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H.B. 52

             1     

HIGHER EDUCATION SAVINGS INCENTIVE

             2     
PROGRAM AMENDMENTS

             3     
2002 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Katherine M. Bryson

             6      This act modifies State System of Higher Education Code and Revenue and Taxation Code
             7      provisions relating to Higher Education Savings Incentive Programs, including refund
             8      provisions. This act also repeals the Higher Education Supplemental Savings Incentive
             9      Program.
             10      This act affects sections of Utah Code Annotated 1953 as follows:
             11      AMENDS:
             12          53B-8a-108, as enacted by Chapter 4, Laws of Utah 1996, Second Special Session
             13          53B-8a-109, as enacted by Chapter 4, Laws of Utah 1996, Second Special Session
             14          59-7-105, as last amended by Chapter 4, Laws of Utah 1996, Second Special Session
             15          59-7-106, as last amended by Chapter 4, Laws of Utah 1996, Second Special Session
             16          59-10-114, as last amended by Chapters 7 and 9, Laws of Utah 2001, First Special Session
             17      REPEALS:
             18          53B-8b-101, as enacted by Chapter 390, Laws of Utah 1997
             19          53B-8b-102, as enacted by Chapter 390, Laws of Utah 1997
             20          53B-8b-103, as enacted by Chapter 390, Laws of Utah 1997
             21          53B-8b-104, as enacted by Chapter 390, Laws of Utah 1997
             22          53B-8b-105, as last amended by Chapter 240, Laws of Utah 1999
             23          53B-8b-106, as enacted by Chapter 390, Laws of Utah 1997
             24          53B-8b-107, as enacted by Chapter 390, Laws of Utah 1997
             25          53B-8b-108, as enacted by Chapter 390, Laws of Utah 1997
             26          53B-8b-109, as enacted by Chapter 390, Laws of Utah 1997
             27          53B-8b-110, as enacted by Chapter 390, Laws of Utah 1997


             28          53B-8b-111, as enacted by Chapter 390, Laws of Utah 1997
             29          53B-8b-112, as enacted by Chapter 390, Laws of Utah 1997
             30          59-10-901, as enacted by Chapter 390, Laws of Utah 1997
             31      Be it enacted by the Legislature of the state of Utah:
             32          Section 1. Section 53B-8a-108 is amended to read:
             33           53B-8a-108. Cancellation of agreements.
             34          (1) Any participant may cancel a participation agreement at will.
             35          (2) If the participation agreement is canceled by a participant prior to the expiration of two
             36      years from the date of original execution of the participation agreement, the participant shall
             37      receive 100% of the principal amount of all contributions made by the participant, up to the current
             38      account balance, but any investment income which has been credited to the participant's account
             39      shall be retained by the trust to cover administration expenses.
             40          (3) After a participation agreement has been in effect for two years, [participants] a
             41      participant shall be entitled to the return upon cancellation of the agreement of the principal
             42      amount of all contributions made by [participants] the participant, up to the current account
             43      balance, plus actual investment income on the contributions less a reasonable administrative refund
             44      fee to be levied by the trust, which shall be sufficient to reasonably compensate the trust for its
             45      administrative costs incident to the participation agreement.
             46          (4) (a) Upon the occurrence of any of the following circumstances, [no] a reasonable
             47      administration refund fee may not be levied by the trust in the event of termination of a
             48      participation agreement:
             49          (i) death of the beneficiary; or
             50          (ii) permanent disability or mental incapacity of the beneficiary.
             51          (b) In the event of cancellation of a participation agreement for any of the causes listed in
             52      Subsection (4)(a), the participant shall be entitled to receive the principal amount of all payments
             53      made by the participant under the participation agreement, up to the current account balance, and
             54      the actual investment income earned on the payments.
             55          Section 2. Section 53B-8a-109 is amended to read:
             56           53B-8a-109. Repayment and ownership of payments and investment income --
             57      Transfer of ownership rights.
             58          (1) (a) The participant retains ownership of all payments made under any participation


             59      agreement up to the date of utilization for payment of higher education costs for the beneficiary.
             60          (b) All income derived from the investment of the payments made by the participant shall
             61      be considered to be held in trust for the benefit of the beneficiary.
             62          (2) (a) In the event the participation agreement is terminated prior to payment of higher
             63      education costs for the beneficiary, the participant is entitled to a full refund of all payments made
             64      under the participation agreement, up to the current account balance, and all investment income
             65      credited on all the payments[.], less:
             66          (i) a reasonable administrative fee which may be levied by the trust; and
             67          (ii) any penalty or tax required to be withheld by the Internal Revenue Code.
             68          (b) No right to receive investment income shall exist in cases of voluntary participant
             69      termination except as provided in Section 53B-8a-108 .
             70          (3) If the beneficiary graduates from an institution of higher education, and a balance
             71      remains in the participant's account, then the program administrator shall pay the balance to the
             72      participant.
             73          (4) The institution of higher education shall obtain ownership of the payments made for
             74      the higher education costs paid to the institution at the time each payment is made to the
             75      institution.
             76          (5) Any amounts which may be paid pursuant to the Utah Educational Savings Plan Trust
             77      which are not listed in this section are owned by the trust.
             78          (6) (a) A participant may transfer ownership rights to another eligible participant, including
             79      a gift of the ownership rights to a minor beneficiary.
             80          (b) The transfer shall be affected and the property distributed in accordance with
             81      administrative regulations promulgated by the board or the terms of the participation agreement.
             82          Section 3. Section 59-7-105 is amended to read:
             83           59-7-105. Additions to unadjusted income.
             84          In computing adjusted income the following amounts shall be added to unadjusted income:
             85          (1) interest from bonds, notes, and other evidences of indebtedness issued by any state of
             86      the United States, including any agency and instrumentality of a state of the United States;
             87          (2) the amount of any deduction taken on a corporation's federal return for taxes paid by
             88      a corporation:
             89          (a) to Utah for taxes imposed by this chapter; and


             90          (b) to another state of the United States, a foreign country, a United States possession, or
             91      the Commonwealth of Puerto Rico for taxes imposed for the privilege of doing business, or
             92      exercising its corporate franchise, including income, franchise, corporate stock and business and
             93      occupation taxes;
             94          (3) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(a) and (2)(a);
             95          (4) capital losses that have been deducted on a Utah corporate return in previous years;
             96          (5) any deduction on the federal return that has been previously deducted on the Utah
             97      return;
             98          (6) the amount of contributions claimed as a tax credit pursuant to Section 59-7-602 ;
             99          (7) the amount of the deduction taken pursuant to Section 59-7-603 for sophisticated
             100      technological equipment;
             101          (8) charitable contributions, to the extent deducted on the federal return when determining
             102      federal taxable income;
             103          (9) the amount of gain or loss determined under Section 59-7-114 relating to a target
             104      corporation under Section 338, Internal Revenue Code, unless such gain or loss has already been
             105      included in the unadjusted income of the target corporation;
             106          (10) the amount of gain or loss determined under Section 59-7-115 relating to corporations
             107      treated for federal purposes as having disposed of its assets under Section 336(e), Internal Revenue
             108      Code, unless such gain or loss has already been included in the unadjusted income of the target
             109      corporation;
             110          (11) adjustments to gains, losses, depreciation expense, amortization expense, and similar
             111      items due to a difference between basis for federal purposes and basis as computed under Section
             112      59-7-107 ; and
             113          (12) the amount refunded to a participant or beneficiary under Title 53B, Chapter 8a,
             114      Higher Education Savings Incentive Program, to the extent deducted on a Utah return in previous
             115      years and not used for qualified higher education costs of the beneficiary, in the year in which the
             116      amount is refunded.
             117          Section 4. Section 59-7-106 is amended to read:
             118           59-7-106. Subtractions from unadjusted income.
             119          In computing adjusted income the following amounts shall be subtracted from unadjusted
             120      income:


             121          (1) the foreign dividend gross-up included in gross income for federal income tax purposes
             122      under Section 78, Internal Revenue Code;
             123          (2) the net capital loss, as defined for federal purposes, if the taxpayer elects to deduct the
             124      loss on the current Utah return. The deduction shall be made by claiming the deduction on the
             125      current Utah return which shall be filed by the due date of the return, including extensions. For
             126      the purposes of this subsection all capital losses in a given year must be:
             127          (a) deducted in the year incurred; or
             128          (b) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue Code;
             129          (3) the decrease in salary expense deduction for federal income tax purposes due to
             130      claiming the federal jobs credit under Section 51, Internal Revenue Code;
             131          (4) the decrease in qualified research and basic research expense deduction for federal
             132      income tax purposes due to claiming the federal research and development credit under Section
             133      41, Internal Revenue Code;
             134          (5) the decrease in qualified clinical testing expense deduction for federal income tax
             135      purposes due to claiming the federal orphan drug credit under Section 28, Internal Revenue Code;
             136          (6) any decrease in any expense deduction for federal income tax purposes due to claiming
             137      any other federal credit;
             138          (7) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(b) and (2)(b);
             139          (8) any income on the federal corporate return that has been previously taxed by Utah;
             140          (9) amounts included in federal taxable income that are due to refunds of taxes imposed
             141      for the privilege of doing business, or exercising a corporate franchise, including income,
             142      franchise, corporate stock and business and occupation taxes paid by the corporation to Utah,
             143      another state of the United States, a foreign country, a United States possession, or the
             144      Commonwealth of Puerto Rico to the extent that the taxes were added to unadjusted income under
             145      Section 59-7-105 ;
             146          (10) charitable contributions, to the extent allowed as a subtraction under Section
             147      59-7-109 ;
             148          (11) (a) 50% of the dividends deemed received or received from subsidiaries which are
             149      members of the unitary group and are organized or incorporated outside of the United States unless
             150      such subsidiaries are included in a combined report under Section 59-7-402 or 59-7-403 . In
             151      arriving at the amount of the dividend exclusion, the taxpayer shall first deduct from the dividends


             152      deemed received or received, the expense directly attributable to those dividends. Interest expense
             153      attributable to excluded dividends shall be determined by multiplying interest expense by a
             154      fraction, the numerator of which is the taxpayer's average investment in such dividend paying
             155      subsidiaries, and the denominator of which is the taxpayer's average total investment in assets;
             156          (b) in determining income apportionable to this state, a portion of the factors of a foreign
             157      subsidiary whose dividends are partially excluded under Subsection (11)(a) shall be included in
             158      the combined report factors. The portion to be included shall be determined by multiplying each
             159      factor of the foreign subsidiary by a fraction, but not to exceed 100%, the numerator of which is
             160      the amount of the dividend paid by the foreign subsidiary which is included in adjusted income,
             161      and the denominator of which is the current year earnings and profits of the foreign subsidiary as
             162      determined under the Internal Revenue Code;
             163          (12) (a) 50% of the adjusted income of a foreign operating company unless the taxpayer
             164      has elected to file a worldwide combined report as provided in Section 59-7-403 . For purposes
             165      of this subsection, when calculating the adjusted income of a foreign operating company, a foreign
             166      operating company may not deduct the subtractions allowable under this subsection and
             167      Subsection (11);
             168          (b) in determining income apportionable to this state, the factors for a foreign operating
             169      company shall be included in the combined report factors in the same percentage its adjusted
             170      income is included in the combined adjusted income;
             171          (13) the amount of gain or loss which is included in unadjusted income but not recognized
             172      for federal purposes on stock sold or exchanged by a member of a selling consolidated group as
             173      defined in Section 338, Internal Revenue Code, if an election has been made pursuant to Section
             174      338(h)(10), Internal Revenue Code;
             175          (14) the amount of gain or loss which is included in unadjusted income but not recognized
             176      for federal purposes on stock sold, exchanged, or distributed by a corporation pursuant to Section
             177      336(e), Internal Revenue Code, if an election under Section 336(e), Internal Revenue Code, has
             178      been made for federal purposes;
             179          (15) (a) adjustments to gains, losses, depreciation expense, amortization expense, and
             180      similar items due to a difference between basis for federal purposes and basis as computed under
             181      Section 59-7-107 ; and
             182          (b) if there has been a reduction in federal basis for a federal tax credit where there is no


             183      corresponding Utah tax credit, the amount of the reduction in basis shall be allowed as an expense
             184      in the year of the federal credit;
             185          (16) any interest expense not deducted on the federal corporate return under Section 265(b)
             186      or 291(e), Internal Revenue Code;
             187          (17) 100% of the dividends received from subsidiaries which are insurance companies
             188      exempt from this chapter under Subsection 59-7-102 (1)(c) and are under "common ownership"
             189      as defined by Subsection 59-7-101 (7); and
             190          (18) any amount included in unadjusted income that was derived from money paid by the
             191      taxpayer to the program fund and investment income earned on those payments under Title 53B,
             192      Chapter 8a, Higher Education Savings Incentive Program, that is included in federal taxable
             193      income, but only when the monies are used for qualified higher education costs of the beneficiary.
             194          Section 5. Section 59-10-114 is amended to read:
             195           59-10-114. Additions to and subtractions from federal taxable income of an
             196      individual.
             197          (1) There shall be added to federal taxable income of a resident or nonresident individual:
             198          (a) the amount of any income tax imposed by this or any predecessor Utah individual
             199      income tax law and the amount of any income tax imposed by the laws of another state, the District
             200      of Columbia, or a possession of the United States, to the extent deducted from federal adjusted
             201      gross income, as defined by Section 62, Internal Revenue Code, in determining federal taxable
             202      income;
             203          (b) a lump sum distribution that the taxpayer does not include in adjusted gross income
             204      on the taxpayer's federal individual income tax return for the taxable year;
             205          (c) for taxable years beginning on or after January 1, 2002, the amount of a child's income
             206      calculated under Subsection (5) that:
             207          (i) a parent elects to report on the parent's federal individual income tax return for the
             208      taxable year; and
             209          (ii) the parent does not include in adjusted gross income on the parent's federal individual
             210      income tax return for the taxable year;
             211          (d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
             212      Code;
             213          (e) a withdrawal from a medical care savings account and any penalty imposed in the


             214      taxable year if:
             215          (i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant
             216      to Section 220, Internal Revenue Code; and
             217          (ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2);
             218          (f) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education
             219      Savings Incentive Program, in the year in which the amount is refunded; and
             220          (g) except as provided in Subsection (6), for taxable years beginning on or after January
             221      1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after January 1,
             222      2003, the interest from bonds, notes, and other evidences of indebtedness issued by one or more
             223      of the following entities:
             224          (i) a state other than this state;
             225          (ii) the District of Columbia;
             226          (iii) a political subdivision of a state other than this state; or
             227          (iv) an agency or instrumentality of an entity described in Subsections (1)(g)(i) through
             228      (iii).
             229          (2) There shall be subtracted from federal taxable income of a resident or nonresident
             230      individual:
             231          (a) the interest or dividends on obligations or securities of the United States and its
             232      possessions or of any authority, commission, or instrumentality of the United States, to the extent
             233      includable in gross income for federal income tax purposes but exempt from state income taxes
             234      under the laws of the United States, but the amount subtracted under this Subsection (2)(a) shall
             235      be reduced by any interest on indebtedness incurred or continued to purchase or carry the
             236      obligations or securities described in this Subsection (2)(a), and by any expenses incurred in the
             237      production of interest or dividend income described in this Subsection (2)(a) to the extent that such
             238      expenses, including amortizable bond premiums, are deductible in determining federal taxable
             239      income;
             240          (b) (i) except as provided in Subsection (2)(b)(ii), 1/2 of the net amount of any income tax
             241      paid or payable to the United States after all allowable credits, as reported on the United States
             242      individual income tax return of the taxpayer for the same taxable year; and
             243          (ii) notwithstanding Subsection (2)(b)(i), for taxable years beginning on or after January
             244      1, 2001, the amount of a credit or an advance refund amount reported on a resident or nonresident


             245      individual's United States individual income tax return allowed as a result of the acceleration of
             246      the income tax rate bracket benefit for 2001 in accordance with Section 101, Economic Growth
             247      and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, may not be used in calculating the
             248      amount described in Subsection (2)(b)(i);
             249          (c) the amount of adoption expenses which, for purposes of this Subsection (2)(c), means
             250      any actual medical and hospital expenses of the mother of the adopted child which are incident to
             251      the child's birth and any welfare agency, child placement service, legal, and other fees or costs
             252      relating to the adoption;
             253          (d) amounts received by taxpayers under age 65 as retirement income which, for purposes
             254      of this section, means pensions and annuities, paid from an annuity contract purchased by an
             255      employer under a plan which meets the requirements of Section 404(a)(2), Internal Revenue Code,
             256      or purchased by an employee under a plan which meets the requirements of Section 408, Internal
             257      Revenue Code, or paid by the United States, a state, or political subdivision thereof, or the District
             258      of Columbia, to the employee involved or the surviving spouse;
             259          (e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500 personal
             260      retirement exemption;
             261          (f) 75% of the amount of the personal exemption, as defined and calculated in the Internal
             262      Revenue Code, for each dependent child with a disability and adult with a disability who is
             263      claimed as a dependent on a taxpayer's return;
             264          (g) any amount included in federal taxable income that was received pursuant to any
             265      federal law enacted in 1988 to provide reparation payments, as damages for human suffering, to
             266      United States citizens and resident aliens of Japanese ancestry who were interned during World
             267      War II;
             268          (h) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
             269      taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
             270          (i) for:
             271          (A) the taxpayer;
             272          (B) the taxpayer's spouse; and
             273          (C) the taxpayer's dependents; and
             274          (ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or 213,
             275      Internal Revenue Code, in determining federal taxable income for the taxable year;


             276          (i) (i) except as otherwise provided in this Subsection (2)(i), the amount of a contribution
             277      made during the taxable year on behalf of the taxpayer to a medical care savings account and
             278      interest earned on a contribution to a medical care savings account established pursuant to Title
             279      31A, Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is accepted
             280      by the account administrator as provided in the Medical Care Savings Account Act, and if the
             281      taxpayer did not deduct or include amounts on the taxpayer's federal individual income tax return
             282      pursuant to Section 220, Internal Revenue Code; and
             283          (ii) a contribution deductible under this Subsection (2)(i) may not exceed either of the
             284      following:
             285          (A) the maximum contribution allowed under the Medical Care Savings Account Act for
             286      the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is covered by
             287      health care insurance as defined in Section 31A-1-301 or self-funded plan that covers the other
             288      spouse, and each spouse has a medical care savings account; or
             289          (B) the maximum contribution allowed under the Medical Care Savings Account Act for
             290      the tax year for taxpayers:
             291          (I) who do not file a joint return; or
             292          (II) who file a joint return, but do not qualify under Subsection (2)(i)(i)(A); and
             293          (j) the amount included in federal taxable income that was derived from money paid by
             294      the taxpayer to the program fund under Title 53B, Chapter 8a, Higher Education Savings Incentive
             295      Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d), and investment
             296      income earned on participation agreements under Subsection 53B-8a-106 (1) [when used for] that
             297      is included in federal taxable income, but only when the funds are used for qualified higher
             298      education costs of the beneficiary;
             299          (k) for taxable years beginning on or after January 1, 2000, any amounts paid for premiums
             300      for long-term care insurance as defined in Section 31A-1-301 to the extent the amounts paid for
             301      long-term care insurance were not deducted under Section 213, Internal Revenue Code, in
             302      determining federal taxable income; and
             303          (l) for taxable years beginning on or after January 1, 2000, if the conditions of Subsection
             304      (4)(a) are met, the amount of income derived by a Ute tribal member:
             305          (i) during a time period that the Ute tribal member resides on homesteaded land
             306      diminished from the Uintah and Ouray Reservation; and


             307          (ii) from a source within the Uintah and Ouray Reservation.
             308          (3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted for
             309      taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or $4,800,
             310      except that:
             311          (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
             312      over $32,000, the amount of the retirement income exemption that may be subtracted shall be
             313      reduced by 50 cents;
             314          (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             315      earned over $16,000, the amount of the retirement income exemption that may be subtracted shall
             316      be reduced by 50 cents; and
             317          (iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
             318      the amount of the retirement income exemption that may be subtracted shall be reduced by 50
             319      cents.
             320          (b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
             321      shall be further reduced according to the following schedule:
             322          (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
             323      over $32,000, the amount of the personal retirement exemption shall be reduced by 50 cents;
             324          (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             325      earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
             326      cents; and
             327          (iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
             328      the amount of the personal retirement exemption shall be reduced by 50 cents.
             329          (c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be calculated
             330      by adding to federal adjusted gross income any interest income not otherwise included in federal
             331      adjusted gross income.
             332          (d) For purposes of determining ownership of items of retirement income common law
             333      doctrine will be applied in all cases even though some items may have originated from service or
             334      investments in a community property state. Amounts received by the spouse of a living retiree
             335      because of the retiree's having been employed in a community property state are not deductible as
             336      retirement income of such spouse.
             337          (e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care


             338      insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:
             339          (i) for an amount that is reimbursed or funded in whole or in part by the federal
             340      government, the state, or an agency or instrumentality of the federal government or the state; and
             341          (ii) for a taxpayer who is eligible to participate in a health plan maintained and funded in
             342      whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
             343          (4) (a) A subtraction for an amount described in Subsection (2)(l) is allowed only if:
             344          (i) the taxpayer is a Ute tribal member; and
             345          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             346      requirements of this Subsection (4).
             347          (b) The agreement described in Subsection (4)(a):
             348          (i) may not:
             349          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             350          (B) provide a subtraction under this section greater than or different from the subtraction
             351      described in Subsection (2)(l); or
             352          (C) affect the power of the state to establish rates of taxation; and
             353          (ii) shall:
             354          (A) provide for the implementation of the subtraction described in Subsection (2)(l);
             355          (B) be in writing;
             356          (C) be signed by:
             357          (I) the governor; and
             358          (II) the chair of the Business Committee of the Ute tribe;
             359          (D) be conditioned on obtaining any approval required by federal law; and
             360          (E) state the effective date of the agreement.
             361          (c) (i) The governor shall report to the commission by no later than February 1 of each year
             362      regarding whether or not an agreement meeting the requirements of this Subsection (4) is in effect.
             363          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
             364      subtraction permitted under Subsection (2)(l) is not allowed for taxable years beginning on or after
             365      the January 1 following the termination of the agreement.
             366          (d) For purposes of Subsection (2)(l) and in accordance with Title 63, Chapter 46a, Utah
             367      Administrative Rulemaking Act, the commission may make rules:
             368          (i) for determining whether income is derived from a source within the Uintah and Ouray


             369      Reservation; and
             370          (ii) that are substantially similar to how federal adjusted gross income derived from Utah
             371      sources is determined under Section 59-10-117 .
             372          (5) (a) For purposes of this Subsection (5), "Form 8814" means:
             373          (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
             374      Interest and Dividends; or
             375          (ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by the
             376      commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to 2000
             377      Form 8814 if for purposes of federal individual income taxes the information contained on 2000
             378      Form 8814 is reported on a form other than Form 8814; and
             379          (B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter 46a,
             380      Utah Administrative Rulemaking Act, the commission may make rules designating a form as being
             381      substantially similar to 2000 Form 8814 if for purposes of federal individual income taxes the
             382      information contained on 2000 Form 8814 is reported on a form other than Form 8814.
             383          (b) The amount of a child's income added to adjusted gross income under Subsection (1)(c)
             384      is equal to the difference between:
             385          (i) the lesser of:
             386          (A) the base amount specified on Form 8814; and
             387          (B) the sum of the following reported on Form 8814:
             388          (I) the child's taxable interest;
             389          (II) the child's ordinary dividends; and
             390          (III) the child's capital gain distributions; and
             391          (ii) the amount not taxed that is specified on Form 8814.
             392          (6) Notwithstanding Subsection (1)(g), interest from bonds, notes, and other evidences of
             393      indebtedness issued by an entity described in Subsections (1)(g)(i) through (iv) may not be added
             394      to federal taxable income of a resident or nonresident individual if, as annually determined by the
             395      commission:
             396          (a) for an entity described in Subsection (1)(g)(i) or (ii), the entity and all of the political
             397      subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on income on
             398      any part of the bonds, notes, and other evidences of indebtedness of this state; or
             399          (b) for an entity described in Subsection (1)(g)(iii) or (iv), the following do not impose a


             400      tax based on income on any part of the bonds, notes, and other evidences of indebtedness of this
             401      state:
             402          (i) the entity; or
             403          (ii) (A) the state in which the entity is located; or
             404          (B) the District of Columbia, if the entity is located within the District of Columbia.
             405          Section 6. Repealer.
             406          This act repeals:
             407          Section 53B-8b-101, Purpose.
             408          Section 53B-8b-102, Definitions.
             409          Section 53B-8b-103, Creation of Utah Supplemental Educational Savings Plan Trust.
             410          Section 53B-8b-104, Additional powers of board as to the trust.
             411          Section 53B-8b-105, Participation agreements -- Content.
             412          Section 53B-8b-106, Program and administrative funds -- Transfer between funds.
             413          Section 53B-8b-107, Ownership of contributions and earnings.
             414          Section 53B-8b-108, Effect of payments on determination of need and eligibility for
             415      student aid.
             416          Section 53B-8b-109, Annual audited financial report.
             417          Section 53B-8b-110, Tax considerations.
             418          Section 53B-8b-111, Property rights to assets in trust.
             419          Section 53B-8b-112, Liberal construction.
             420          Section 59-10-901, Tax considerations for Utah Supplemental Educational Savings
             421      Plan Trust.




Legislative Review Note
    as of 11-27-01 4:01 PM


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

Office of Legislative Research and General Counsel


Committee Note

The Revenue and Taxation Interim Committee recommended this bill.


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