H.B. 78 Enrolled

CORPORATE FRANCHISE AND INCOME TAX
AMENDMENTS
2005 GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Wayne A. Harper
Senate Sponsor: Curtis S. Bramble

LONG TITLE
General Description:
This bill amends the Corporate Franchise and Income Taxes chapter relating to the
apportionment of income.
Highlighted Provisions:
This bill:
. for taxable years beginning on or after January 1, 2006, allows a taxpayer to elect to
calculate the apportionment of business income on the basis of a fraction that
increases the weighting of the sales factor;
. provides that a taxpayer making such an election may not revoke the election for a
period of five taxable years;
. grants rulemaking authority to the State Tax Commission;
. addresses the State Tax Commission's authority to make adjustments in the
accounting, allocation, or apportionment of income; and
. makes technical changes.
Monies Appropriated in this Bill:
None
Other Special Clauses:
This bill takes effect for taxable years beginning on or after January 1, 2006.
Utah Code Sections Affected:
AMENDS:
59-7-311, as renumbered and amended by Chapter 2, Laws of Utah 1987

59-7-320, as last amended by Chapter 83, Laws of Utah 1994
59-7-401, as enacted by Chapter 169, Laws of Utah 1993
59-7-801, as enacted by Chapter 178, Laws of Utah 1994

Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-7-311 is amended to read:
59-7-311. Method of apportionment of business income.
(1) All business income shall be apportioned to this state by multiplying the business
income by a fraction[,] calculated as provided in Subsection (2).
(2) The fraction described in Subsection (1) is calculated as follows:
(a) for a taxpayer that does not make an election authorized by Subsection (3):
(i) the numerator of [which is] the fraction is the sum of:
(A) the property factor [plus] as calculated under Section 59-7-312 ;
(B) the payroll factor [plus] as calculated under Section 59-7-315 ; and
(C) the sales factor[, and] as calculated under Section 59-7-317 ; and
(ii) the denominator of [which] the fraction is three[.]; and
(b) for a taxpayer that makes an election authorized by Subsection (3):
(i) the numerator of the fraction is the sum of:
(A) the property factor as calculated under Section 59-7-312 ;
(B) the payroll factor as calculated under Section 59-7-315 ; and
(C) the product of:
(I) the sales factor as calculated under Section 59-7-317 ; and
(II) two; and
(ii) the denominator of the fraction is four.
(3) (a) For purposes of Subsection (2) and subject to Subsection (3)(b), for taxable years
beginning on or after January 1, 2006, a taxpayer may elect to calculate the fraction for
apportioning business income under this section in accordance with Subsection (2)(b).
(b) If a taxpayer makes the election described in Subsection (3)(a), the taxpayer may not

revoke the election for a period of five taxable years.
(c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
commission may make rules providing procedures for a taxpayer to make the election described
in Subsection (3)(a).
Section 2. Section 59-7-320 is amended to read:
59-7-320. Equitable adjustment of standard allocation or apportionment.
[If] Notwithstanding any other provision of this part, if the allocation and apportionment
provisions of this [chapter] part do not fairly represent the extent of the taxpayer's business
activity in this state, the taxpayer may petition for or the commission may require, in respect to
all or any part of the taxpayer's business activity, if reasonable:
(1) separate accounting;
(2) the exclusion of any one or more of the factors;
(3) the inclusion of one or more additional factors which will fairly represent the
taxpayer's business activity in this state; or
(4) the employment of any other method to effectuate an equitable allocation and
apportionment of the taxpayer's income.
Section 3. Section 59-7-401 is amended to read:
59-7-401. Determining threshold level of business activity for corporations
organized or incorporated outside of the United States.
(1) Except as provided in Subsection (2), in determining whether a corporation is a
foreign operating company or has met the threshold level of business activity, business activity
within and without the United States shall be measured by means of the factors ordinarily
applicable under Sections 59-7-312 through 59-7-319 .
(2) (a) Any taxpayer who would ordinarily be required to apportion business income [by
means of the three-factor formula] in accordance with Part 3, Allocation and Apportionment of
Income - Utah UDITPA Provisions, shall use a two-factor formula of property and payroll.
(b) The results of the property and payroll factor computation shall be divided by two, or
by one if either the property or payroll factor has a denominator of zero.

Section 4. Section 59-7-801 is amended to read:
59-7-801. Definitions.
For purposes of this part:
(1) "Unrelated business income" means unrelated business income as determined under
Section 512, Internal Revenue Code.
(2) "Utah unrelated business income" means the unrelated business income apportioned
to Utah [by the apportionment method provided] in accordance with Part 3 [of this chapter],
Allocation and Apportionment of Income - Utah UDITPA Provisions.
Section 5. Effective date.
This bill takes effect for taxable years beginning on or after January 1, 2006.