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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