S.B. 8 Enrolled

RESEARCH TAX CREDITS MODIFICATIONS
1999 GENERAL SESSION
STATE OF UTAH
Sponsor: Howard C. Nielson
Mike Dmitrich
R. Mont Evans
Parley Hellewell
Lyle W. Hillyard
Scott N. Howell
Joseph L. Hull
Ed P. Mayne
Robert F. Montgomery
L. Steven Poulton
Howard A. Stephenson
John L. Valentine
Michael G. Waddoups

AN ACT RELATING TO REVENUE AND TAXATION; MODIFYING THE INDIVIDUAL
INCOME TAX AND CORPORATE FRANCHISE AND INCOME TAX CREDITS FOR
RESEARCH ACTIVITIES CONDUCTED IN THE STATE TO ALLOW CERTAIN
TAXPAYERS AN IRREVOCABLE ELECTION TO BE TREATED AS A START-UP
COMPANY FOR PURPOSES OF CALCULATING THE BASE AMOUNT; PROVIDING
THAT A TAXPAYER QUALIFYING FOR A CREDIT FOR A PURCHASE OF MACHINERY,
EQUIPMENT, OR BOTH MAY NOT CLAIM THE CREDIT OR CARRY THE CREDIT
FORWARD IF THE MACHINERY, EQUIPMENT, OR BOTH IS PRIMARILY USED TO
CONDUCT QUALIFIED RESEARCH IN THE STATE FOR A TIME PERIOD THAT IS LESS
THAN 12 CONSECUTIVE MONTHS; CLARIFYING THE REQUIREMENTS FOR
ELIGIBILITY FOR THE INDIVIDUAL INCOME TAX AND CORPORATE FRANCHISE
AND INCOME TAX CREDITS FOR MACHINERY, EQUIPMENT, OR BOTH, USED FOR
QUALIFIED RESEARCH OR BASIC RESEARCH; MAKING TECHNICAL CHANGES; AND
PROVIDING FOR RETROSPECTIVE OPERATION.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
59-7-612, as enacted by Chapter 367, Laws of Utah 1998
59-7-613, as enacted by Chapter 371, Laws of Utah 1998
59-10-131, as enacted by Chapter 367, Laws of Utah 1998
59-10-132, as enacted by Chapter 371, Laws of Utah 1998
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-7-612 is amended to read:

59-7-612. Credits for research activities conducted in the state -- Carry forward --
Commission to report modification or repeal of federal credits -- Tax Review Commission
study.
(1) (a) For taxable years beginning on or after January 1, 1999, but beginning before
December 31, 2010, a taxpayer meeting the requirements of this section shall qualify for the
following nonrefundable credits for increasing research activities in this state:
(i) a research credit of 6% of the taxpayer's qualified research expenses for the current
taxable year that exceed the base amount provided for under Subsection (4); and
(ii) a credit for payments to qualified organizations for basic research as provided in Section
41(e), Internal Revenue Code of 6% for the current taxable year that exceed the base amount
provided for under Subsection (4).
(b) If a taxpayer qualifying for a credit under Subsection (1)(a) seeks to claim the credit, the
taxpayer shall:
(i) claim the credit or a portion of the credit for the taxable year immediately following the
taxable year for which the taxpayer qualifies for the credit;
(ii) carry the credit or a portion of the credit forward as provided in Subsection (4)(f); or
(iii) claim a portion of the credit and carry forward a portion of the credit as provided in
Subsections (1)(b)(i) and (ii).
(c) The credits provided for in this section do not include the alternative incremental credit
provided for in Section 41(c)(4), Internal Revenue Code.
(2) For purposes of claiming a credit under this section, a unitary group as defined in Section
59-7-101 is considered to be one taxpayer.
(3) Except as specifically provided for in this section:
(a) the credits authorized under Subsection (1) shall be calculated as provided in Section 41,
Internal Revenue Code; and
(b) the definitions provided in Section 41, Internal Revenue Code, apply in calculating the
credits authorized under Subsection (1).
(4) For purposes of this section:

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(a) the base amount shall be calculated as provided in Sections 41(c) and 41(h), Internal
Revenue Code, except that:
(i) the base amount does not include the calculation of the alternative incremental credit
provided for in Section 41(c)(4), Internal Revenue Code; [and]
(ii) a taxpayer's gross receipts include only those gross receipts attributable to sources within
this state as provided in Part 3, Allocation and Apportionment of Income -- Utah UDITPA
Provisions; and
(iii) notwithstanding Section 41(c), Internal Revenue Code, for purposes of calculating the
base amount, a taxpayer:
(A) may elect to be treated as a start-up company as provided in Section 41(c)(3)(B)
regardless of whether the taxpayer meets the requirements of Section 41(c)(3)(B)(i)(I) or (II); and
(B) may not revoke an election to be treated as a start-up company under Subsection
(4)(a)(iii)(A);
(b) "basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except that the
term includes only basic research conducted in this state;
(c) "qualified research" is as defined in Section 41(d), Internal Revenue Code, except that
the term includes only qualified research conducted in this state;
(d) "qualified research expenses" is as defined and calculated in Section 41(b), Internal
Revenue Code, except that the term includes only those expenses incurred in conducting qualified
research in this state;
(e) notwithstanding the provisions of Section 41(h), Internal Revenue Code, the credits
provided for in this section shall not terminate if the credits terminate under Section 41, Internal
Revenue Code; and
(f) notwithstanding the provisions of Sections 39 and 41(g), Internal Revenue Code,
governing the carry forward and carry back of federal tax credits, if the amount of a tax credit
claimed by a taxpayer under this section exceeds the taxpayer's tax liability under this chapter for
a taxable year, the amount of the credit exceeding the liability:
(i) may be carried forward for a period that does not exceed the next 14 taxable years; and

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(ii) may not be carried back to a taxable year preceding the current taxable year.
(5) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
commission may make rules for purposes of this section prescribing a certification process for
qualified organizations to ensure that amounts paid to the qualified organizations are for basic
research conducted in this state.
(6) If a federal tax credit under Section 41, Internal Revenue Code, is modified or repealed,
the commission shall report the modification or repeal to the Tax Review Commission within 60
days after the day on which the modification or repeal becomes effective.
(7) (a) Except as provided in Subsection (7)(b), the Tax Review Commission shall review
the credits provided for in this section on or before the earlier of:
(i) October 1 of the year after the year in which the commission reports under Subsection
(6) a modification or repeal of a federal tax credit under Section 41, Internal Revenue Code; or
(ii) October 1, 2004.
(b) Notwithstanding Subsection (7)(a), the Tax Review Commission is not required to
review the credits provided for in this section if the only modification to a federal tax credit under
Section 41, Internal Revenue Code, is the extension of the termination date provided for in Section
41(h), Internal Revenue Code.
(c) The Tax Review Commission shall address in a review under this section the:
(i) cost of the credit;
(ii) purpose and effectiveness of the credit;
(iii) whether the credit benefits the state; and
(iv) whether the credit should be:
(A) continued;
(B) modified; or
(C) repealed.
(d) If the Tax Review Commission reviews the credits provided for in this section, the Tax
Review Commission shall report its findings to the Revenue and Taxation Interim Committee on or
before the November interim meeting of the year in which the Tax Review Commission reviews the

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credits.
Section 2. Section 59-7-613 is amended to read:
59-7-613. Credits for machinery, equipment, or both primarily used for conducting
qualified research or basic research -- Carry forward -- Commission to report modification
or repeal of federal credits -- Tax Review Commission study.
(1) As used in this section:
(a) "Basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except that the
term includes only basic research conducted in this state.
(b) "Equipment" includes:
(i) computers;
(ii) computer equipment; and
(iii) computer software.
(c) "Purchase price":
(i) includes the cost of installing an item of machinery or equipment; and
(ii) does not include sales or use taxes imposed on an item of machinery or equipment.
(d) "Qualified organization" is as defined in Section 41(e)(6), Internal Revenue Code.
(e) "Qualified research" is as defined in Section 41(d), Internal Revenue Code, except that
the term includes only qualified research conducted in this state.
(2) (a) [For] Except as provided in Subsection (2)(c), for taxable years beginning on or after
January 1, 1999, but beginning before December 31, 2010, a taxpayer [meeting the requirements of
this section] shall qualify for the following nonrefundable credits for the taxable year in which the
machinery, equipment, or both, meets the requirements of either Subsection (2)(a)(i) or (2)(a)(ii):
(i) a credit of 6% of the purchase price of either machinery, equipment, or both:
(A) purchased by the taxpayer during the taxable year;
(B) that is not exempt from sales or use taxes; and
(C) that is primarily used to conduct qualified research in this state; and
(ii) a credit of 6% of the purchase price of either machinery, equipment, or both:
(A) purchased by the taxpayer during the taxable year;

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(B) that is not exempt from sales or use taxes; [and]
(C) that is donated to a qualified organization [to be]; and
(D) that is primarily used to conduct basic research in this state.
(b) If a taxpayer qualifying for a credit under Subsection (2)(a) seeks to claim the credit, the
taxpayer shall:
(i) claim the credit or a portion of the credit for the taxable year immediately following the
taxable year for which the taxpayer qualifies for the credit;
(ii) carry the credit or a portion of the credit forward as provided in Subsection (5); or
(iii) claim a portion of the credit and carry forward a portion of the credit as provided in
Subsections (2)(b)(i) and (ii).
(c) Notwithstanding Subsection (2)(a), if a taxpayer qualifies for a credit under Subsection
(2)(a) for a purchase of machinery, equipment, or both, the taxpayer may not claim the credit or carry
the credit forward if the machinery, equipment, or both, is primarily used to conduct qualified
research in the state for a time period that is less than 12 consecutive months.
(3) For purposes of claiming a credit under this section, a unitary group as defined in Section
59-7-101 is considered to be one taxpayer.
(4) Notwithstanding the provisions of Section 41(h), Internal Revenue Code, the credits
provided for in this section shall not terminate if the credits terminate under Section 41, Internal
Revenue Code.
(5) Notwithstanding the provisions of Sections 39 and 41(g), Internal Revenue Code,
governing the carry forward and carry back of federal tax credits, if the amount of a tax credit
claimed by a taxpayer under this section exceeds the taxpayer's tax liability under this chapter for
a taxable year, the amount of the credit exceeding the liability:
(a) may be carried forward for a period that does not exceed the next 14 taxable years; and
(b) may not be carried back to a taxable year preceding the current taxable year.
(6) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
commission may make rules for purposes of this section prescribing a certification process for
qualified organizations to ensure that either machinery, equipment, or both provided to the qualified

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organization is to be primarily used to conduct basic research in this state.
(7) If a federal tax credit under Section 41, Internal Revenue Code, is modified or repealed,
the commission shall report the modification or repeal to the Tax Review Commission within 60
days after the day on which the modification or repeal becomes effective.
(8) (a) Except as provided in Subsection (8)(b), the Tax Review Commission shall review
the credits provided for in this section on or before the earlier of:
(i) October 1 of the year after the year in which the commission reports under Subsection
(7) a modification or repeal of a federal tax credit under Section 41, Internal Revenue Code; or
(ii) October 1, 2004.
(b) Notwithstanding Subsection (8)(a), the Tax Review Commission is not required to
review the credits provided for in this section if the only modification to a federal tax credit under
Section 41, Internal Revenue Code, is the extension of the termination date provided for in Section
41(h), Internal Revenue Code.
(c) The Tax Review Commission shall address in a review under this section the:
(i) cost of the credit;
(ii) purpose and effectiveness of the credit;
(iii) whether the credit benefits the state; and
(iv) whether the credit should be:
(A) continued;
(B) modified; or
(C) repealed.
(d) If the Tax Review Commission reviews the credits provided for in this section, the Tax
Review Commission shall report its findings to the Revenue and Taxation Interim Committee on or
before the November interim meeting of the year in which the Tax Review Commission reviews the
credits.
Section 3. Section 59-10-131 is amended to read:
59-10-131. Credits for research activities conducted in the state -- Carry forward --
Commission to report modification or repeal of federal credits -- Tax Review Commission

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study.
(1) (a) For taxable years beginning on or after January 1, 1999, but beginning before
December 31, 2010, a taxpayer meeting the requirements of this section shall qualify for the
following nonrefundable credits for increasing research activities in this state:
(i) a research credit of 6% of the taxpayer's qualified research expenses for the current
taxable year that exceed the base amount provided for under Subsection (4); and
(ii) a credit for payments to qualified organizations for basic research as provided in Section
41(e), Internal Revenue Code of 6% for the current taxable year that exceed the base amount
provided for under Subsection (4).
(b) If a taxpayer qualifying for a credit under Subsection (1)(a) seeks to claim the credit the
taxpayer shall:
(i) claim the credit or a portion of the credit for the taxable year immediately following the
taxable year for which the taxpayer qualifies for the credit;
(ii) carry the credit or a portion of the credit forward as provided in Subsection (4)(f); or
(iii) claim a portion of the credit and carry forward a portion of the credit as provided in
Subsections (1)(b)(i) and (ii).
(c) The credits provided for in this section do not include the alternative incremental credit
provided for in Section 41(c)(4), Internal Revenue Code.
(2) For purposes of claiming a credit under this section, a unitary group as defined in Section
59-7-101 is considered to be one taxpayer.
(3) Except as specifically provided for in this section:
(a) the credits authorized under Subsection (1) shall be calculated as provided in Section 41,
Internal Revenue Code; and
(b) the definitions provided in Section 41, Internal Revenue Code, apply in calculating the
credits authorized under Subsection (1).
(4) For purposes of this section:
(a) the base amount shall be calculated as provided in Sections 41(c) and 41(h), Internal
Revenue Code, except that:

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(i) the base amount does not include the calculation of the alternative incremental credit
provided for in Section 41(c)(4), Internal Revenue Code; [and]
(ii) a taxpayer's gross receipts include only those gross receipts attributable to sources within
this state as provided in Chapter 7, Part 3, Allocation and Apportionment of Income -- Utah UDITPA
Provisions; and
(iii) notwithstanding Section 41(c), Internal Revenue Code, for purposes of calculating the
base amount, a taxpayer:
(A) may elect to be treated as a start-up company as provided in Section 41(c)(3)(B)
regardless of whether the taxpayer meets the requirements of Section 41(c)(3)(B)(i)(I) or (II); and
(B) may not revoke an election to be treated as a start-up company under Subsection
(4)(a)(iii)(A);
(b) "basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except that the
term includes only basic research conducted in this state;
(c) "qualified research" is as defined in Section 41(d), Internal Revenue Code, except that
the term includes only qualified research conducted in this state;
(d) "qualified research expenses" is as defined and calculated in Section 41(b), Internal
Revenue Code, except that the term includes only those expenses incurred in conducting qualified
research in this state;
(e) notwithstanding the provisions of Section 41(h), Internal Revenue Code, the credits
provided for in this section shall not terminate if the credits terminate under Section 41, Internal
Revenue Code; and
(f) notwithstanding the provisions of Sections 39 and 41(g), Internal Revenue Code,
governing the carry forward and carry back of federal tax credits, if the amount of a tax credit
claimed by a taxpayer under this section exceeds the taxpayer's tax liability under this chapter for
a taxable year, the amount of the credit exceeding the liability:
(i) may be carried forward for a period that does not exceed the next 14 taxable years; and
(ii) may not be carried back to a taxable year preceding the current taxable year.
(5) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the

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commission may make rules for purposes of this section prescribing a certification process for
qualified organizations to ensure that amounts paid to the qualified organizations are for basic
research conducted in this state.
(6) If a federal tax credit under Section 41, Internal Revenue Code, is modified or repealed,
the commission shall report the modification or repeal to the Tax Review Commission within 60
days after the day on which the modification or repeal becomes effective.
(7) (a) Except as provided in Subsection (7)(b), the Tax Review Commission shall review
the credits provided for in this section on or before the earlier of:
(i) October 1 of the year after the year in which the commission reports under Subsection
(6) a modification or repeal of a federal tax credit under Section 41, Internal Revenue Code; or
(ii) October 1, 2004.
(b) Notwithstanding Subsection (7)(a), the Tax Review Commission is not required to
review the credits provided for in this section if the only modification to a federal tax credit under
Section 41, Internal Revenue Code, is the extension of the termination date provided for in Section
41(h), Internal Revenue Code.
(c) The Tax Review Commission shall address in a review under this section the:
(i) cost of the credit;
(ii) purpose and effectiveness of the credit;
(iii) whether the credit benefits the state; and
(iv) whether the credit should be:
(A) continued;
(B) modified; or
(C) repealed.
(d) If the Tax Review Commission reviews the credits provided for in this section, the Tax
Review Commission shall report its findings to the Revenue and Taxation Interim Committee on or
before the November interim meeting of the year in which the Tax Review Commission reviews the
credits.
Section 4. Section 59-10-132 is amended to read:

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59-10-132. Credits for machinery, equipment, or both primarily used for conducting
qualified research or basic research -- Carry forward -- Commission to report modification
or repeal of federal credits -- Tax Review Commission study.
(1) As used in this section:
(a) "Basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except that the
term includes only basic research conducted in this state.
(b) "Equipment" includes:
(i) computers;
(ii) computer equipment; and
(iii) computer software.
(c) "Purchase price":
(i) includes the cost of installing an item of machinery or equipment; and
(ii) does not include sales or use taxes imposed on an item of machinery or equipment.
(d) "Qualified organization" is as defined in Section 41(e)(6), Internal Revenue Code.
(e) "Qualified research" is as defined in Section 41(d), Internal Revenue Code, except that
the term includes only qualified research conducted in this state.
(2) (a) [For] Except as provided in Subsection (2)(c), for taxable years beginning on or after
January 1, 1999, but beginning before December 31, 2010, a taxpayer [meeting the requirements of
this section] shall qualify for the following nonrefundable credits for the taxable year in which the
machinery, equipment, or both, meets the requirements of either Subsection (2)(a)(i) or (2)(a)(ii):
(i) a credit of 6% of the purchase price of either machinery, equipment, or both:
(A) purchased by the taxpayer during the taxable year;
(B) that is not exempt from sales or use taxes; and
(C) that is primarily used to conduct qualified research in this state; and
(ii) a credit of 6% of the purchase price paid by the taxpayer for either machinery,
equipment, or both:
(A) purchased by the taxpayer during the taxable year;
(B) that is not exempt from sales or use taxes; [and]

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(C) that is donated to a qualified organization [to be]; and
(D) that is primarily used to conduct basic research in this state.
(b) If a taxpayer qualifying for a credit under Subsection (2)(a) seeks to claim the credit, the
taxpayer shall:
(i) claim the credit or a portion of the credit for the taxable year immediately following the
taxable year for which the taxpayer qualifies for the credit;
(ii) carry the credit or a portion of the credit forward as provided in Subsection (5);
(iii) claim a portion of the credit and carry forward a portion of the credit as provided in
Subsections (2)(b)(i) and (ii).
(c) Notwithstanding Subsection (2)(a), if a taxpayer qualifies for a credit under Subsection
(2)(a) for a purchase of machinery, equipment, or both, the taxpayer may not claim the credit or carry
the credit forward if the machinery, equipment, or both, is primarily used to conduct qualified
research in the state for a time period that is less than 12 consecutive months.
(3) For purposes of claiming a credit under this section, a unitary group as defined in Section
59-7-101 is considered to be one taxpayer.
(4) Notwithstanding the provisions of Section 41(h), Internal Revenue Code, the credits
provided for in this section shall not terminate if the credits terminate under Section 41, Internal
Revenue Code.
(5) Notwithstanding the provisions of Sections 39 and 41(g), Internal Revenue Code,
governing the carry forward and carry back of federal tax credits, if the amount of a tax credit
claimed by a taxpayer under this section exceeds a taxpayer's tax liability under this chapter for a
taxable year, the amount of the credit exceeding the liability:
(a) may be carried forward for a period that does not exceed the next 14 taxable years; and
(b) may not be carried back to a taxable year preceding the current taxable year.
(6) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
commission may make rules for purposes of this section prescribing a certification process for
qualified organizations to ensure that either machinery, equipment, or both provided to the qualified
organization is to be primarily used to conduct basic research in this state.

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(7) If a federal tax credit under Section 41, Internal Revenue Code, is modified or repealed,
the commission shall report the modification or repeal to the Tax Review Commission within 60
days after the day on which the modification or repeal becomes effective.
(8) (a) Except as provided in Subsection (8)(b), the Tax Review Commission shall review
the credits provided for in this section on or before the earlier of:
(i) October 1 of the year after the year in which the commission reports under Subsection
(7) a modification or repeal of a federal tax credit under Section 41, Internal Revenue Code; or
(ii) October 1, 2004.
(b) Notwithstanding Subsection (8)(a), the Tax Review Commission is not required to
review the credits provided for in this section if the only modification to a federal tax credit under
Section 41, Internal Revenue Code, is the extension of the termination date provided for in Section
41(h), Internal Revenue Code.
(c) The Tax Review Commission shall address in a review under this section the:
(i) cost of the credit;
(ii) purpose and effectiveness of the credit;
(iii) whether the credit benefits the state; and
(iv) whether the credit should be:
(A) continued;
(B) modified; or
(C) repealed.
(d) If the Tax Review Commission reviews the credits provided for in this section, the Tax
Review Commission shall report its findings to the Revenue and Taxation Interim Committee on or
before the November interim meeting of the year in which the Tax Review Commission reviews the
credits.
Section 5. Retrospective operation.
This act has retrospective operation for taxable years beginning on or after January 1, 1999.

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