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H.B. 256
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6 This act modifies the Individual Income Tax Act to reduce the amount of federal income
7 tax that a resident or nonresident individual may subtract from federal taxable income in
8 determining state individual income tax liability. The act makes technical changes. This
9 act takes effect for taxable years beginning on or after January 1, 2004.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 AMENDS:
12 59-10-114, as last amended by Chapter 211, Laws of Utah 2002
13 Be it enacted by the Legislature of the state of Utah:
14 Section 1. Section 59-10-114 is amended to read:
15 59-10-114. Additions to and subtractions from federal taxable income of an
16 individual.
17 (1) There shall be added to federal taxable income of a resident or nonresident
18 individual:
19 (a) the amount of any income tax imposed by this or any predecessor Utah individual
20 income tax law and the amount of any income tax imposed by the laws of another state, the
21 District of Columbia, or a possession of the United States, to the extent deducted from federal
22 adjusted gross income, as defined by Section 62, Internal Revenue Code, in determining federal
23 taxable income;
24 (b) a lump sum distribution that the taxpayer does not include in adjusted gross income
25 on the taxpayer's federal individual income tax return for the taxable year;
26 (c) for taxable years beginning on or after January 1, 2002, the amount of a child's
27 income calculated under Subsection (5) that:
28 (i) a parent elects to report on the parent's federal individual income tax return for the
29 taxable year; and
30 (ii) the parent does not include in adjusted gross income on the parent's federal
31 individual income tax return for the taxable year;
32 (d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
33 Code;
34 (e) a withdrawal from a medical care savings account and any penalty imposed in the
35 taxable year if:
36 (i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant
37 to Section 220, Internal Revenue Code; and
38 (ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2);
39 (f) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education
40 Savings Incentive Program, in the year in which the amount is refunded; and
41 (g) except as provided in Subsection (6), for taxable years beginning on or after
42 January 1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after
43 January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
44 one or more of the following entities:
45 (i) a state other than this state;
46 (ii) the District of Columbia;
47 (iii) a political subdivision of a state other than this state; or
48 (iv) an agency or instrumentality of an entity described in Subsections (1)(g)(i) through
49 (iii).
50 (2) There shall be subtracted from federal taxable income of a resident or nonresident
51 individual:
52 (a) the interest or dividends on obligations or securities of the United States and its
53 possessions or of any authority, commission, or instrumentality of the United States, to the
54 extent includable in gross income for federal income tax purposes but exempt from state
55 income taxes under the laws of the United States, but the amount subtracted under this
56 Subsection (2)(a) shall be reduced by any interest on indebtedness incurred or continued to
57 purchase or carry the obligations or securities described in this Subsection (2)(a), and by any
58 expenses incurred in the production of interest or dividend income described in this Subsection
59 (2)(a) to the extent that such expenses, including amortizable bond premiums, are deductible in
60 determining federal taxable income;
61 (b) (i) except as provided in Subsection (2)(b)(ii), [
62 income tax paid or payable to the United States after all allowable credits, as reported on the
63 United States individual income tax return of the taxpayer for the same taxable year; and
64 (ii) notwithstanding Subsection (2)(b)(i), for taxable years beginning on or after
65 January 1, 2001, the amount of a credit or an advance refund amount reported on a resident or
66 nonresident individual's United States individual income tax return allowed as a result of the
67 acceleration of the income tax rate bracket benefit for 2001 in accordance with Section 101,
68 Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, may not be
69 used in calculating the amount described in Subsection (2)(b)(i);
70 (c) the amount of adoption expenses which, for purposes of this Subsection (2)(c),
71 means any actual medical and hospital expenses of the mother of the adopted child which are
72 incident to the child's birth and any welfare agency, child placement service, legal, and other
73 fees or costs relating to the adoption;
74 (d) amounts received by taxpayers under age 65 as retirement income which, for
75 purposes of this section, means pensions and annuities, paid from an annuity contract
76 purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
77 Internal Revenue Code, or purchased by an employee under a plan which meets the
78 requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
79 political subdivision thereof, or the District of Columbia, to the employee involved or the
80 surviving spouse;
81 (e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
82 personal retirement exemption;
83 (f) 75% of the amount of the personal exemption, as defined and calculated in the
84 Internal Revenue Code, for each dependent child with a disability and adult with a disability
85 who is claimed as a dependent on a taxpayer's return;
86 (g) any amount included in federal taxable income that was received pursuant to any
87 federal law enacted in 1988 to provide reparation payments, as damages for human suffering,
88 to United States citizens and resident aliens of Japanese ancestry who were interned during
89 World War II;
90 (h) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
91 taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
92 (i) for:
93 (A) the taxpayer;
94 (B) the taxpayer's spouse; and
95 (C) the taxpayer's dependents; and
96 (ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
97 213, Internal Revenue Code, in determining federal taxable income for the taxable year;
98 (i) (i) except as otherwise provided in this Subsection (2)(i), the amount of a
99 contribution made during the taxable year on behalf of the taxpayer to a medical care savings
100 account and interest earned on a contribution to a medical care savings account established
101 pursuant to Title 31A, Chapter 32a, Medical Care Savings Account Act, to the extent the
102 contribution is accepted by the account administrator as provided in the Medical Care Savings
103 Account Act, and if the taxpayer did not deduct or include amounts on the taxpayer's federal
104 individual income tax return pursuant to Section 220, Internal Revenue Code; and
105 (ii) a contribution deductible under this Subsection (2)(i) may not exceed either of the
106 following:
107 (A) the maximum contribution allowed under the Medical Care Savings Account Act
108 for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is
109 covered by health care insurance as defined in Section 31A-1-301 or self-funded plan that
110 covers the other spouse, and each spouse has a medical care savings account; or
111 (B) the maximum contribution allowed under the Medical Care Savings Account Act
112 for the tax year for taxpayers:
113 (I) who do not file a joint return; or
114 (II) who file a joint return, but do not qualify under Subsection (2)(i)(i)(A); [
115 (j) the amount included in federal taxable income that was derived from money paid by
116 the taxpayer to the program fund under Title 53B, Chapter 8a, Higher Education Savings
117 Incentive Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d), and
118 investment income earned on participation agreements under Subsection 53B-8a-106 (1) that is
119 included in federal taxable income, but only when the funds are used for qualified higher
120 education costs of the beneficiary;
121 (k) for taxable years beginning on or after January 1, 2000, any amounts paid for
122 premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
123 amounts paid for long-term care insurance were not deducted under Section 213, Internal
124 Revenue Code, in determining federal taxable income; and
125 (l) for taxable years beginning on or after January 1, 2000, if the conditions of
126 Subsection (4)(a) are met, the amount of income derived by a Ute tribal member:
127 (i) during a time period that the Ute tribal member resides on homesteaded land
128 diminished from the Uintah and Ouray Reservation; and
129 (ii) from a source within the Uintah and Ouray Reservation.
130 (3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted
131 for taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
132 $4,800, except that:
133 (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
134 earned over $32,000, the amount of the retirement income exemption that may be subtracted
135 shall be reduced by 50 cents;
136 (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
137 earned over $16,000, the amount of the retirement income exemption that may be subtracted
138 shall be reduced by 50 cents; and
139 (iii) for individual taxpayers, for each $1 of adjusted gross income earned over
140 $25,000, the amount of the retirement income exemption that may be subtracted shall be
141 reduced by 50 cents.
142 (b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
143 shall be further reduced according to the following schedule:
144 (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
145 earned over $32,000, the amount of the personal retirement exemption shall be reduced by 50
146 cents;
147 (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
148 earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
149 cents; and
150 (iii) for individual taxpayers, for each $1 of adjusted gross income earned over
151 $25,000, the amount of the personal retirement exemption shall be reduced by 50 cents.
152 (c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be
153 calculated by adding to federal adjusted gross income any interest income not otherwise
154 included in federal adjusted gross income.
155 (d) For purposes of determining ownership of items of retirement income common law
156 doctrine will be applied in all cases even though some items may have originated from service
157 or investments in a community property state. Amounts received by the spouse of a living
158 retiree because of the retiree's having been employed in a community property state are not
159 deductible as retirement income of such spouse.
160 (e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
161 insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:
162 (i) for an amount that is reimbursed or funded in whole or in part by the federal
163 government, the state, or an agency or instrumentality of the federal government or the state;
164 and
165 (ii) for a taxpayer who is eligible to participate in a health plan maintained and funded
166 in whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
167 (4) (a) A subtraction for an amount described in Subsection (2)(l) is allowed only if:
168 (i) the taxpayer is a Ute tribal member; and
169 (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
170 requirements of this Subsection (4).
171 (b) The agreement described in Subsection (4)(a):
172 (i) may not:
173 (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
174 (B) provide a subtraction under this section greater than or different from the
175 subtraction described in Subsection (2)(l); or
176 (C) affect the power of the state to establish rates of taxation; and
177 (ii) shall:
178 (A) provide for the implementation of the subtraction described in Subsection (2)(l);
179 (B) be in writing;
180 (C) be signed by:
181 (I) the governor; and
182 (II) the chair of the Business Committee of the Ute tribe;
183 (D) be conditioned on obtaining any approval required by federal law; and
184 (E) state the effective date of the agreement.
185 (c) (i) The governor shall report to the commission by no later than February 1 of each
186 year regarding whether or not an agreement meeting the requirements of this Subsection (4) is
187 in effect.
188 (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
189 subtraction permitted under Subsection (2)(l) is not allowed for taxable years beginning on or
190 after the January 1 following the termination of the agreement.
191 (d) For purposes of Subsection (2)(l) and in accordance with Title 63, Chapter 46a,
192 Utah Administrative Rulemaking Act, the commission may make rules:
193 (i) for determining whether income is derived from a source within the Uintah and
194 Ouray Reservation; and
195 (ii) that are substantially similar to how federal adjusted gross income derived from
196 Utah sources is determined under Section 59-10-117 .
197 (5) (a) For purposes of this Subsection (5), "Form 8814" means:
198 (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
199 Interest and Dividends; or
200 (ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by
201 the commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to
202 2000 Form 8814 if for purposes of federal individual income taxes the information contained
203 on 2000 Form 8814 is reported on a form other than Form 8814; and
204 (B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter
205 46a, Utah Administrative Rulemaking Act, the commission may make rules designating a form
206 as being substantially similar to 2000 Form 8814 if for purposes of federal individual income
207 taxes the information contained on 2000 Form 8814 is reported on a form other than Form
208 8814.
209 (b) The amount of a child's income added to adjusted gross income under Subsection
210 (1)(c) is equal to the difference between:
211 (i) the lesser of:
212 (A) the base amount specified on Form 8814; and
213 (B) the sum of the following reported on Form 8814:
214 (I) the child's taxable interest;
215 (II) the child's ordinary dividends; and
216 (III) the child's capital gain distributions; and
217 (ii) the amount not taxed that is specified on Form 8814.
218 (6) Notwithstanding Subsection (1)(g), interest from bonds, notes, and other evidences
219 of indebtedness issued by an entity described in Subsections (1)(g)(i) through (iv) may not be
220 added to federal taxable income of a resident or nonresident individual if, as annually
221 determined by the commission:
222 (a) for an entity described in Subsection (1)(g)(i) or (ii), the entity and all of the
223 political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
224 income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
225 (b) for an entity described in Subsection (1)(g)(iii) or (iv), the following do not impose
226 a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
227 this state:
228 (i) the entity; or
229 (ii) (A) the state in which the entity is located; or
230 (B) the District of Columbia, if the entity is located within the District of Columbia.
231 Section 2. Effective date.
232 This act takes effect for taxable years beginning on or after January 1, 2004.
Legislative Review Note
as of 1-31-03 9:08 AM
A limited legal review of this legislation raises no obvious constitutional or statutory concerns.