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S.B. 57 Enrolled
This act modifies Corporate Franchise and Income Taxes to define terms, to amend the
exemption from state corporate franchise and income taxes for certain cooperatives, and to
make technical changes. This act has an immediate effective date. This act has retrospective
operation for taxable years beginning on or after January 1, 2002.
This act affects sections of Utah Code Annotated 1953 as follows:
59-7-101, as last amended by Chapter 331, Laws of Utah 1997
59-7-102, as last amended by Chapter 331, Laws of Utah 1997
59-7-402, as last amended by Chapters 20 and 311, Laws of Utah 1995
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-7-101 is amended to read:
As used in this chapter:
(1) "Adjusted income" means unadjusted income as modified by Sections 59-7-105 and
(2) (a) "Affiliated group" means one or more chains of corporations that are connected
through stock ownership with a common parent corporation that meet the following requirements:
(i) at least 80% of the stock of each of the corporations in the group, excluding the
common parent corporation, is owned by one or more of the other corporations in the group; and
(ii) the common parent directly owns at least 80% of the stock of at least one of the
corporations in the group.
(b) "Affiliated group" does not include corporations that are qualified to do business but
are not otherwise doing business in this state.
(c) For purposes of this Subsection (2), "stock" does not include nonvoting stock which is
limited and preferred as to dividends.
(3) "Apportionable income" means adjusted income less nonbusiness income net of related
expenses, to the extent included in adjusted income.
(4) "Apportioned income" means apportionable income multiplied by the apportionment
fraction as determined in Section 59-7-311 .
(5) "Business income" means income as defined in Section 59-7-302 .
(6) "Corporate return" or "return" includes a combined report.
(7) (a) "Common ownership" means the direct or indirect control or ownership of more than
50% of the outstanding voting stock of:
(i) a parent-subsidiary controlled group as defined in Section 1563, Internal Revenue Code,
except that 50% shall be substituted for 80%;
(ii) a brother-sister controlled group as defined in Section 1563, Internal Revenue Code,
except that 50% shall be substituted for 80%; or
(iii) three or more corporations each of which is a member of a group of corporations
described in Subsection (2)(a)(i) or (2)(a)(ii), and one of which is:
(A) a common parent corporation included in a group of corporations described in
Subsection (2)(a)(i); and
(B) included in a group of corporations described in Subsection (2)(a)(ii).
(b) Ownership of outstanding voting stock shall be determined by Section 1563, Internal
(8) "Corporation" includes:
(a) entities defined as corporations under Sections 7701(a) and 7704, Internal Revenue Code;
(b) other organizations that are taxed as corporations for federal income tax purposes under
the Internal Revenue Code.
(9) "Dividend" means any distribution, including money or other type of property, made by
a corporation to its shareholders out of its earnings or profits accumulated after December 31, 1930.
(10) (a) "Doing business" includes any transaction in the course of its business by a domestic
corporation, or by a foreign corporation qualified to do or doing intrastate business in this state[
(b) Except as provided in Subsection 59-7-102 (2), "doing business" includes:
(i) the right to do business through incorporation or qualification[
(ii) the owning, renting, or leasing of real or personal property within this state[
(iii) the participation in joint ventures, working and operating agreements, the performance
of which takes place in this state.
(11) "Domestic corporation" means a corporation [
under the laws of this state.
(12) (a) "Farmers' cooperative" means an association, corporation, or other organization that
(i) (A) an association, corporation, or other organization of:
(I) farmers; or
(II) fruit growers; or
(B) an association, corporation, or other organization that is similar to an association,
corporation, or organization described in Subsection (12)(a)(i)(A); and
(ii) organized and operated on a cooperative basis to:
(A) (I) market the products of members of the cooperative or the products of other
(II) return to the members of the cooperative or other producers the proceeds of sales less
necessary marketing expenses on the basis of the quantity of the products of a member or producer
or the value of the products of a member or producer; or
(B) (I) purchase supplies and equipment for the use of members of the cooperative or other
(II) turn over the supplies and equipment described in Subsection (12)(a)(ii)(B)(I) at actual
costs plus necessary expenses to the members of the cooperative or other persons.
(b) (i) Subject to Subsection (12)(b)(ii), for purposes of this Subsection (12), the commission
by rule, made in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, shall
(A) the terms:
(I) "member"; and
(II) "producer"; and
(B) what constitutes an association, corporation, or other organization that is similar to an
association, corporation, or organization described in Subsection (12)(a)(i)(A).
(ii) The rules made under this Subsection (12)(b) shall be consistent with the filing
requirements under federal law for a farmers' cooperative.
organized under the laws of this state.
(i) is incorporated in the United States[
(ii) 80% or more of whose business activity, as determined under Section 59-7-401 , is
conducted outside the United States.
(b) "Foreign operating company" does not include a corporation [
the Puerto Rico and Possession Tax Credit as provided in Section 936, Internal Revenue Code.
Internal Revenue Code.
during the year in which Utah taxable income is determined.
the last day of the taxable year of the S corporation, is:
(a) an individual not domiciled in Utah; or
(b) a nonresident trust or nonresident estate, as defined in Section 59-10-103 .
(a) expenses directly attributable to nonbusiness income; and
(b) the portion of interest or other expense indirectly attributable to both nonbusiness and
business income which bears the same ratio to the aggregate amount of such interest or other
expense, determined without regard to this Subsection (20), as the average amount of the asset
producing the nonbusiness income bears to the average amount of all assets of the taxpayer within
the taxable year.
Internal Revenue Code.
Section 168, Internal Revenue Code.
Columbia and "United States" includes the 50 states and the District of Columbia.
calendar year upon the basis of which the adjusted income is computed[
(b) In the case of a return made for a fractional part of a year under this chapter or under
rules prescribed by the commission, "taxable year" includes the period for which such return is made.
equal to or greater than 20% of the corporation's total business activity as determined under Section
return basis before intercompany eliminations as determined by the Internal Revenue Code, before
the net operating loss deduction and special deductions for dividends received.
(i) are related through common ownership; and
(ii) by a preponderance of the evidence as determined by a court of competent jurisdiction
or the commission, are economically interdependent with one another as demonstrated by the
(A) centralized management;
(B) functional integration;
(C) economies of scale.
(b) "Unitary group" does not include S corporations.
deduction, if determined to be less than zero.
with Section 59-7-110 .
less Utah net loss deduction.
(b) "Utah taxable income" includes income from tangible or intangible property located or
having situs in this state, regardless of whether carried on in intrastate, interstate, or foreign
nonbusiness income allocable to Utah net of related expenses.
(i) all members of a unitary group [
(A) corporations organized or incorporated in the United States, including those corporations
qualifying for the Puerto Rico and Possession Tax Credit as provided in Section 936, Internal
Revenue Code, in accordance with Subsection [
(B) corporations organized or incorporated outside of the United States meeting the
threshold level of business activity; and
(ii) an affiliated group electing to file a water's edge combined report under Subsection
(b) There is a rebuttable presumption that a corporation which qualifies for the Puerto Rico
and Possession Tax Credit provided in Section 936, Internal Revenue Code, is part of a unitary
activities of all members of a unitary group irrespective of the country in which the corporations are
incorporated or conduct business activity.
Section 2. Section 59-7-102 is amended to read:
(1) Except as provided in [
(c) an insurance [
insurance company's premiums under [
(d) a building [
(e) a farmers' cooperative.
(2) Notwithstanding any other provision in [
Receipts Tax on Certain Corporations Not Required to Pay Corporate Franchise or Income Tax Act,
a person not otherwise subject to the tax imposed by this chapter or Chapter 8 [
subject to the tax imposed by Sections 59-7-104 , 59-7-201 , 59-7-701 , and 59-8-104 , [
(a) that person's ownership of tangible personal property located at the premises of a printer's
facility in this state with which the person has contracted for printing; or
(b) the activities of the person's employees or agents who are:
(i) located solely at the premises of a printer's facility; and [
(ii) performing services:
(A) related to:
(I) quality control[
(III) printing services; and
(B) performed by the printer's facility in this state with which the person has contracted for
(3) Notwithstanding Subsection (1), an organization, company, authority, or farmers'
cooperative exempt from this chapter under Subsection (1) is subject to Part 8, Unrelated Business
Income, to the extent provided in Part 8.
(4) Notwithstanding Subsection (1)(b), to the extent the income of an organization described
in Subsection (1)(b) is taxable for federal tax purposes under Section 528, Internal Revenue Code,
the organization's income is also taxable under this chapter.
Section 3. Section 59-7-402 is amended to read:
59-7-402. Water's edge combined report.
(1) Except as provided in Section 59-7-403 , if any corporation listed in Subsection 59-7-101
(2) (a) A group of corporations that are not otherwise a unitary group may elect to file a
water's edge combined report if each member of the group is:
(i) doing business in Utah;
(ii) part of the same affiliated group; and
(iii) qualified, under Section 1501, Internal Revenue Code, to file a federal consolidated
(b) Each corporation within the affiliated group that is doing business in Utah must consent
to filing a combined report. If an affiliated group elects to file a combined report, each corporation
within the affiliated group that is doing business in Utah must file a combined report.
(c) Corporations that elect to file a water's edge combined report under this section may not
thereafter elect to file a separate return without the consent of the commission.
Section 4. Effective date.
If approved by two-thirds of all the members elected to each house, this act takes effect upon
approval by the governor, or the day following the constitutional time limit of Utah Constitution
Article VII, Section 8, without the governor's signature, or in the case of a veto, the date of veto
Section 5. Retrospective operation.
This act has retrospective operation for taxable years beginning on or after January 1, 2002.
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