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H.B. 117

             1     

INDIVIDUAL INCOME TAX - ESTIMATED

             2     
TAX PAYMENTS AND USE OF REVENUES

             3     
FOR EDUCATION

             4     
2000 GENERAL SESSION

             5     
STATE OF UTAH

             6     
Sponsor: Patrice M. Arent

             7      Keele Johnson
             8      Lawanna Shurtliff
             9      Lloyd W. Frandsen
             10      Gary F. Cox
             11      Afton B. Bradshaw
             12      Brad King
             13      Richard M. Siddoway
             14      Ralph Becker
             15      Sheryl L. Allen
             16      Karen W. Morgan
             17      David N. Cox
Brent H. Goodfellow
Kory M. Holdaway
James R. Gowans
David L. Gladwell
Trisha S. Beck
Chad E. Bennion
Judy Ann Buffmire
Jordan Tanner
David M. Jones
Wayne A. Harper
Duane E. Bourdeaux
David L. Hogue
Susan J. Koehn
Fred J. Fife
Ron Bigelow
Loretta Baca
David L. Zolman
Perry L. Buckner
Katherine M. Bryson
Neil A. Hansen
Jackie Biskupski
Mary Carlson


             18      AN ACT RELATING TO THE INDIVIDUAL INCOME TAX ACT; REQUIRING TAXPAYERS
             19      TO MAKE ESTIMATED TAX PAYMENTS TO THE STATE TAX COMMISSION UNDER
             20      CERTAIN CIRCUMSTANCES; PROVIDING REQUIREMENTS FOR MAKING ESTIMATED
             21      TAX PAYMENTS TO THE STATE TAX COMMISSION; PROVIDING PURPOSES FOR
             22      WHICH REVENUES GENERATED BY THE ESTIMATED TAX PAYMENT ACT MAY BE
             23      USED; AND MAKING TECHNICAL CHANGES.
             24      This act affects sections of Utah Code Annotated 1953 as follows:
             25      AMENDS:
             26          59-1-401, as last amended by Chapter 205, Laws of Utah 1995
             27      ENACTS:
             28          59-10-1001, Utah Code Annotated 1953
             29          59-10-1002, Utah Code Annotated 1953
             30          59-10-1003, Utah Code Annotated 1953


             31          59-10-1004, Utah Code Annotated 1953
             32          59-10-1005, Utah Code Annotated 1953
             33          59-10-1006, Utah Code Annotated 1953
             34      This act enacts uncodified material.
             35      Be it enacted by the Legislature of the state of Utah:
             36          Section 1. Section 59-1-401 is amended to read:
             37           59-1-401. Penalties.
             38          (1) (a) The penalty for failure to file a tax return within the time prescribed by law
             39      including extensions is the greater of $20 or 10% of the unpaid tax due on the return.
             40          (b) Subsection (1) does not apply to amended returns.
             41          (2) The penalty for failure to pay tax due shall be the greater of $20 or 10% of the unpaid
             42      tax for:
             43          (a) failure to pay any tax, as reported on a timely filed return;
             44          (b) failure to pay any tax within 90 days of the due date of the return, if there was a late
             45      filed return subject to the penalty provided under Subsection (1)(a);
             46          (c) failure to pay any tax within 30 days of the date of mailing any notice of deficiency of
             47      tax unless a petition for redetermination or a request for agency action is filed within 30 days of
             48      the date of mailing the notice of deficiency;
             49          (d) failure to pay any tax within 30 days after the date the commission's order constituting
             50      final agency action resulting from a timely filed petition for redetermination or request for agency
             51      action is issued or is considered to have been issued under Subsection 63-46b-13 (3)(b); and
             52          (e) failure to pay any tax within 30 days after the date of a final judicial decision resulting
             53      from a timely filed petition for judicial review.
             54          (3) (a) (i) Beginning January 1, 1995, in the case of any failure to pay or underpayment of
             55      estimated tax or quarterly installments required by Sections 59-5-107 , 59-5-207 , 59-7-504 , and
             56      59-9-104 , there shall be added a penalty in an amount determined by applying the interest rate
             57      provided under Section 59-1-402 plus four percentage points to the amount of the underpayment
             58      for the period of the underpayment.
             59          (ii) For taxable years beginning on or after January 1, 2001, if a taxpayer fails to pay or
             60      underpays an estimated tax payment under Section 59-10-1004 , there shall be added a penalty in
             61      an amount determined by applying the interest rate provided under Section 59-1-402 plus three


             62      percentage points to the amount of the underpayment for the period of the underpayment.
             63          (b) (i) For purposes of Subsection (3)(a), the amount of the underpayment shall be the
             64      excess of the required installment over the amount, if any, of the installment paid on or before the
             65      due date for the installment.
             66          (ii) The period of the underpayment shall run from the due date for the installment to
             67      whichever of the following dates is the earlier:
             68          (A) the original due date of the tax return, without extensions, for the taxable year; or
             69          (B) with respect to any portion of the underpayment, the date on which that portion is paid.
             70          (iii) For purposes of this Subsection (3), a payment of estimated tax shall be credited
             71      against unpaid required installments in the order in which the installments are required to be paid.
             72          (4) (a) In case of an extension of time to file an individual income tax or corporate
             73      franchise tax return, if the lesser of 90% of the total tax reported on the tax return or 100% of the
             74      prior year's tax is not paid by the due date of the return, not including extensions, a 2% per month
             75      penalty shall apply on the unpaid tax during the period of extension.
             76          (b) If a return is not filed within the extension time period as provided in Section 59-7-505
             77      or 59-10-516 , penalties as provided in Subsection (1) and Subsection (2)(b) shall be added in lieu
             78      of the penalty assessed under this subsection as if no extension of time for filing a return had been
             79      granted.
             80          (5) (a) Additional penalties for underpayments of tax are as follows:
             81          (i) If any underpayment of tax is due to negligence, the penalty is 10% of the
             82      underpayment.
             83          (ii) If any underpayment of tax is due to intentional disregard of law or rule, the penalty
             84      is 15% of the underpayment.
             85          (iii) For intent to evade the tax, the penalty is the greater of $500 per period or 50% of the
             86      tax due.
             87          (iv) If the underpayment is due to fraud with intent to evade the tax, the penalty is the
             88      greater of $500 per period or 100% of the underpayment.
             89          (b) If the commission determines that a person is liable for a penalty imposed under
             90      Subsection (5)(a)(ii), (iii), or (iv), the commission shall notify the taxpayer of the proposed penalty.
             91          (i) The notice of proposed penalty shall:
             92          (A) set forth the basis of the assessment; and


             93          (B) be mailed by registered mail, postage prepaid, to the person's last-known address.
             94          (ii) Upon receipt of the notice of proposed penalty, the person against whom the penalty
             95      is proposed may:
             96          (A) pay the amount of the proposed penalty at the place and time stated in the notice; or
             97          (B) proceed in accordance with the review procedures of Subsection (5)(b)(iii).
             98          (iii) Any person against whom a penalty has been proposed in accordance with this
             99      subsection may contest the proposed penalty by filing a petition for an adjudicative proceeding
             100      with the commission.
             101          (iv) If the commission determines that a person is liable for a penalty under this subsection,
             102      the commission shall assess the penalty and give notice and demand for payment. The notice and
             103      demand for payment shall be mailed by registered mail, postage prepaid, to the person's last-known
             104      address.
             105          (6) The penalty for failure to file an information return or a complete supporting schedule
             106      is $50 for each return or schedule up to a maximum of $1,000.
             107          (7) If any taxpayer, in furtherance of a frivolous position, has a prima facie intent to delay
             108      or impede administration of the tax law and files a purported return that fails to contain
             109      information from which the correctness of reported tax liability can be determined or that clearly
             110      indicates that the tax liability shown must be substantially incorrect, the penalty is $500.
             111          (8) For monthly payment of sales and use taxes under Section 59-12-108 , in addition to
             112      any other penalties for late payment, a vendor may not retain a percentage of sales and use taxes
             113      collected as otherwise allowable under Section 59-12-108 .
             114          (9) As provided in Section 76-8-1101 , the following are criminal penalties:
             115          (a) Any person who is required by this title or any laws the commission administers or
             116      regulates to register with or obtain a license or permit from the commission, or who operates
             117      without having registered or secured a license or permit, or who operates when the registration,
             118      license, or permit is expired or not current, is guilty of a class B misdemeanor, except that,
             119      notwithstanding Section 76-3-301 , the fine is not less than $500 nor more than $1,000.
             120          (b) Any person who, with intent to evade any tax or requirement of this title or any lawful
             121      requirement of the commission, fails to make, render, sign, or verify any return or to supply any
             122      information within the time required under this title, or who makes, renders, signs, or verifies any
             123      false or fraudulent return or statement, or who supplies any false or fraudulent information, is


             124      guilty of a third degree felony, except that, notwithstanding Section 76-3-301 , the fine is not less
             125      than $1,000 nor more than $5,000.
             126          (c) Any person who willfully attempts to evade or defeat any tax or the payment thereof
             127      is, in addition to other penalties provided by law, guilty of a second degree felony, except that,
             128      notwithstanding Section 76-3-301 , the fine is not less than $1,500 nor more than $25,000.
             129          (d) The statute of limitations for prosecution for a violation of this section is six years from
             130      the date the tax should have been remitted.
             131          (10) Upon making a record of its actions, and upon reasonable cause shown, the
             132      commission may waive, reduce, or compromise any of the penalties or interest imposed under this
             133      part.
             134          Section 2. Section 59-10-1001 is enacted to read:
             135     
Part 10. Estimated Tax Payment Act

             136          59-10-1001. Title.
             137          This part is known as the "Estimated Tax Payment Act."
             138          Section 3. Section 59-10-1002 is enacted to read:
             139          59-10-1002. Definitions.
             140          As used in this part:
             141          (1) "Adjusted state tax liability" means the difference between:
             142          (a) a taxpayer's tax liability under this chapter for the taxable year; and
             143          (b) any credits the taxpayer may claim under this chapter for the taxable year.
             144          (2) "Adjusted state tax liability after withholding" means the difference between:
             145          (a) the taxpayer's adjusted state tax liability; and
             146          (b) the total amount an employer withholds for the taxable year under Part 4.
             147          (3) "Calendar year taxpayer" means a taxpayer that:
             148          (a) meets the requirements of Subsection 59-10-1003 (1); and
             149          (b) has a taxable year that:
             150          (i) begins on January 1; and
             151          (ii) is for a 12-month period.
             152          (4) "Estimated tax payment threshold" means an amount of adjusted state tax liability after
             153      withholding that is equal to $1,000 for a taxpayer that files a return under this chapter, regardless
             154      of the taxpayer's filing status.


             155          (5) "Farmer" is as defined in Section 6654, Internal Revenue Code.
             156          (6) "Fiscal year taxpayer" means a taxpayer that:
             157          (a) meets the requirements of Subsection 59-10-1003 (1); and
             158          (b) has a taxable year that:
             159          (i) begins on a day other than January 1; and
             160          (ii) is for a 12-month period.
             161          (7) "Fisherman" is as defined in Section 6654, Internal Revenue Code.
             162          (8) "Required annual payment" means:
             163          (a) for a taxpayer other than a farmer or fisherman, an amount equal to the lesser of:
             164          (i) 90% of the taxpayer's adjusted state tax liability for the taxable year; or
             165          (ii) 100% of the taxpayer's adjusted state tax liability for the previous taxable year if:
             166          (A) that taxable year was for a period of 12 months; and
             167          (B) the taxpayer filed a return under this chapter for that taxable year; or
             168          (b) for a farmer or fisherman, an amount equal to the lesser of:
             169          (i) 66-2/3% of the farmer's or fisherman's adjusted state tax liability for the taxable year;
             170      or
             171          (ii) 100% of the farmer's or fisherman's adjusted state tax liability for the previous taxable
             172      year if:
             173          (A) that taxable year was for a period of 12 months; and
             174          (B) the taxpayer filed a return under this chapter for that taxable year.
             175          (9) "Required annual payment after withholding" means the difference between:
             176          (a) a taxpayer's required annual payment; and
             177          (b) the total amount an employer withholds for the taxable year under Part 4.
             178          (10) "Taxpayer's tax liability under this chapter for the taxable year" means the product
             179      of:
             180          (a) the taxpayer's state taxable income for the taxable year; and
             181          (b) the amount of tax imposed under this chapter for the taxable year on the amount
             182      described in Subsection (10)(a).
             183          Section 4. Section 59-10-1003 is enacted to read:
             184          59-10-1003. Estimated tax payments -- Required annual payment.
             185          (1) For taxable years beginning on or after January 1, 2001, a taxpayer shall pay to the


             186      commission as provided in this part one or more estimated tax payments if on the last day of the
             187      taxpayer's taxable year the taxpayer's adjusted state tax liability after withholding for the taxable
             188      year will be greater than or equal to the estimated tax payment threshold.
             189          (2) (a) For taxable years beginning on or after January 1, 2001, a taxpayer described in
             190      Subsection (1) shall make a required annual payment to the commission.
             191          (b) The required annual payment under Subsection (2)(a) shall be made by:
             192          (i) employer withholding as provided in Part 4;
             193          (ii) the taxpayer making to the commission as provided in this part one or more estimated
             194      tax payments; or
             195          (iii) a combination of Subsections (2)(b)(i) and (ii).
             196          Section 5. Section 59-10-1004 is enacted to read:
             197          59-10-1004. Payment schedule for estimated tax payments -- Taxpayers having a
             198      taxable year beginning on January 1 -- Taxpayers having a taxable year beginning on a date
             199      other than January 1 -- Taxpayers meeting estimated tax payment threshold on or after
             200      April 1 -- Change in payments if taxpayer's tax liability changes.
             201          (1) A taxpayer required to make estimated tax payments to the commission under this part
             202      shall make the estimated tax payments as provided in this section.
             203          (2) (a) Except as provided in Subsections (4) through (6), a calendar year taxpayer shall
             204      make four estimated tax payments:
             205          (i) as provided in this Subsection (2); and
             206          (ii) that are each equal to 25% of the required annual payment after withholding.
             207          (b) A taxpayer shall make the estimated tax payments described in Subsection (2)(a) on
             208      or before:
             209          (i) April 15 of the taxable year;
             210          (ii) June 15 of the taxable year;
             211          (iii) September 15 of the taxable year; and
             212          (iv) January 15 of the year after the taxable year.
             213          (3) (a) Except as provided in Subsections (5) and (6), a fiscal year taxpayer shall make four
             214      estimated tax payments:
             215          (i) as provided in this Subsection (3); and
             216          (ii) that are each equal to 25% of the required annual payment after withholding.


             217          (b) A taxpayer shall make the estimated tax payments described in Subsection (3)(a) on
             218      or before the 15th day of the:
             219          (i) fourth month of the taxable year;
             220          (ii) sixth month of the taxable year;
             221          (iii) ninth month of the taxable year; and
             222          (iv) first month of the year after the taxable year.
             223          (4) (a) Notwithstanding Subsection (2) and except as provided in Subsections (5) and (6),
             224      for a taxable year a calendar year taxpayer shall make estimated tax payments as provided in this
             225      Subsection (4) if:
             226          (i) on March 31 of the taxable year the taxpayer's adjusted state tax liability after
             227      withholding for the taxable year will be less than the estimated tax payment threshold on the last
             228      day of the taxpayer's taxable year; and
             229          (ii) on or after April 1 of the taxable year the taxpayer's adjusted state tax liability after
             230      withholding for the taxable year will be greater than or equal to the estimated tax payment
             231      threshold on the last day of the taxpayer's taxable year.
             232          (b) If, on or after April 1 but on or before May 31 of the taxable year, a taxpayer's adjusted
             233      state tax liability after withholding for the taxable year will be greater than or equal to the
             234      estimated tax payment threshold on the last day of the taxpayer's taxable year, the taxpayer shall
             235      pay:
             236          (i) 50% of the required annual payment after withholding on or before June 15 of the
             237      taxable year;
             238          (ii) 25% of the required annual payment after withholding on or before September 15 of
             239      the taxable year; and
             240          (iii) 25% of the required annual payment after withholding on or before January 15 of the
             241      year after the taxable year.
             242          (c) If, on or after June 1 but on or before August 31 of the taxable year, a taxpayer's
             243      adjusted state tax liability after withholding for the taxable year will be greater than or equal to the
             244      estimated tax payment threshold on the last day of the taxpayer's taxable year, the taxpayer shall
             245      pay:
             246          (i) 75% of the required annual payment after withholding on or before September 15 of
             247      the taxable year; and


             248          (ii) 25% of the required annual payment after withholding on or before January 15 of the
             249      year after the taxable year.
             250          (d) If, on or after September 1 of the taxable year, a taxpayer's adjusted state tax liability
             251      after withholding for the taxable year will be greater than or equal to the estimated tax payment
             252      threshold on the last day of the taxpayer's taxable year, the taxpayer shall pay 100% of the required
             253      annual payment after withholding on or before January 15 of the year after the taxable year.
             254          (5) For purposes of Subsections (2) through (4), if after making an estimated tax payment
             255      a taxpayer's adjusted state tax liability after withholding changes, the taxpayer shall proportionally
             256      increase or decrease the taxpayer's remaining estimated tax payments for the taxable year so that
             257      the balance of the required annual payment after withholding is made in equal installments.
             258          (6) Notwithstanding Subsections (2) through (4), a farmer or fisherman shall make one
             259      estimated tax payment for the taxable year:
             260          (a) on or before the 15th day after the last day of the farmer's or fisherman's taxable year;
             261      and
             262          (b) in an amount equal to the total amount of the required annual payment after
             263      withholding.
             264          Section 6. Section 59-10-1005 is enacted to read:
             265          59-10-1005. Taxpayers having a taxable year of less than 12 months -- Rulemaking
             266      authority.
             267          In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             268      commission shall make rules providing for estimated tax payments for a taxpayer having a taxable
             269      year of less than 12 months.
             270          Section 7. Section 59-10-1006 is enacted to read:
             271          59-10-1006. Penalties -- Exceptions to penalties.
             272          (1) Except as provided in Subsections (2) and (3), a taxpayer shall pay a penalty as
             273      provided in Section 59-1-401 if the taxpayer fails to pay or underpays an estimated tax payment
             274      under Section 59-10-1004 .
             275          (2) Notwithstanding Subsection (1) and except as provided in Subsection (3), the
             276      commission may waive, reduce, or compromise the penalty described in Subsection (1).
             277          (3) Notwithstanding Subsections (1) and (2), in accordance with Title 63, Chapter 46a,
             278      Utah Administrative Rulemaking Act, the commission shall make rules providing for the following


             279      exceptions to the penalty described in Subsection (1):
             280          (a) an exception that is consistent with Section 6654(e)(1), Internal Revenue Code;
             281          (b) an exception that is consistent with Section 6654(e)(2), Internal Revenue Code;
             282          (c) an exception for a taxpayer's failure to pay the final estimated tax payment for a taxable
             283      year that is consistent with Section 6654(h), Internal Revenue Code;
             284          (d) an exception for a farmer's or fisherman's failure to pay the estimated tax payment
             285      required by Subsection 59-10-1004 (6) that is consistent with Section 6654(i), Internal Revenue
             286      Code;
             287          (e) an exception that is consistent with Section 6658(a), Internal Revenue Code; and
             288          (f) an exception for the first year that a taxpayer is required to file a return under this
             289      chapter if the individual:
             290          (i) files the return under this chapter on or before the due date provided for under this
             291      chapter for filing the return; and
             292          (ii) pays in full the amount of tax due for the taxable year.
             293          Section 8. Expenditure of certain revenues generated by the Required Annual
             294      Payment and Estimated Tax Payment Act.
             295          (1) Beginning on January 1, 2001, through June 30, 2001, the revenues collected under
             296      Title 59, Chapter 10, Part 10, Estimated Tax Payment Act, shall be expended as follows:
             297          (a) 75% of the revenues shall be allocated to the State Board of Education created by Title
             298      53A, Chapter 1, Part 1, State Board of Education, to be distributed to school districts as provided
             299      in this section for:
             300          (i) textbooks;
             301          (ii) libraries;
             302          (iii) science lab supplies;
             303          (iv) other instructional materials; or
             304          (v) a combination of Subsections (1)(a)(i) through (iv); and
             305          (b) 25% of the revenues shall be allocated to the State Board of Regents created by Title
             306      53B, Chapter 1, Governance, Powers, Rights, and Responsibilities, to be distributed to the
             307      institutions described in Subsections 53B-1-102 (1)(b) through (k) for:
             308          (i) libraries;
             309          (ii) science lab supplies;


             310          (iii) applied technology education supplies;
             311          (iv) other instructional materials; or
             312          (v) a combination of Subsections (1)(b)(i) through (iv).
             313          (2) (a) For purposes of the allocations described in Subsection (1)(a), the State Board of
             314      Education shall distribute the allocations to school districts on the basis of the ratio of a school
             315      district's average daily membership to the state total average daily membership.
             316          (b) For purposes of the allocations described in Subsection (1)(b), the State Board of
             317      Regents shall develop criteria for distributing the allocations to the institutions described in
             318      Subsections 53B-1-102 (1)(b) through (k).




Legislative Review Note
    as of 2-10-00 10:36 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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