-311 .
629 (5) "Business income" is as defined in Section 59-7-302 .
630 (6) (a) "Captive real estate investment trust" means a real estate investment trust if:
631 (i) the shares or beneficial interests of the real estate investment trust are not regularly
632 traded on an established securities market; and
633 (ii) more than 50% of the voting power or value of the shares or beneficial interests of
634 the real estate investment trust are directly, indirectly, or constructively:
635 (A) owned by a controlling entity of the real estate investment trust; or
636 (B) controlled by a controlling entity of the real estate investment trust.
637 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
638 commission may make rules defining "established securities market."
639 (7) (a) "Controlling entity of a captive real estate investment trust" means an entity
640 that:
641 (i) is treated as an association taxable as a corporation under the Internal Revenue
642 Code;
643 (ii) is not exempt from federal income taxation under Section 501(a), Internal Revenue
644 Code; and
645 (iii) directly, indirectly, or constructively holds more than 50% of:

646 (A) the voting power of a captive real estate investment trust; or
647 (B) the value of the shares or beneficial interests of a captive real estate investment
648 trust.
649 (b) "Controlling entity of a captive real estate investment trust" does not include:
650 (i) a real estate investment trust, except for a captive real estate investment trust;
651 (ii) a qualified real estate investment subsidiary described in Section 856(i), Internal
652 Revenue Code, except for a qualified real estate investment trust subsidiary of a captive real
653 estate investment trust; or
654 (iii) a foreign real estate investment trust.
655 (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
656 commission may make rules defining "established securities market."
657 [(7)] (8) (a) "Common ownership" means the direct or indirect control or ownership of
658 more than 50% of the outstanding voting stock of:
659 (i) a parent-subsidiary controlled group as defined in Section 1563, Internal Revenue
660 Code, except that 50% shall be substituted for 80%;
661 (ii) a brother-sister controlled group as defined in Section 1563, Internal Revenue
662 Code, except that 50% shall be substituted for 80%; or
663 (iii) three or more corporations each of which is a member of a group of corporations
664 described in Subsection (2)(a)(i) or (2)(a)(ii), and one of which is:
665 (A) a common parent corporation included in a group of corporations described in
666 Subsection (2)(a)(i); and
667 (B) included in a group of corporations described in Subsection (2)(a)(ii).
668 (b) Ownership of outstanding voting stock shall be determined by Section 1563,
669 Internal Revenue Code.
670 [(6)] (9) "Corporate return" or "return" includes a combined report.
671 [(8)] (10) "Corporation" includes:
672 (a) entities defined as corporations under Sections 7701(a) and 7704, Internal Revenue
673 Code; and
674 (b) other organizations that are taxed as corporations for federal income tax purposes
675 under the Internal Revenue Code.
676 [(9)] (11) "Dividend" means any distribution, including money or other type of

677 property, made by a corporation to its shareholders out of its earnings or profits accumulated
678 after December 31, 1930.
679 [(10)] (12) (a) "Doing business" includes any transaction in the course of its business
680 by a domestic corporation, or by a foreign corporation qualified to do or doing intrastate
681 business in this state.
682 (b) Except as provided in Subsection 59-7-102 (2), "doing business" includes:
683 (i) the right to do business through incorporation or qualification;
684 (ii) the owning, renting, or leasing of real or personal property within this state; and
685 (iii) the participation in joint ventures, working and operating agreements, the
686 performance of which takes place in this state.
687 [(11)] (13) "Domestic corporation" means a corporation that is incorporated or
688 organized under the laws of this state.
689 [(12)] (14) (a) "Farmers' cooperative" means an association, corporation, or other
690 organization that is:
691 (i) (A) an association, corporation, or other organization of:
692 (I) farmers; or
693 (II) fruit growers; or
694 (B) an association, corporation, or other organization that is similar to an association,
695 corporation, or organization described in Subsection [(12)] (14)(a)(i)(A); and
696 (ii) organized and operated on a cooperative basis to:
697 (A) (I) market the products of members of the cooperative or the products of other
698 producers; and
699 (II) return to the members of the cooperative or other producers the proceeds of sales
700 less necessary marketing expenses on the basis of the quantity of the products of a member or
701 producer or the value of the products of a member or producer; or
702 (B) (I) purchase supplies and equipment for the use of members of the cooperative or
703 other persons; and
704 (II) turn over the supplies and equipment described in Subsection [(12)]
705 (14)(a)(ii)(B)(I) at actual costs plus necessary expenses to the members of the cooperative or
706 other persons.
707 (b) (i) Subject to Subsection [(12)] (14)(b)(ii), for purposes of this Subsection [(12)]

708 (14), the commission by rule, made in accordance with Title 63, Chapter 46a, Utah
709 Administrative Rulemaking Act, shall define:
710 (A) the terms:
711 (I) "member"; and
712 (II) "producer"; and
713 (B) what constitutes an association, corporation, or other organization that is similar to
714 an association, corporation, or organization described in Subsection [(12)] (14)(a)(i)(A).
715 (ii) The rules made under this Subsection [(12)] (14)(b) shall be consistent with the
716 filing requirements under federal law for a farmers' cooperative.
717 [(13)] (15) "Foreign corporation" means a corporation that is not incorporated or
718 organized under the laws of this state.
719 [(14)] (16) (a) "Foreign operating company" means a corporation that:
720 (i) is incorporated in the United States; and
721 (ii) 80% or more of whose business activity, as determined under Section 59-7-401 , is
722 conducted outside the United States.
723 (b) "Foreign operating company" does not include a corporation that qualifies for the
724 Puerto Rico and Possession Tax Credit as provided in Section 936, Internal Revenue Code.
725 (17) (a) "Foreign real estate investment trust" means:
726 (i) a business entity organized outside the laws of the United States if:
727 (A) at least 75% of the business entity's total asset value at the close of the business
728 entity's taxable year is represented by:
729 (I) real estate assets, as defined in Section 856(c)(5)(B), Internal Revenue Code;
730 (II) cash or cash equivalents; or
731 (III) one or more securities issued or guaranteed by the United States;
732 (B) the business entity is:
733 (I) not subject to income taxation:
734 (Aa) on amounts distributed to the business entity's beneficial owners; and
735 (Bb) in the jurisdiction in which the business entity is organized; or
736 (II) exempt from income taxation on an entity level in the jurisdiction in which the
737 business entity is organized;
738 (C) the business entity distributes at least 85% of the business entity's taxable income,

739 as computed in the jurisdiction in which the business entity is organized, to the holders of the
740 business entity's:
741 (I) shares or beneficial interests; and
742 (II) on an annual basis;
743 (D) (I) not more than 10% of the following is held directly, indirectly, or constructively
744 by a single person:
745 (Aa) the voting power of the business entity; or
746 (Bb) the value of the shares or beneficial interests of the business entity; or
747 (II) the shares of the business entity are regularly traded on an established securities
748 market; and
749 (E) the business entity is organized in a country that has a tax treaty with the United
750 States; or
751 (ii) a listed Australian property trust.
752 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
753 commission may make rules defining:
754 (i) "cash or cash equivalents";
755 (ii) "established securities market"; or
756 (iii) "listed Australian property trust."
757 [(15)] (18) "Income" includes losses.
758 [(16)] (19) "Internal Revenue Code" means Title 26 of the United States Code as
759 effective during the year in which Utah taxable income is determined.
760 [(17)] (20) "Nonbusiness income" is as defined in Section 59-7-302 .
761 [(18)] (21) "Nonresident shareholder" means any shareholder of an S corporation who
762 on the last day of the taxable year of the S corporation, is:
763 (a) an individual not domiciled in Utah; or
764 (b) a nonresident trust or nonresident estate, as defined in Section 59-10-103 .
765 (22) "Real estate investment trust" is as defined in Section 856, Internal Revenue Code.
766 [(19)] (23) "Related expenses" means:
767 (a) expenses directly attributable to nonbusiness income; and
768 (b) the portion of interest or other expense indirectly attributable to both nonbusiness
769 and business income which bears the same ratio to the aggregate amount of such interest or

770 other expense, determined without regard to this Subsection [(19)] (23), as the average amount
771 of the asset producing the nonbusiness income bears to the average amount of all assets of the
772 taxpayer within the taxable year.
773 [(20)] (24) "Resident shareholder" means any shareholder of an S corporation who is
774 not a nonresident shareholder.
775 [(22)] (25) "Safe harbor lease" means a lease that qualified as a safe harbor lease under
776 Section 168, Internal Revenue Code.
777 [(21)] (26) "S corporation" means an S corporation as defined in Section 1361, Internal
778 Revenue Code.
779 [(23)] (27) "State of the United States" includes any of the 50 states or the District of
780 Columbia [and "United States" includes the 50 states and the District of Columbia].
781 [(24)] (28) (a) "Taxable year" means the calendar year or the fiscal year ending during
782 such calendar year upon the basis of which the adjusted income is computed.
783 (b) In the case of a return made for a fractional part of a year under this chapter or
784 under rules prescribed by the commission, "taxable year" includes the period for which such
785 return is made.
786 [(25)] (29) "Taxpayer" means any corporation subject to the tax imposed by this
787 chapter.
788 [(26)] (30) "Threshold level of business activity" means business activity in the United
789 States equal to or greater than 20% of the corporation's total business activity as determined
790 under Section 59-7-401 .
791 [(27)] (31) "Unadjusted income" means federal taxable income as determined on a
792 separate return basis before intercompany eliminations as determined by the Internal Revenue
793 Code, before the net operating loss deduction and special deductions for dividends received.
794 [(28)] (32) (a) "Unitary group" means a group of corporations that:
795 (i) are related through common ownership; and
796 (ii) by a preponderance of the evidence as determined by a court of competent
797 jurisdiction or the commission, are economically interdependent with one another as
798 demonstrated by the following factors:
799 (A) centralized management;
800 (B) functional integration; and

801 (C) economies of scale.
802 (b) "Unitary group" includes a captive real estate investment trust.
803 [(b)] (c) "Unitary group" does not include an S [corporations] corporation.
804 (33) "United States" includes the 50 states and the District of Columbia.
805 [(29)] (34) "Utah net loss" means the current year Utah taxable income before Utah net
806 loss deduction, if determined to be less than zero.
807 [(30)] (35) "Utah net loss deduction" means the amount of Utah net losses from other
808 taxable years that may be carried back or carried forward to the current taxable year in
809 accordance with Section 59-7-110 .
810 [(31)] (36) (a) "Utah taxable income" means Utah taxable income before net loss
811 deduction less Utah net loss deduction.
812 (b) "Utah taxable income" includes income from tangible or intangible property located
813 or having situs in this state, regardless of whether carried on in intrastate, interstate, or foreign
814 commerce.
815 [(32)] (37) "Utah taxable income before net loss deduction" means apportioned income
816 plus nonbusiness income allocable to Utah net of related expenses.
817 [(33)] (38) (a) "Water's edge combined report" means a report combining the income
818 and activities of:
819 (i) all members of a unitary group that are:
820 (A) corporations organized or incorporated in the United States, including those
821 corporations qualifying for the Puerto Rico and Possession Tax Credit as provided in Section
822 936, Internal Revenue Code, in accordance with Subsection [(33)] (38)(b); and
823 (B) corporations organized or incorporated outside of the United States meeting the
824 threshold level of business activity; and
825 (ii) an affiliated group electing to file a water's edge combined report under Subsection
826 59-7-402 (2).
827 (b) There is a rebuttable presumption that a corporation which qualifies for the Puerto
828 Rico and Possession Tax Credit provided in Section 936, Internal Revenue Code, is part of a
829 unitary group.
830 [(34)] (39) "Worldwide combined report" means the combination of the income and
831 activities of all members of a unitary group irrespective of the country in which the

832 corporations are incorporated or conduct business activity.
833 Section 17. Section 59-7-105 is amended to read:
834 59-7-105. Additions to unadjusted income.
835 In computing adjusted income the following amounts shall be added to unadjusted
836 income:
837 (1) interest from bonds, notes, and other evidences of indebtedness issued by any state
838 of the United States, including any agency and instrumentality of a state of the United States;
839 (2) the amount of any deduction taken on a corporation's federal return for taxes paid
840 by a corporation:
841 (a) to Utah for taxes imposed by this chapter; and
842 (b) to another state of the United States, a foreign country, a United States possession,
843 or the Commonwealth of Puerto Rico for taxes imposed for the privilege of doing business, or
844 exercising its corporate franchise, including income, franchise, corporate stock and business
845 and occupation taxes;
846 (3) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(a) and
847 (2)(a);
848 (4) capital losses that have been deducted on a Utah corporate return in previous years;
849 (5) any deduction on the federal return that has been previously deducted on the Utah
850 return;
851 (6) the amount of contributions claimed as a tax credit pursuant to Section 59-7-602 ;
852 (7) the amount of the deduction taken pursuant to Section 59-7-603 for sophisticated
853 technological equipment;
854 (8) charitable contributions, to the extent deducted on the federal return when
855 determining federal taxable income;
856 (9) the amount of gain or loss determined under Section 59-7-114 relating to a target
857 corporation under Section 338, Internal Revenue Code, unless such gain or loss has already
858 been included in the unadjusted income of the target corporation;
859 (10) the amount of gain or loss determined under Section 59-7-115 relating to
860 corporations treated for federal purposes as having disposed of its assets under Section 336(e),
861 Internal Revenue Code, unless such gain or loss has already been included in the unadjusted
862 income of the target corporation;

863 (11) adjustments to gains, losses, depreciation expense, amortization expense, and
864 similar items due to a difference between basis for federal purposes and basis as computed
865 under Section 59-7-107 ; [and]
866 (12) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
867 Incentive Program, from the account of a corporation that is an account owner as defined in
868 Section 53B-8a-102 , for the taxable year for which the amount is withdrawn, if that amount
869 withdrawn from the account of the corporation that is the account owner:
870 (a) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
871 (b) is subtracted by the corporation:
872 (i) that is the account owner; and
873 (ii) in accordance with Subsection 59-7-106 (18)[.]; and
874 (13) the amount of the deduction for dividends paid, as defined in Section 561, Internal
875 Revenue Code, that is allowed under Section 857(b)(2)(B), Internal Revenue Code, in
876 computing the taxable income of a captive real estate investment trust, if that captive real estate
877 investment trust is subject to federal income taxation.
878 Section 18. Section 59-7-106 is amended to read:
879 59-7-106. Subtractions from unadjusted income.
880 In computing adjusted income the following amounts shall be subtracted from
881 unadjusted income:
882 (1) the foreign dividend gross-up included in gross income for federal income tax
883 purposes under Section 78, Internal Revenue Code;
884 (2) the net capital loss, as defined for federal purposes, if the taxpayer elects to deduct
885 the loss on the current Utah return. The deduction shall be made by claiming the deduction on
886 the current Utah return which shall be filed by the due date of the return, including extensions.
887 For the purposes of this Subsection (2) all capital losses in a given year must be:
888 (a) deducted in the year incurred; or
889 (b) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue
890 Code;
891 (3) the decrease in salary expense deduction for federal income tax purposes due to
892 claiming the federal jobs credit under Section 51, Internal Revenue Code;
893 (4) the decrease in qualified research and basic research expense deduction for federal

894 income tax purposes due to claiming the federal research and development credit under Section
895 41, Internal Revenue Code;
896 (5) the decrease in qualified clinical testing expense deduction for federal income tax
897 purposes due to claiming the federal orphan drug credit under Section 28, Internal Revenue
898 Code;
899 (6) any decrease in any expense deduction for federal income tax purposes due to
900 claiming any other federal credit;
901 (7) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(b) and
902 (2)(b);
903 (8) any income on the federal corporate return that has been previously taxed by Utah;
904 (9) amounts included in federal taxable income that are due to refunds of taxes
905 imposed for the privilege of doing business, or exercising a corporate franchise, including
906 income, franchise, corporate stock and business and occupation taxes paid by the corporation to
907 Utah, another state of the United States, a foreign country, a United States possession, or the
908 Commonwealth of Puerto Rico to the extent that the taxes were added to unadjusted income
909 under Section 59-7-105 ;
910 (10) charitable contributions, to the extent allowed as a subtraction under Section
911 59-7-109 ;
912 (11) (a) 50% of the dividends deemed received or received from subsidiaries which are
913 members of the unitary group and are organized or incorporated outside of the United States
914 unless such subsidiaries are included in a combined report under Section 59-7-402 or 59-7-403 .
915 In arriving at the amount of the dividend exclusion, the taxpayer shall first deduct from the
916 dividends deemed received or received, the expense directly attributable to those dividends.
917 Interest expense attributable to excluded dividends shall be determined by multiplying interest
918 expense by a fraction, the numerator of which is the taxpayer's average investment in such
919 dividend paying subsidiaries, and the denominator of which is the taxpayer's average total
920 investment in assets;
921 (b) in determining income apportionable to this state, a portion of the factors of a
922 foreign subsidiary whose dividends are partially excluded under Subsection (11)(a) shall be
923 included in the combined report factors. The portion to be included shall be determined by
924 multiplying each factor of the foreign subsidiary by a fraction, but not to exceed 100%, the

925 numerator of which is the amount of the dividend paid by the foreign subsidiary which is
926 included in adjusted income, and the denominator of which is the current year earnings and
927 profits of the foreign subsidiary as determined under the Internal Revenue Code;
928 (12) (a) 50% of the adjusted income of a foreign operating company unless the
929 taxpayer has elected to file a worldwide combined report as provided in Section 59-7-403 . For
930 purposes of this Subsection (12), when calculating the adjusted income of a foreign operating
931 company, a foreign operating company may not deduct the subtractions allowable under this
932 Subsection (12) and Subsection (11);
933 (b) in determining income apportionable to this state, the factors for a foreign operating
934 company shall be included in the combined report factors in the same percentage its adjusted
935 income is included in the combined adjusted income;
936 (13) the amount of gain or loss which is included in unadjusted income but not
937 recognized for federal purposes on stock sold or exchanged by a member of a selling
938 consolidated group as defined in Section 338, Internal Revenue Code, if an election has been
939 made pursuant to Section 338(h)(10), Internal Revenue Code;
940 (14) the amount of gain or loss which is included in unadjusted income but not
941 recognized for federal purposes on stock sold, exchanged, or distributed by a corporation
942 pursuant to Section 336(e), Internal Revenue Code, if an election under Section 336(e), Internal
943 Revenue Code, has been made for federal purposes;
944 (15) (a) adjustments to gains, losses, depreciation expense, amortization expense, and
945 similar items due to a difference between basis for federal purposes and basis as computed
946 under Section 59-7-107 ; and
947 (b) if there has been a reduction in federal basis for a federal tax credit where there is
948 no corresponding Utah tax credit, the amount of the reduction in basis shall be allowed as an
949 expense in the year of the federal credit;
950 (16) any interest expense not deducted on the federal corporate return under Section
951 265(b) or 291(e), Internal Revenue Code;
952 (17) 100% of the dividends received from subsidiaries which are insurance companies
953 exempt from this chapter under Subsection 59-7-102 (1)(c) and are under "common ownership"
954 as defined by Subsection 59-7-101 [(7)](8); [and]
955 (18) subject to Subsection 59-7-105 (12), the amount of a qualified investment as

956 defined in Section 53B-8a-102 that:
957 (a) a corporation that is an account owner as defined in Section 53B-8a-102 makes
958 during the taxable year;
959 (b) the corporation described in Subsection (18)(a) does not deduct on a federal
960 corporation income tax return; and
961 (c) does not exceed the maximum amount of the qualified investment that may be
962 subtracted from unadjusted income for a taxable year in accordance with Subsections
963 53B-8a-106 (1)(d) and (f)[.]; and
964 (19) for purposes of income included in a combined report under Part 4, Combined
965 Reporting, the entire amount of the dividends a member of a unitary group receives or is
966 considered to receive from a captive real estate investment trust.
967 Section 19. Section 59-7-116.5 is amended to read:
968 59-7-116.5. Real estate investment trusts.
969 (1) A real estate investment trust[, as defined in Section 856, Internal Revenue Code,]
970 that is not a captive real estate investment trust shall be taxed on the same income taxed for
971 federal purposes under the Internal Revenue Code.
972 (2) Any income taxable under this section shall be taxed at the same rate and in the
973 same manner provided for in this chapter.
974 Section 20. Section 59-7-402 is amended to read:
975 59-7-402. Water's edge combined report.
976 (1) Except as provided in Section 59-7-403 , if any corporation listed in Subsection
977 59-7-101 [(33)](38)(a) is doing business in Utah, the unitary group shall file a water's edge
978 combined report.
979 (2) (a) A group of corporations that are not otherwise a unitary group may elect to file a
980 water's edge combined report if each member of the group is:
981 (i) doing business in Utah;
982 (ii) part of the same affiliated group; and
983 (iii) qualified, under Section 1501, Internal Revenue Code, to file a federal
984 consolidated return.
985 (b) Each corporation within the affiliated group that is doing business in Utah must
986 consent to filing a combined report. If an affiliated group elects to file a combined report, each

987 corporation within the affiliated group that is doing business in Utah must file a combined
988 report.
989 (c) Corporations that elect to file a water's edge combined report under this section may
990 not thereafter elect to file a separate return without the consent of the commission.
991 Section 21. Section 59-10-103 is amended to read:
992 59-10-103. Definitions.
993 (1) As used in this chapter:
994 (a) "Adjusted gross income":
995 (i) for a resident or nonresident individual, is as defined in Section 62, Internal
996 Revenue Code; or
997 (ii) for a resident or nonresident estate or trust, is as calculated in Section 67(e),
998 Internal Revenue Code.
999 [(b) "Adoption expenses" means:]
1000 [(i) any actual medical and hospital expenses of the mother of the adopted child which
1001 are incident to the child's birth;]
1002 [(ii) any welfare agency fees or costs;]
1003 [(iii) any child placement service fees or costs;]
1004 [(iv) any legal fees or costs; or]
1005 [(v) any other fees or costs relating to an adoption.]
1006 [(c) "Adult with a disability" means an individual who:]
1007 [(i) is 18 years of age or older;]
1008 [(ii) is eligible for services under Title 62A, Chapter 5, Services for People with
1009 Disabilities; and]
1010 [(iii) is not enrolled in:]
1011 [(A) an education program for students with disabilities that is authorized under
1012 Section 53A-15-301 ; or]
1013 [(B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.]
1014 [(d) (i) For purposes of Subsection 59-10-114 (2)(l), "capital gain transaction" means a
1015 transaction that results in a:]
1016 [(A) short-term capital gain; or]
1017 [(B) long-term capital gain.]

1018 [(ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
1019 the commission may by rule define the term "transaction."]
1020 [(e) "Commercial domicile" means the principal place from which the trade or business
1021 of a Utah small business corporation is directed or managed.]
1022 [(f)] (b) "Corporation" includes:
1023 (i) [associations] an association;
1024 (ii) a joint stock [companies] company; and
1025 (iii) an insurance [companies] company.
1026 [(g) "Dependent child with a disability" means an individual 21 years of age or younger
1027 who:]
1028 [(i) (A) is diagnosed by a school district representative under rules adopted by the State
1029 Board of Education as having a disability classified as:]
1030 [(I) autism;]
1031 [(II) deafness;]
1032 [(III) preschool developmental delay;]
1033 [(IV) dual sensory impairment;]
1034 [(V) hearing impairment;]
1035 [(VI) intellectual disability;]
1036 [(VII) multidisability;]
1037 [(VIII) orthopedic impairment;]
1038 [(IX) other health impairment;]
1039 [(X) traumatic brain injury; or]
1040 [(XI) visual impairment;]
1041 [(B) is not receiving residential services from:]
1042 [(I) the Division of Services for People with Disabilities created under Section
1043 62A-5-102 ; or]
1044 [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
1045 and]
1046 [(C) is enrolled in:]
1047 [(I) an education program for students with disabilities that is authorized under Section
1048 53A-15-301 ; or]

1049 [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
1050 or]
1051 [(ii) is identified under guidelines of the Department of Health as qualified for:]
1052 [(A) Early Intervention; or]
1053 [(B) Infant Development Services.]
1054 [(h)] (c) "Distributable net income" is as defined in Section 643, Internal Revenue
1055 Code.
1056 [(i)] (d) "Employee" is as defined in Section 59-10-401 .
1057 [(j)] (e) "Employer" is as defined in Section 59-10-401 .
1058 [(k)] (f) "Federal taxable income":
1059 (i) for a resident or nonresident individual, means taxable income as defined by Section
1060 63, Internal Revenue Code; or
1061 (ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
1062 (b), Internal Revenue Code.
1063 [(l)] (g) "Fiduciary" means:
1064 (i) a guardian;
1065 (ii) a trustee;
1066 (iii) an executor;
1067 (iv) an administrator;
1068 (v) a receiver;
1069 (vi) a conservator; or
1070 (vii) any person acting in any fiduciary capacity for any individual.
1071 (h) "Guaranteed annuity interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
1072 [(m)] (i) "Homesteaded land diminished from the Uintah and Ouray Reservation"
1073 means the homesteaded land that was held to have been diminished from the Uintah and Ouray
1074 Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
1075 [(n)] (j) "Individual" means a natural person and includes aliens and minors.
1076 [(o)] (k) "Irrevocable trust" means a trust in which the settlor may not revoke or
1077 terminate all or part of the trust without the consent of a person who has a substantial beneficial
1078 interest in the trust and the interest would be adversely affected by the exercise of the settlor's
1079 power to revoke or terminate all or part of the trust.

1080 [(p) For purposes of Subsection 59-10-114 (2)(l), "long-term capital gain" is as defined
1081 in Section 1222, Internal Revenue Code.]
1082 (l) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.
1083 [(q)] (m) "Nonresident individual" means an individual who is not a resident of this
1084 state.
1085 [(r)] (n) "Nonresident trust" or "nonresident estate" means a trust or estate which is not
1086 a resident estate or trust.
1087 [(s)] (o) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
1088 unincorporated organization:
1089 (A) through or by means of which any business, financial operation, or venture is
1090 carried on; and
1091 (B) which is not, within the meaning of this chapter:
1092 (I) a trust;
1093 (II) an estate; or
1094 (III) a corporation.
1095 (ii) "Partnership" does not include any organization not included under the definition of
1096 "partnership" in Section 761, Internal Revenue Code.
1097 (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
1098 organization described in Subsection (1)[(s)](o)(i).
1099 [(t) "Qualifying military servicemember" means a member of:]
1100 [(i) The Utah Army National Guard;]
1101 [(ii) The Utah Air National Guard; or]
1102 [(iii) the following if the member is assigned to a unit that is located in the state:]
1103 [(A) The Army Reserve;]
1104 [(B) The Naval Reserve;]
1105 [(C) The Air Force Reserve;]
1106 [(D) The Marine Corps Reserve; or]
1107 [(E) The Coast Guard Reserve.]
1108 [(u) "Qualifying stock" means stock that is:]
1109 [(i) (A) common; or]
1110 [(B) preferred;]

1111 [(ii) as defined by the commission by rule, originally issued to:]
1112 [(A) a resident or nonresident individual; or]
1113 [(B) a partnership if the resident or nonresident individual making a subtraction from
1114 federal taxable income in accordance with Subsection 59-10-114 (2)(l):]
1115 [(I) was a partner when the stock was issued; and]
1116 [(II) remains a partner until the last day of the taxable year for which the resident or
1117 nonresident individual makes the subtraction from federal taxable income in accordance with
1118 Subsection 59-10-114 (2)(l); and]
1119 [(iii) issued:]
1120 [(A) by a Utah small business corporation;]
1121 [(B) on or after January 1, 2003; and]
1122 [(C) for:]
1123 [(I) money; or]
1124 [(II) other property, except for stock or securities.]
1125 (p) "Qualified nongrantor charitable lead trust" means a trust:
1126 (i) that is irrevocable;
1127 (ii) that has a trust term measured by:
1128 (A) a fixed term of years; or
1129 (B) the life of a person living on the day on which the trust is created;
1130 (iii) under which:
1131 (A) a portion of the value of the trust assets is distributed during the trust term:
1132 (I) to an organization described in Section 170(c), Internal Revenue Code; and
1133 (II) as a:
1134 (Aa) guaranteed annuity interest; or
1135 (Bb) unitrust interest; and
1136 (B) assets remaining in the trust at the termination of the trust term are distributed to a
1137 beneficiary:
1138 (I) designated in the trust; and
1139 (II) that is not an organization described in Section 170(c), Internal Revenue Code;
1140 (iv) for which the trust is allowed a deduction under Section 642(c), Internal Revenue
1141 Code; and

1142 (v) under which the grantor of the trust is not treated as the owner of any portion of the
1143 trust for federal income tax purposes.
1144 [(v)] (q) (i) "Resident individual" means:
1145 (A) an individual who is domiciled in this state for any period of time during the
1146 taxable year, but only for the duration of the period during which the individual is domiciled in
1147 this state; or
1148 (B) an individual who is not domiciled in this state but:
1149 (I) maintains a permanent place of abode in this state; and
1150 (II) spends in the aggregate 183 or more days of the taxable year in this state.
1151 (ii) For purposes of Subsection (1)[(v)] (q)(i)(B), a fraction of a calendar day shall be
1152 counted as a whole day.
1153 [(w)] (r) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
1154 [(x) For purposes of Subsection 59-10-114 (2)(l), "short-term capital gain" is as defined
1155 in Section 1222, Internal Revenue Code.]
1156 (s) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.
1157 (t) "State income tax percentage for a nonresident estate or trust" means a percentage
1158 equal to a nonresident estate's or trust's state taxable income for the taxable year divided by the
1159 nonresident estate's or trust's total adjusted gross income for that taxable year after making the
1160 adjustments required by:
1161 (i) Section 59-10-202 ;
1162 (ii) Section 59-10-207 ;
1163 (iii) Section 59-10-209.1 ; or
1164 (iv) Section 59-10-210 ;
1165 (u) "State income tax percentage for a nonresident individual" means a percentage
1166 equal to a nonresident individual's state taxable income for the taxable year divided by the
1167 difference between:
1168 (i) the nonresident individual's total adjusted gross income for that taxable year, after
1169 making the:
1170 (A) additions and subtractions required by Section 59-10-114 ; and
1171 (B) adjustments required by Section 59-10-115 ; and
1172 (ii) if the nonresident individual described in Subsection (1)(u)(i) is a servicemember,

1173 the compensation the servicemember receives for military service if the servicemember is
1174 serving in compliance with military orders.
1175 (v) "State income tax percentage for a part-year resident individual" means, for a
1176 taxable year, a fraction:
1177 (i) the numerator of which is the sum of:
1178 (A) subject to Subsections 59-10-1404 (3) and (4), for the time period during the
1179 taxable year that the part-year resident individual is a resident, the part-year resident
1180 individual's total adjusted gross income for that time period, after making the:
1181 (I) additions and subtractions required by Section 59-10-114 ; and
1182 (II) adjustments required by Section 59-10-115 ; and
1183 (B) for the time period during the taxable year that the part-year resident individual is a
1184 nonresident, an amount calculated by:
1185 (I) determining the part-year resident individual's adjusted gross income for that time
1186 period, after making the:
1187 (Aa) additions and subtractions required by Section 59-10-114 ; and
1188 (Bb) adjustments required by Section 59-10-115 ; and
1189 (II) calculating the portion of the amount determined under Subsection (1)(v)(i)(B)(I)
1190 that is derived from Utah sources in accordance with Section 59-10-117 ; and
1191 (ii) the denominator of which is the difference between:
1192 (A) the part-year resident individual's total adjusted gross income for that taxable year,
1193 after making the:
1194 (I) additions and subtractions required by Section 59-10-114 ; and
1195 (II) adjustments required by Section 59-10-115 ; and
1196 (B) if the part-year resident individual is a servicemember, any compensation the
1197 servicemember receives for military service during the portion of the taxable year that the
1198 servicemember is a nonresident if the servicemember is serving in compliance with military
1199 orders.
1200 [(y)] (w) "Taxable income" or "state taxable income":
1201 (i) subject to Subsection [ 59-10-302 (2)] 59-10-1404 (3), for a resident individual [other
1202 than a resident individual described in Subsection (1)(y)(iii)], means the resident individual's
1203 [federal taxable] adjusted gross income after making the:

1204 (A) additions and subtractions required by Section 59-10-114 ; and
1205 (B) adjustments required by Section 59-10-115 ;
1206 (ii) for a nonresident individual [other than a nonresident individual described in
1207 Subsection (1)(y)(iii), is as defined in Section 59-10-116 ;], is an amount calculated by:
1208 (A) determining the nonresident individual's adjusted gross income for the taxable
1209 year, after making the:
1210 (I) additions and subtractions required by Section 59-10-114 ; and
1211 (II) adjustments required by Section 59-10-115 ; and
1212 (B) calculating the portion of the amount determined under Subsection (1)(w)(ii)(A)
1213 that is derived from Utah sources in accordance with Section 59-10-117 ;
1214 [(iii) for a resident or nonresident individual that collects and pays a tax described in
1215 Part 12, Single Rate Individual Income Tax Act, is as defined in Section 59-10-1202 ;]
1216 [(iv)] (iii) for a resident estate or trust, is as calculated under Section 59-10-201.1 ; and
1217 [(v)] (iv) for a nonresident estate or trust, is as calculated under Section 59-10-204 .
1218 [(z)] (x) "Taxpayer" means any individual, estate, [or] trust, or beneficiary of an estate
1219 or trust, [whose income is] that has income subject in whole or part to the tax imposed by this
1220 chapter.
1221 (y) "Trust term" means a time period:
1222 (i) beginning on the day on which a qualified nongrantor charitable lead trust is
1223 created; and
1224 (ii) ending on the day on which the qualified nongrantor charitable lead trust described
1225 in Subsection (1)(y)(i) terminates.
1226 [(aa)] (z) "Uintah and Ouray Reservation" means the lands recognized as being
1227 included within the Uintah and Ouray Reservation in:
1228 (i) Hagen v. Utah, 510 U.S. 399 (1994); and
1229 (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
1230 [(bb) (i) "Utah small business corporation" means a corporation that:]
1231 [(A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
1232 Code;]
1233 [(B) except as provided in Subsection (1)(bb)(ii), meets the requirements of Section
1234 1244(c)(1)(C), Internal Revenue Code; and]

1235 [(C) has its commercial domicile in this state.]
1236 [(ii) Notwithstanding Subsection (1)(bb)(i)(B), the time period described in Section
1237 1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the source of a
1238 corporation's aggregate gross receipts shall end on the last day of the taxable year for which the
1239 resident or nonresident individual makes a subtraction from federal taxable income in
1240 accordance with Subsection 59-10-114 (2)(l).]
1241 (aa) "Unadjusted income" means an amount equal to the difference between:
1242 (i) the total income required to be reported by a resident or nonresident estate or trust
1243 on the resident or nonresident estate's or trust's federal income tax return for estates and trusts
1244 for the taxable year; and
1245 (ii) the sum of the following:
1246 (A) fees paid or incurred to the fiduciary of a resident or nonresident estate or trust:
1247 (I) for administering the resident or nonresident estate or trust; and
1248 (II) that the resident or nonresident estate or trust deducts as allowed on the resident or
1249 nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
1250 year;
1251 (B) the income distribution deduction that a resident or nonresident estate or trust
1252 deducts under Section 651 or 661, Internal Revenue Code, as allowed on the resident or
1253 nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
1254 year;
1255 (C) the amount that a resident or nonresident estate or trust deducts as a deduction for
1256 estate tax or generation skipping transfer tax under Section 691(c), Internal Revenue Code, as
1257 allowed on the resident or nonresident estate's or trust's federal income tax return for estates
1258 and trusts for the taxable year; and
1259 (D) the amount that a resident or nonresident estate or trust deducts as a personal
1260 exemption under Section 642(b), Internal Revenue Code, as allowed on the resident or
1261 nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
1262 year.
1263 (bb) "Unitrust interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
1264 (cc) "Ute tribal member" means a person who is enrolled as a member of the Ute
1265 Indian Tribe of the Uintah and Ouray Reservation.

1266 (dd) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
1267 (ee) "Wages" is as defined in Section 59-10-401 .
1268 (2) (a) Any term used in this chapter has the same meaning as when used in
1269 comparable context in the laws of the United States relating to federal income taxes unless a
1270 different meaning is clearly required.
1271 (b) Any reference to the Internal Revenue Code or to the laws of the United States shall
1272 mean the Internal Revenue Code or other provisions of the laws of the United States relating to
1273 federal income taxes that are in effect for the taxable year.
1274 (c) Any reference to a specific section of the Internal Revenue Code or other provision
1275 of the laws of the United States relating to federal income taxes shall include any
1276 corresponding or comparable provisions of the Internal Revenue Code as [hereafter] amended,
1277 redesignated, or reenacted.
1278 Section 22. Section 59-10-104 is amended to read:
1279 59-10-104. Tax basis -- Tax rate -- Exemption.
1280 (1) [Except as provided in Subsection (5) or Part 12, Single Rate Individual Income
1281 Tax Act, for] For taxable years beginning on or after January 1, [2006] 2008, [but beginning on
1282 or before December 31, 2007,] a tax is imposed on the state taxable income of [every] a
1283 resident individual as provided in this section.
1284 [(2) For an individual, other than a husband and wife or head of household required to
1285 use the tax table under Subsection (3), the tax under this section is imposed in accordance with
1286 the following income brackets:]
1287 [If the state taxable income is: The tax is:]
1288 [Less than or equal to $1,000 2.3% of the state taxable income]
1289 [Greater than $1,000 but less than $23, plus 3.3% of state taxable]
1290 [or equal to $2,000 income greater than $1,000]
1291 [Greater than $2,000 but less than $56, plus 4.2% of state taxable]
1292 [or equal to $3,000 income greater than $2,000]
1293 [Greater than $3,000 but less than $98, plus 5.2% of state taxable]
1294 [or equal to $4,000 income greater than $3,000]
1295 [Greater than $4,000 but less than $150, plus 6% of state taxable]
1296 [or equal to $5,500 income greater than $4,000]

1297 [Greater than $5,500 $240, plus 6.98% of state taxable]
1298 [income greater than $5,500]
1299 [(3) For a husband and wife filing a single return jointly, or a head of household as
1300 defined in Section 2(b), Internal Revenue Code, filing a single return, the tax under this section
1301 is imposed in accordance with the following income brackets:]
1302 [If the state taxable income is: The tax is:]
1303 [Less than or equal to $2,000 2.3% of the state taxable income]
1304 [Greater than $2,000 but less than $46, plus 3.3% of state taxable]
1305 [or equal to $4,000 income greater than $2,000]
1306 [Greater than $4,000 but less than $112, plus 4.2% of state taxable]
1307 [or equal to $6,000 income greater than $4,000]
1308 [Greater than $6,000 but less than $196, plus 5.2% of state taxable]
1309 [or equal to $8,000 income greater than $6,000]
1310 [Greater than $8,000 but less than $300, plus 6% of state taxable]
1311 [or equal to $11,000 income greater than $8,000]
1312 [Greater than $11,000 $480, plus 6.98% of state taxable]
1313 [income greater than $11,000]
1314 [(4) (a) For taxable years beginning on or after January 1, 2009, the commission shall:]
1315 [(i) make the following adjustments to the income brackets under Subsection (2):]
1316 [(A) increase or decrease the income brackets under Subsection (2) by a percentage
1317 equal to the percentage difference between the consumer price index for the preceding calendar
1318 year and the consumer price index for the calendar year 2007; and]
1319 [(B) after making an increase or decrease under Subsection (4)(a)(i)(A), round the
1320 income brackets under Subsection (2) to the nearest whole dollar;]
1321 [(ii) after making the adjustments described in Subsection (4)(a)(i) to the income
1322 brackets under Subsection (2), adjust the income brackets under Subsection (3) so that for each
1323 income bracket under Subsection (2) there is a corresponding income bracket under Subsection
1324 (3) that is equal to the product of:]
1325 [(A) each income bracket under Subsection (2); and]
1326 [(B) two; and]
1327 [(iii) to the extent necessary to reflect an adjustment under Subsection (4)(a)(i) or (ii):]

1328 [(A) increase or decrease the amount of tax under Subsection (2) or (3) prior to adding
1329 in the portion of the tax calculated as a percentage of state taxable income; and]
1330 [(B) after making an increase or decrease under Subsection (4)(a)(iii)(A), round the
1331 amount of tax under Subsection (2) or (3) to the nearest whole dollar.]
1332 [(b) The commission may not increase or decrease the tax rate percentages provided in
1333 Subsection (2) or (3).]
1334 [(c) For purposes of Subsection (4)(a)(i), the commission shall calculate the consumer
1335 price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.]
1336 (2) For purposes of Subsection (1), for a taxable year, the tax is an amount equal to the
1337 product of:
1338 (a) the resident individual's state taxable income for that taxable year; and
1339 (b) 5%.
1340 [(5)] (3) This section does not apply to a resident individual exempt from taxation
1341 under Section 59-10-104.1 .
1342 Section 23. Section 59-10-104.1 is amended to read:
1343 59-10-104.1. Exemption from taxation.
1344 (1) For purposes of this section:
1345 (a) "Personal exemptions" means the total exemption amount an individual is allowed
1346 to claim for the taxable year under Section 151, Internal Revenue Code, for:
1347 (i) the individual;
1348 (ii) the individual's spouse; and
1349 (iii) the individual's dependents.
1350 (b) "Standard deduction":
1351 (i) [except as provided in Subsection (1)(b)(ii),] means the standard deduction an
1352 individual is allowed to claim for the taxable year under Section 63, Internal Revenue Code;
1353 and
1354 (ii) notwithstanding Subsection (1)(b)(i), does not include an additional amount
1355 allowed under Section 63(f), Internal Revenue Code, for an individual or an individual's spouse
1356 who is:
1357 (A) blind; or
1358 (B) 65 years of age or older.

1359 (2) For taxable years beginning on or after January 1, 2002, an individual is exempt
1360 from a tax imposed by Section 59-10-104 or 59-10-116 [or described in Section 59-10-1203 ]
1361 if the individual's adjusted gross income on the individual's federal individual income tax
1362 return for the taxable year is less than or equal to the sum of the individual's:
1363 (a) personal exemptions for that taxable year; and
1364 (b) standard deduction for that taxable year.
1365 Section 24. Section 59-10-110 is amended to read:
1366 59-10-110. Disallowance of federal tax credits.
1367 [No] A credit applied directly to the income tax calculated for federal income tax
1368 purposes [pursuant to] in accordance with the Internal Revenue Code [shall] may not be
1369 applied in calculating the tax due under this chapter.
1370 Section 25. Section 59-10-114 is amended to read:
1371 59-10-114. Additions to and subtractions from adjusted gross income of an
1372 individual.
1373 (1) There shall be added to [federal taxable] adjusted gross income of a resident or
1374 nonresident individual:
1375 [(a) the amount of any income tax imposed by this or any predecessor Utah individual
1376 income tax law and the amount of any income tax imposed by the laws of another state, the
1377 District of Columbia, or a possession of the United States, to the extent deducted from adjusted
1378 gross income in determining federal taxable income;]
1379 [(b)] (a) a lump sum distribution that the taxpayer does not include in adjusted gross
1380 income on the taxpayer's federal individual income tax return for the taxable year;
1381 [(c)] (b) [for taxable years beginning on or after January 1, 2002,] the amount of a
1382 child's income calculated under Subsection [(5)] (4) that:
1383 (i) a parent elects to report on the parent's federal individual income tax return for the
1384 taxable year; and
1385 (ii) the parent does not include in adjusted gross income on the parent's federal
1386 individual income tax return for the taxable year;
1387 [(d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
1388 Code;]
1389 [(e)] (c) (i) a withdrawal from a medical care savings account and any penalty imposed

1390 [in] for the taxable year if:
1391 [(i)] (A) the resident or nonresident individual [did] does not deduct [or include] the
1392 amounts on the resident or nonresident individual's federal individual income tax return
1393 [pursuant to] under Section 220, Internal Revenue Code;
1394 [(ii)] (I) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2); and
1395 [(iii)] (II) the withdrawal is [deducted by]:
1396 (Aa) subtracted on a return the resident or nonresident individual [under Subsection
1397 (2)(h);] files under this chapter for a taxable year beginning on or before December 31, 2007;
1398 or
1399 (Bb) used as the basis for a resident or nonresident individual to claim a tax credit
1400 under Section 59-10-1021 ;
1401 (ii) a disbursement required to be added to adjusted gross income in accordance with
1402 Subsection 31A-32a-105 (3); or
1403 (iii) an amount required to be added to adjusted gross income in accordance with
1404 Subsection 31A-32a-105 (5)(c);
1405 [(f)] (d) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
1406 Incentive Program, from the account of a resident or nonresident individual who is an account
1407 owner as defined in Section 53B-8a-102 , for the taxable year for which the amount is
1408 withdrawn, if that amount withdrawn from the account of the resident or nonresident individual
1409 who is the account owner:
1410 (i) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
1411 (ii) is:
1412 (A) subtracted by the resident or nonresident individual:
1413 (I) who is the account owner; and
1414 [(II) in accordance with Subsection (2)(i); or]
1415 (II) on the resident or nonresident individual's return filed under this chapter for a
1416 taxable year beginning on or before December 31, 2007; or
1417 (B) used as the basis for the resident or nonresident individual who is the account
1418 owner to claim a tax credit under Section [ 59-10-1206.1 ] 59-10-1017 ;
1419 [(g)] (e) except as provided in Subsection (6), [for taxable years beginning on or after
1420 January 1, 2003,] for bonds, notes, and other evidences of indebtedness acquired on or after

1421 January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
1422 one or more of the following entities:
1423 (i) a state other than this state;
1424 (ii) the District of Columbia;
1425 (iii) a political subdivision of a state other than this state; or
1426 (iv) an agency or instrumentality of an entity described in Subsections (1)[(g)](e)(i)
1427 through (iii);
1428 [(h)] (f) subject to Subsection (2)[(n)](c), any distribution received by a resident
1429 beneficiary of a resident trust of income that was taxed at the trust level for federal tax
1430 purposes, but was subtracted from state taxable income of the trust pursuant to Subsection
1431 59-10-202 (2)[(c)](b);
1432 [(i)] (g) any distribution received by a resident beneficiary of a nonresident trust of
1433 undistributed distributable net income realized by the trust on or after January 1, 2004, if that
1434 undistributed distributable net income was taxed at the trust level for federal tax purposes, but
1435 was not taxed at the trust level by any state, with undistributed distributable net income
1436 considered to be distributed from the most recently accumulated undistributed distributable net
1437 income; and
1438 [(j)] (h) any adoption expense:
1439 (i) for which a resident or nonresident individual receives reimbursement from another
1440 person; and
1441 (ii) to the extent to which the resident or nonresident individual [deducts] subtracts that
1442 adoption expense:
1443 [(A) under Subsection (2)(c); or]
1444 (A) on a return filed under this chapter for a taxable year beginning on or before
1445 December 31, 2007; or
1446 (B) from federal taxable income on a federal individual income tax return.
1447 (2) There shall be subtracted from [federal taxable] adjusted gross income of a resident
1448 or nonresident individual:
1449 (a) the difference between:
1450 [(a)] (i) the interest or a dividend on [obligations or securities] an obligation or security
1451 of the United States [and its possessions or of any] or an authority, commission, [or]

1452 instrumentality, or possession of the United States, to the extent that interest or dividend is:
1453 (A) included in adjusted gross income for federal income tax purposes for the taxable
1454 year [but]; and
1455 (B) exempt from state income taxes under the laws of the United States[, but the
1456 amount subtracted under this Subsection (2)(a) shall be reduced by]; and
1457 (ii) any interest on indebtedness incurred or continued to purchase or carry the
1458 [obligations or securities] obligation or security described in [this] Subsection (2)(a)(i)[, and by
1459 any expenses incurred in the production of interest or dividend income described in this
1460 Subsection (2)(a) to the extent that such expenses, including amortizable bond premiums, are
1461 deductible in determining federal taxable income];
1462 [(b) 1/2 of the net amount of any income tax paid or payable to the United States after
1463 all allowable credits, as reported on the United States individual income tax return of the
1464 taxpayer for the same taxable year;]
1465 [(c) the amount of adoption expenses for one of the following taxable years as elected
1466 by the resident or nonresident individual:]
1467 [(i) regardless of whether a court issues an order granting the adoption, the taxable year
1468 in which the adoption expenses are:]
1469 [(A) paid; or]
1470 [(B) incurred;]
1471 [(ii) the taxable year in which a court issues an order granting the adoption; or]
1472 [(iii) any year in which the resident or nonresident individual may claim the federal
1473 adoption expenses credit under Section 23, Internal Revenue Code;]
1474 [(d) amounts received by taxpayers under age 65 as retirement income which, for
1475 purposes of this section, means pensions and annuities, paid from an annuity contract
1476 purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
1477 Internal Revenue Code, or purchased by an employee under a plan which meets the
1478 requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
1479 political subdivision thereof, or the District of Columbia, to the employee involved or the
1480 surviving spouse;]
1481 [(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
1482 personal retirement exemption;]

1483 [(f) 75% of the amount of the personal exemption, as defined and calculated in the
1484 Internal Revenue Code, for each dependent child with a disability and adult with a disability
1485 who is claimed as a dependent on a taxpayer's return;]
1486 [(g) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
1487 taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:]
1488 [(i) for:]
1489 [(A) the taxpayer;]
1490 [(B) the taxpayer's spouse; and]
1491 [(C) the taxpayer's dependents; and]
1492 [(ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
1493 213, Internal Revenue Code, in determining federal taxable income for the taxable year;]
1494 [(h) (i) except as provided in this Subsection (2)(h), the amount of a contribution made
1495 during the taxable year on behalf of the taxpayer to a medical care savings account and interest
1496 earned on a contribution to a medical care savings account established pursuant to Title 31A,
1497 Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is accepted by
1498 the account administrator as provided in the Medical Care Savings Account Act, and if the
1499 taxpayer did not deduct or include amounts on the taxpayer's federal individual income tax
1500 return pursuant to Section 220, Internal Revenue Code; and]
1501 [(ii) a contribution deductible under this Subsection (2)(h) may not exceed either of the
1502 following:]
1503 [(A) the maximum contribution allowed under the Medical Care Savings Account Act
1504