S.B. 118 Enrolled

INDIVIDUAL INCOME TAX - ADOPTION
EXPENSES
2003 GENERAL SESSION
STATE OF UTAH
Sponsor: Carlene M. Walker
This act modifies the Individual Income Tax Act to allow an individual to choose from
specified options the taxable year for which the individual may subtract adoption
expenses from federal taxable income. This act has retrospective operation for taxable
years beginning on or after January 1, 2003.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
59-10-103, as last amended by Chapter 257, Laws of Utah 2000
59-10-114, as last amended by Chapter 211, Laws of Utah 2002
59-10-133, as enacted by Chapter 327, Laws of Utah 2001
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-10-103 is amended to read:
59-10-103. Definitions.
(1) As used in this chapter:
(a) "Adoption expenses" means:
(i) any actual medical and hospital expenses of the mother of the adopted child which
are incident to the child's birth;
(ii) any welfare agency fees or costs;
(iii) any child placement service fees or costs;
(iv) any legal fees or costs; or
(v) any other fees or costs relating to an adoption.
[(a)] (b) "Adult with a disability" means an individual who:
(i) is 18 years of age or older;
(ii) is eligible for services under Title 62A, Chapter 5, Services to People with
Disabilities; and

(iii) is not enrolled in:
(A) an education program for students with disabilities that is authorized under Section
53A-15-301 ; or
(B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.
[(b)] (c) "Corporation" includes associations, joint stock companies, and insurance
companies.
[(c)] (d) "Dependent child with a disability" means an individual 21 years of age or
younger who:
(i) (A) is diagnosed by a school district representative under rules adopted by the State
Board of Education as having a disability classified as:
(I) autism;
(II) deafness;
(III) preschool developmental delay;
(IV) dual sensory impairment;
(V) hearing impairment;
(VI) intellectual disability;
(VII) multidisability;
(VIII) orthopedic impairment;
(IX) other health impairment;
(X) traumatic brain injury; or
(XI) visual impairment;
(B) is not receiving residential services from:
(I) the Division of Services for People with Disabilities created under Section
62A-5-102 ; or
(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
and
(C) is enrolled in:
(I) an education program for students with disabilities that is authorized under Section

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53A-15-301 ; or
(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind; or
(ii) is identified under guidelines of the Department of Health as qualified for:
(A) Early Intervention; or
(B) Infant Development Services.
[(d)] (e) "Employer," "employee," and "wages" are defined as provided in Section
59-10-401 .
[(e)] (f) "Fiduciary" means a guardian, trustee, executor, administrator, receiver,
conservator, or any person acting in any fiduciary capacity for any individual.
[(f)] (g) "Homesteaded land diminished from the Uintah and Ouray Reservation" means
the homesteaded land that was held to have been diminished from the Uintah and Ouray
Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
[(g)] (h) "Individual" means a natural person and includes aliens and minors.
[(h)] (i) "Nonresident individual" means an individual who is not a resident of this state.
[(i)] (j) "Nonresident trust" or "nonresident estate" means a trust or estate which is not a
resident estate or trust.
[(j)] (k) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
unincorporated organization, through or by means of which any business, financial operation, or
venture is carried on, and which is not, within the meaning of this chapter, a trust or estate or a
corporation.
(ii) "Partnership" does not include any organization not included under the definition of
"partnership" contained in Section 761, Internal Revenue Code.
(iii) "Partner" includes a member in such a syndicate, group, pool, joint venture, or
organization.
[(k)] (l) "Resident individual" means:
(i) an individual who is domiciled in this state for any period of time during the taxable
year, but only for the duration of such period; or
(ii) an individual who is not domiciled in this state but maintains a permanent place of

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abode in this state and spends in the aggregate 183 or more days of the taxable year in this state.
For purposes of this Subsection (1)[(k)](l)(ii), a fraction of a calendar day shall be counted as a
whole day.
[(l)] (m) (i) "Resident estate" or "resident trust" means:
(A) an estate of a decedent who at his death was domiciled in this state;
(B) a trust, or a portion of a trust, consisting of property transferred by will of a decedent
who at his death was domiciled in this state; or
(C) a trust administered in this state.
(ii) For purposes of this chapter, a trust shall be considered to be administered in this
state if:
(A) the place of business where the fiduciary transacts a major portion of its
administration of the trust is in this state; or
(B) the usual place of business of the fiduciary is in this state.
(iii) Where there are two or more fiduciaries, the residency status of the trust shall be
determined by the situs of the corporate or professional fiduciary with primary responsibility for
the administration of the trust as defined in the trust instrument.
(iv) The commission may, by rule, provide additional guidelines to determine the
residency status of a trust.
[(m)] (n) "Taxable income" and "state taxable income" are defined as provided in
Sections 59-10-111 , 59-10-112 , 59-10-116 , 59-10-201.1 , and 59-10-204 .
[(n)] (o) "Taxpayer" means any individual, estate, or trust or beneficiary of an estate or
trust, whose income is subject in whole or part to the tax imposed by this chapter.
[(o)] (p) "Uintah and Ouray Reservation" means the lands recognized as being included
within the Uintah and Ouray Reservation in:
(i) Hagen v. Utah, 510 U.S. 399 (1994); and
(ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
[(p)] (q) "Ute tribal member" means a person who is enrolled as a member of the Ute
Indian Tribe of the Uintah and Ouray Reservation.

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[(q)] (r) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
(2) Any term used in this chapter has the same meaning as when used in comparable
context in the laws of the United States relating to federal income taxes unless a different
meaning is clearly required. Any reference to the Internal Revenue Code or to the laws of the
United States shall mean the Internal Revenue Code or other provisions of the laws of the United
States relating to federal income taxes which are in effect for the taxable year. Any reference to a
specific section of the Internal Revenue Code or other provision of the laws of the United States
relating to federal income taxes shall include any corresponding or comparable provisions of the
Internal Revenue Code as hereafter amended, redesignated, or reenacted.
Section 2. Section 59-10-114 is amended to read:
59-10-114. Additions to and subtractions from federal taxable income of an
individual.
(1) There shall be added to federal taxable income of a resident or nonresident
individual:
(a) the amount of any income tax imposed by this or any predecessor Utah individual
income tax law and the amount of any income tax imposed by the laws of another state, the
District of Columbia, or a possession of the United States, to the extent deducted from federal
adjusted gross income, as defined by Section 62, Internal Revenue Code, in determining federal
taxable income;
(b) a lump sum distribution that the taxpayer does not include in adjusted gross income
on the taxpayer's federal individual income tax return for the taxable year;
(c) for taxable years beginning on or after January 1, 2002, the amount of a child's
income calculated under Subsection (5) that:
(i) a parent elects to report on the parent's federal individual income tax return for the
taxable year; and
(ii) the parent does not include in adjusted gross income on the parent's federal individual
income tax return for the taxable year;
(d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue

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Code;
(e) a withdrawal from a medical care savings account and any penalty imposed in the
taxable year if:
(i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant
to Section 220, Internal Revenue Code; and
(ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2);
(f) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education
Savings Incentive Program, in the year in which the amount is refunded; and
(g) except as provided in Subsection (6), for taxable years beginning on or after January
1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after January 1,
2003, the interest from bonds, notes, and other evidences of indebtedness issued by one or more
of the following entities:
(i) a state other than this state;
(ii) the District of Columbia;
(iii) a political subdivision of a state other than this state; or
(iv) an agency or instrumentality of an entity described in Subsections (1)(g)(i) through
(iii).
(2) There shall be subtracted from federal taxable income of a resident or nonresident
individual:
(a) the interest or dividends on obligations or securities of the United States and its
possessions or of any authority, commission, or instrumentality of the United States, to the extent
includable in gross income for federal income tax purposes but exempt from state income taxes
under the laws of the United States, but the amount subtracted under this Subsection (2)(a) shall
be reduced by any interest on indebtedness incurred or continued to purchase or carry the
obligations or securities described in this Subsection (2)(a), and by any expenses incurred in the
production of interest or dividend income described in this Subsection (2)(a) to the extent that
such expenses, including amortizable bond premiums, are deductible in determining federal
taxable income;

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(b) (i) except as provided in Subsection (2)(b)(ii), 1/2 of the net amount of any income
tax paid or payable to the United States after all allowable credits, as reported on the United
States individual income tax return of the taxpayer for the same taxable year; and
(ii) notwithstanding Subsection (2)(b)(i), for taxable years beginning on or after January
1, 2001, the amount of a credit or an advance refund amount reported on a resident or
nonresident individual's United States individual income tax return allowed as a result of the
acceleration of the income tax rate bracket benefit for 2001 in accordance with Section 101,
Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, may not be
used in calculating the amount described in Subsection (2)(b)(i);
(c) the amount of adoption expenses [which, for purposes of this Subsection (2)(c),
means any actual medical and hospital expenses of the mother of the adopted child which are
incident to the child's birth and any welfare agency, child placement service, legal, and other fees
or costs relating to the adoption;] for one of the following taxable years as elected by the resident
or nonresident individual:
(i) regardless of whether a court issues an order granting the adoption, the taxable year in
which the adoption expenses are:
(A) paid; or
(B) incurred;
(ii) the taxable year in which a court issues an order granting the adoption; or
(iii) any year in which the resident or nonresident individual may claim the federal
adoption expenses credit under Section 23, Internal Revenue Code;
(d) amounts received by taxpayers under age 65 as retirement income which, for
purposes of this section, means pensions and annuities, paid from an annuity contract purchased
by an employer under a plan which meets the requirements of Section 404(a)(2), Internal
Revenue Code, or purchased by an employee under a plan which meets the requirements of
Section 408, Internal Revenue Code, or paid by the United States, a state, or political subdivision
thereof, or the District of Columbia, to the employee involved or the surviving spouse;
(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500

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personal retirement exemption;
(f) 75% of the amount of the personal exemption, as defined and calculated in the
Internal Revenue Code, for each dependent child with a disability and adult with a disability who
is claimed as a dependent on a taxpayer's return;
(g) any amount included in federal taxable income that was received pursuant to any
federal law enacted in 1988 to provide reparation payments, as damages for human suffering, to
United States citizens and resident aliens of Japanese ancestry who were interned during World
War II;
(h) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
(i) for:
(A) the taxpayer;
(B) the taxpayer's spouse; and
(C) the taxpayer's dependents; and
(ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
213, Internal Revenue Code, in determining federal taxable income for the taxable year;
(i) (i) except as otherwise provided in this Subsection (2)(i), the amount of a contribution
made during the taxable year on behalf of the taxpayer to a medical care savings account and
interest earned on a contribution to a medical care savings account established pursuant to Title
31A, Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is accepted
by the account administrator as provided in the Medical Care Savings Account Act, and if the
taxpayer did not deduct or include amounts on the taxpayer's federal individual income tax return
pursuant to Section 220, Internal Revenue Code; and
(ii) a contribution deductible under this Subsection (2)(i) may not exceed either of the
following:
(A) the maximum contribution allowed under the Medical Care Savings Account Act for
the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is covered
by health care insurance as defined in Section 31A-1-301 or self-funded plan that covers the

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other spouse, and each spouse has a medical care savings account; or
(B) the maximum contribution allowed under the Medical Care Savings Account Act for
the tax year for taxpayers:
(I) who do not file a joint return; or
(II) who file a joint return, but do not qualify under Subsection [(2)(i)(i)(A)] (2)(i)(ii)(A);
and
(j) the amount included in federal taxable income that was derived from money paid by
the taxpayer to the program fund under Title 53B, Chapter 8a, Higher Education Savings
Incentive Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d), and
investment income earned on participation agreements under Subsection 53B-8a-106 (1) that is
included in federal taxable income, but only when the funds are used for qualified higher
education costs of the beneficiary;
(k) for taxable years beginning on or after January 1, 2000, any amounts paid for
premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
amounts paid for long-term care insurance were not deducted under Section 213, Internal
Revenue Code, in determining federal taxable income; and
(l) for taxable years beginning on or after January 1, 2000, if the conditions of Subsection
(4)(a) are met, the amount of income derived by a Ute tribal member:
(i) during a time period that the Ute tribal member resides on homesteaded land
diminished from the Uintah and Ouray Reservation; and
(ii) from a source within the Uintah and Ouray Reservation.
(3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted for
taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
$4,800, except that:
(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
over $32,000, the amount of the retirement income exemption that may be subtracted shall be
reduced by 50 cents;
(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income

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earned over $16,000, the amount of the retirement income exemption that may be subtracted
shall be reduced by 50 cents; and
(iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
the amount of the retirement income exemption that may be subtracted shall be reduced by 50
cents.
(b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
shall be further reduced according to the following schedule:
(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
over $32,000, the amount of the personal retirement exemption shall be reduced by 50 cents;
(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
cents; and
(iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
the amount of the personal retirement exemption shall be reduced by 50 cents.
(c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be calculated
by adding to federal adjusted gross income any interest income not otherwise included in federal
adjusted gross income.
(d) For purposes of determining ownership of items of retirement income common law
doctrine will be applied in all cases even though some items may have originated from service or
investments in a community property state. Amounts received by the spouse of a living retiree
because of the retiree's having been employed in a community property state are not deductible as
retirement income of such spouse.
(e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:
(i) for an amount that is reimbursed or funded in whole or in part by the federal
government, the state, or an agency or instrumentality of the federal government or the state; and
(ii) for a taxpayer who is eligible to participate in a health plan maintained and funded in
whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.

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(4) (a) A subtraction for an amount described in Subsection (2)(l) is allowed only if:
(i) the taxpayer is a Ute tribal member; and
(ii) the governor and the Ute tribe execute and maintain an agreement meeting the
requirements of this Subsection (4).
(b) The agreement described in Subsection (4)(a):
(i) may not:
(A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
(B) provide a subtraction under this section greater than or different from the subtraction
described in Subsection (2)(l); or
(C) affect the power of the state to establish rates of taxation; and
(ii) shall:
(A) provide for the implementation of the subtraction described in Subsection (2)(l);
(B) be in writing;
(C) be signed by:
(I) the governor; and
(II) the chair of the Business Committee of the Ute tribe;
(D) be conditioned on obtaining any approval required by federal law; and
(E) state the effective date of the agreement.
(c) (i) The governor shall report to the commission by no later than February 1 of each
year regarding whether or not an agreement meeting the requirements of this Subsection (4) is in
effect.
(ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
subtraction permitted under Subsection (2)(l) is not allowed for taxable years beginning on or
after the January 1 following the termination of the agreement.
(d) For purposes of Subsection (2)(l) and in accordance with Title 63, Chapter 46a, Utah
Administrative Rulemaking Act, the commission may make rules:
(i) for determining whether income is derived from a source within the Uintah and Ouray
Reservation; and

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

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any part of the bonds, notes, and other evidences of indebtedness of this state; or
(b) for an entity described in Subsection (1)(g)(iii) or (iv), the following do not impose a
tax based on income on any part of the bonds, notes, and other evidences of indebtedness of this
state:
(i) the entity; or
(ii) (A) the state in which the entity is located; or
(B) the District of Columbia, if the entity is located within the District of Columbia.
Section 3. Section 59-10-133 is amended to read:
59-10-133. Tax credits for special needs adoptions.
(1) For purposes of this section, a "child who has a special need" means a child:
(a) for whom permanent custody has been awarded to the Utah Division of Child and
Family Services[,];
(b) who cannot or should not be returned to the home of the child's biological parents[,];
and
(c) who meets at least one of the following conditions:
[(a)] (i) the child is five years of age or older;
[(b)] (ii) the child is under the age of 18 with a physical, emotional, or mental disability;
or
[(c)] (iii) the child is a member of a sibling group placed together for adoption.
(2) For taxable years beginning on or after January 1, 2001, a taxpayer who adopts a
child who has a special need may claim on the taxpayer's individual income tax return for the
taxable year a refundable credit of $1,000 against taxes otherwise due under this chapter for:
(a) adoptions for which a court issues an order granting the adoption on or after January
1, 2001;
(b) the taxable year during which a court issues an order granting the adoption; and
(c) each child who has a special need whom the taxpayer adopts.
(3) The credit provided for in this section may not be carried forward or carried back.
(4) Nothing in this section shall affect the ability of any taxpayer who adopts a child who

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has a special need to receive [financial aid for] adoption [expenses] assistance under Section
[ 62A-4a-108 ] 62A-4a-907 .
Section 4. Retrospective operation.
This act has retrospective operation for taxable years beginning on or after January 1,
2003.

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