H.B. 101

1

AMENDMENTS TO THE INDIVIDUAL INCOME
2 TAX
3 2005 GENERAL SESSION
4 STATE OF UTAH
5 Sponsor: Wayne A. Harper
6
7 LONG TITLE
8 General Description:
9 This bill modifies the Fiduciaries and Trusts title, the Medical Care Savings Account
10 Act, the Higher Education Savings Incentive Program chapter, the Individual Income
11 Tax Act, and the Travel Reduction chapter relating to the calculation of state individual
12 income taxes.
13 Highlighted Provisions:
14 This bill:
15 . addresses the calculation of individual income taxes on:
16 . a resident or nonresident individual; and
17 . a resident or nonresident estate or trust;
18 . repeals definitions and provides definitions;
19 . repeals the individual income tax brackets and provides a single individual income
20 tax rate;
21 . provides that state individual income taxes on a resident and nonresident individual
22 are calculated on the basis of the resident or nonresident individual's federal
23 adjusted gross income rather than federal taxable income;
24 . modifies the additions to and subtractions from income for:
25 . a resident or nonresident individual; and
26 . a resident or nonresident estate or trust; and
27 . makes technical changes.

28 Monies Appropriated in this Bill:
29 None
30 Other Special Clauses:
31 This bill takes effect for taxable years beginning on or after January 1, 2006.
32 Utah Code Sections Affected:
33 AMENDS:
34 22-3-505, as enacted by Chapter 285, Laws of Utah 2004
35 53B-8a-106, as last amended by Chapter 144, Laws of Utah 2000
36 53B-8a-112, as enacted by Chapter 4, Laws of Utah 1996, Second Special Session
37 59-10-103, as last amended by Chapter 2, Laws of Utah 2004, Fourth Special Session
38 59-10-104, as last amended by Chapters 323 and 324, Laws of Utah 2001
39 59-10-105, as last amended by Chapter 323, Laws of Utah 2001
40 59-10-114, as last amended by Chapter 2, Laws of Utah 2004, Fourth Special Session
41 59-10-115, as renumbered and amended by Chapter 2, Laws of Utah 1987
42 59-10-116, as last amended by Chapter 79, Laws of Utah 2004
43 59-10-120, as renumbered and amended by Chapter 2, Laws of Utah 1987
44 59-10-201, as last amended by Chapter 3, Laws of Utah 2003, Second Special Session
45 59-10-202, as last amended by Chapter 3, Laws of Utah 2003, Second Special Session
46 59-10-205, as last amended by Chapter 345, Laws of Utah 1995
47 59-10-210, as last amended by Chapter 345, Laws of Utah 1995
48 72-12-107, as renumbered and amended by Chapter 270, Laws of Utah 1998
49 REPEALS:
50 31A-32a-101, as enacted by Chapter 131, Laws of Utah 1999
51 31A-32a-102, as last amended by Chapter 116, Laws of Utah 2001
52 31A-32a-103, as enacted by Chapter 131, Laws of Utah 1999
53 31A-32a-104, as enacted by Chapter 131, Laws of Utah 1999
54 31A-32a-105, as enacted by Chapter 131, Laws of Utah 1999
55 31A-32a-106, as last amended by Chapter 53, Laws of Utah 2001
56 31A-32a-107, as enacted by Chapter 131, Laws of Utah 1999
57 59-10-111, as last amended by Chapter 96, Laws of Utah 1987
58 59-10-112, as last amended by Chapter 345, Laws of Utah 1995

59 59-10-201.1, as enacted by Chapter 345, Laws of Utah 1995
60 59-10-204, as last amended by Chapter 345, Laws of Utah 1995
61
62 Be it enacted by the Legislature of the state of Utah:
63 Section 1. Section 22-3-505 is amended to read:
64 22-3-505. Income taxes.
65 (1) A tax required to be paid by a trustee based on receipts allocated to income must be
66 paid from income.
67 (2) A tax required to be paid by a trustee based on receipts allocated to principal must
68 be paid from principal, even if the tax is called an income tax by the taxing authority.
69 (3) A tax required to be paid by a trustee on the trust's share of an entity's taxable
70 income must be paid proportionately:
71 (a) from income to the extent that receipts from the entity are allocated to income; and
72 (b) from principal to the extent that:
73 (i) receipts from the entity are allocated to principal; and
74 (ii) the trust's share of the entity's state taxable income exceeds the total receipts
75 described in Subsections (3)(a) and (3)(b)(i).
76 (4) For purposes of this section, receipts allocated to principal or income must be
77 reduced by the amount distributed to a beneficiary from principal or income for which the trust
78 receives a deduction in calculating the tax.
79 Section 2. Section 53B-8a-106 is amended to read:
80 53B-8a-106. Participation agreements for trust.
81 The trust may enter into participation agreements with participants on behalf of
82 beneficiaries under the following terms and agreements:
83 (1) (a) Each participation agreement shall require a participant to agree to invest a
84 specific amount of money in the trust for a specific period of time for the benefit of a specific
85 beneficiary, not to exceed an amount determined by the board.
86 (b) Participation agreements may be amended to provide for adjusted levels of
87 payments based upon changed circumstances or changes in educational plans.
88 (c) A participant may make additional optional payments as long as the total payments
89 for a specific beneficiary do not exceed the total estimated higher education costs as

90 determined by the board.
91 [(d) The maximum amount of investments that may be subtracted from federal taxable
92 income of a resident or nonresident individual under Subsection 59-10-114 (2)(j) shall be
93 $1,200 for each individual beneficiary for the 1996 calendar year and an amount adjusted
94 annually thereafter to reflect increases in the Consumer Price Index.]
95 (2) The participation agreement may include a minimum rate of return for the
96 investment made by the participant.
97 [(3) (a) Beneficiaries designated in participation agreements must be designated from
98 date of birth through age 18 for the participant to subtract allowable investments from federal
99 taxable income under Subsection 59-10-114 (2)(j).]
100 [(b) Participants may designate beneficiaries after age 18, but investments for those
101 beneficiaries are not eligible for subtraction from federal taxable income.]
102 [(4)] (3) Payment of benefits provided under participation agreements must begin not
103 later than the first full fall academic quarter or semester at an institution of higher education
104 following the 22nd birthday or high school graduation of the beneficiary, whichever is later,
105 unless the participant notifies the program administrator to the contrary.
106 [(5)] (4) The execution of a participation agreement by the trust may not guarantee in
107 any way that higher education costs will be equal to projections and estimates provided by the
108 trust or that the beneficiary named in any participation agreement will:
109 (a) be admitted to an institution of higher education;
110 (b) if admitted, be determined a resident for tuition purposes by the institution of
111 higher education, unless the participation agreement is vested;
112 (c) be allowed to continue attendance at the institution of higher education following
113 admission; or
114 (d) graduate from the institution of higher education.
115 [(6)] (5) Beneficiaries may be changed as permitted by the rules and regulations of the
116 board upon written request of the participant prior to the date of admission of any beneficiary
117 under a participation agreement by an institution of higher education so long as the substitute
118 beneficiary is eligible for participation.
119 [(7)] (6) Participation agreements may be freely amended throughout their terms in
120 order to enable participants to increase or decrease the level of participation, change the

121 designation of beneficiaries, and carry out similar matters as authorized by rule.
122 [(8)] (7) Each participation agreement shall provide that the participation agreement
123 may be canceled upon the terms and conditions, and upon payment of the fees and costs set
124 forth and contained in the board's rules and regulations.
125 Section 3. Section 53B-8a-112 is amended to read:
126 53B-8a-112. Tax considerations.
127 (1) For tax purposes the property of the trust and its income are governed by Sections
128 59-7-105 , 59-7-106 , [ 59-10-114 ,] and 59-10-201 .
129 (2) The tax commission, in consultation with the board, may adopt rules necessary to
130 monitor and implement the tax provisions referred to in Subsection (1) as related to the
131 property of the trust and its income.
132 Section 4. Section 59-10-103 is amended to read:
133 59-10-103. Definitions.
134 (1) As used in this chapter:
135 [(a) "Adoption expenses" means:]
136 [(i) any actual medical and hospital expenses of the mother of the adopted child which
137 are incident to the child's birth;]
138 [(ii) any welfare agency fees or costs;]
139 [(iii) any child placement service fees or costs;]
140 [(iv) any legal fees or costs; or]
141 [(v) any other fees or costs relating to an adoption.]
142 [(b) "Adult with a disability" means an individual who:]
143 [(i) is 18 years of age or older;]
144 [(ii) is eligible for services under Title 62A, Chapter 5, Services to People with
145 Disabilities; and]
146 [(iii) is not enrolled in:]
147 [(A) an education program for students with disabilities that is authorized under
148 Section 53A-15-301 ; or]
149 [(B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.]
150 [(c) (i) For purposes of Subsection 59-10-114 (2)(m), "capital gain transaction" means a
151 transaction that results in a:]

152 [(A) short-term capital gain; or]
153 [(B) long-term capital gain.]
154 [(ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
155 the commission may by rule define the term "transaction."]
156 [(d) "Commercial domicile" means the principal place from which the trade or business
157 of a Utah small business corporation is directed or managed.]
158 [(e)] (a) "Corporation" includes:
159 (i) associations;
160 (ii) joint stock companies; and
161 (iii) insurance companies.
162 [(f) "Dependent child with a disability" means an individual 21 years of age or younger
163 who:]
164 [(i) (A) is diagnosed by a school district representative under rules adopted by the State
165 Board of Education as having a disability classified as:]
166 [(I) autism;]
167 [(II) deafness;]
168 [(III) preschool developmental delay;]
169 [(IV) dual sensory impairment;]
170 [(V) hearing impairment;]
171 [(VI) intellectual disability;]
172 [(VII) multidisability;]
173 [(VIII) orthopedic impairment;]
174 [(IX) other health impairment;]
175 [(X) traumatic brain injury; or]
176 [(XI) visual impairment;]
177 [(B) is not receiving residential services from:]
178 [(I) the Division of Services for People with Disabilities created under Section
179 62A-5-102 ; or]
180 [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
181 and]
182 [(C) is enrolled in:]

183 [(I) an education program for students with disabilities that is authorized under Section
184 53A-15-301 ; or]
185 [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
186 or]
187 [(ii) is identified under guidelines of the Department of Health as qualified for:]
188 [(A) Early Intervention; or]
189 [(B) Infant Development Services.]
190 [(g)] (b) "Employee" is as defined in Section 59-10-401 .
191 [(h)] (c) "Employer" is as defined in Section 59-10-401 .
192 (d) "Federal adjusted gross income" means "adjusted gross income" as defined in
193 Section 62, Internal Revenue Code.
194 (e) "Federal taxable income" means "taxable income" as defined in Section 63, Internal
195 Revenue Code.
196 [(i)] (f) "Fiduciary" means:
197 (i) a guardian;
198 (ii) a trustee;
199 (iii) an executor;
200 (iv) an administrator;
201 (v) a receiver;
202 (vi) a conservator; or
203 (vii) any person acting in any fiduciary capacity for any individual.
204 [(j)] (g) "Homesteaded land diminished from the Uintah and Ouray Reservation"
205 means the homesteaded land that was held to have been diminished from the Uintah and Ouray
206 Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
207 [(k)] (h) "Individual" means a natural person and includes aliens and minors.
208 [(l)] (i) "Irrevocable trust" means a trust in which the settlor may not revoke or
209 terminate all or part of the trust without the consent of a person who has a substantial beneficial
210 interest in the trust and the interest would be adversely affected by the exercise of the settlor's
211 power to revoke or terminate all or part of the trust.
212 [(m) For purposes of Subsection 59-10-114 (2)(m), "long-term capital gain" is as
213 defined in Section 1222, Internal Revenue Code.]

214 [(n)] (j) "Nonresident individual" means an individual who is not a resident of this
215 state.
216 [(o)] (k) "Nonresident trust" or "nonresident estate" means a trust or estate which is not
217 a resident estate or trust.
218 [(p)] (l) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
219 unincorporated organization:
220 (A) through or by means of which any business, financial operation, or venture is
221 carried on; and
222 (B) which is not, within the meaning of this chapter:
223 (I) a trust;
224 (II) an estate; or
225 (III) a corporation.
226 (ii) "Partnership" does not include any organization not included under the definition of
227 "partnership" in Section 761, Internal Revenue Code.
228 (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
229 organization described in Subsection (1)[(p)] (l)(i).
230 [(q) "Qualifying military service" means:]
231 [(i) in the case of a member of The Army Reserve, The Naval Reserve, The Air Force
232 Reserve, The Marine Corps Reserve, or The Coast Guard Reserve, active duty in accordance
233 with an order received under:]
234 [(A) 10 U.S.C. Sec. 12301;]
235 [(B) 10 U.S.C. Sec. 12302;]
236 [(C) 10 U.S.C. Sec. 12303; or]
237 [(D) 10 U.S.C. Sec. 12304; or]
238 [(ii) in the case of a member of The Army National Guard of the United States or The
239 Air National Guard of the United States:]
240 [(A) active duty in accordance with an order received under:]
241 [(I) 10 U.S.C. Sec. 12301;]
242 [(II) 10 U.S.C. Sec. 12302;]
243 [(III) 10 U.S.C. Sec. 12303; or]
244 [(IV) 10 U.S.C. Sec. 12304; or]

245 [(B) service under a call to active service:]
246 [(I) authorized by the:]
247 [(Aa) President of the United States; or]
248 [(Bb) Secretary of Defense of the United States;]
249 [(II) for a period of more than 30 consecutive days;]
250 [(III) in accordance with an order received under 32 U.S.C. Sec. 502(f); and]
251 [(IV) for purposes of responding to a national emergency:]
252 [(Aa) declared by the President of the United States; and]
253 [(Bb) supported by federal funds.]
254 [(r) "Qualifying stock" means stock that is:]
255 [(i) (A) common; or]
256 [(B) preferred;]
257 [(ii) as defined by the commission by rule, originally issued to:]
258 [(A) a resident or nonresident individual; or]
259 [(B) a partnership if the resident or nonresident individual making a subtraction from
260 federal taxable income in accordance with Subsection 59-10-114 (2)(m):]
261 [(I) was a partner when the stock was issued; and]
262 [(II) remains a partner until the last day of the taxable year for which the resident or
263 nonresident individual makes the subtraction from federal taxable income in accordance with
264 Subsection 59-10-114 (2)(m); and]
265 [(iii) issued:]
266 [(A) by a Utah small business corporation;]
267 [(B) on or after January 1, 2003; and]
268 [(C) for:]
269 [(I) money; or]
270 [(II) other property, except for stock or securities.]
271 [(s)] (m) (i) "Resident individual" means:
272 (A) an individual who is domiciled in this state for any period of time during the
273 taxable year, but only for the duration of the period during which the individual is domiciled in
274 this state; or
275 (B) an individual who is not domiciled in this state but:

276 (I) maintains a permanent place of abode in this state; and
277 (II) spends in the aggregate 183 or more days of the taxable year in this state.
278 (ii) For purposes of Subsection (1)[(s)] (m)(i)(B), a fraction of a calendar day shall be
279 counted as a whole day.
280 [(t)] (n) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
281 [(u) For purposes of Subsection 59-10-114 (2)(m), "short-term capital gain" is as
282 defined in Section 1222, Internal Revenue Code.]
283 (o) "State taxable income" means:
284 (i) for a resident individual, the difference between:
285 (A) the resident individual's federal adjusted gross income for a taxable year; and
286 (B) the subtractions required by Section 59-10-114 ;
287 (ii) for a resident estate or resident trust, the difference between:
288 (A) the sum of:
289 (I) the resident estate's or resident trust's taxable income as determined under Section
290 641, Internal Revenue Code, for a taxable year; and
291 (II) the additions required by:
292 (Aa) Section 59-10-202 ; and
293 (Bb) Section 59-10-209 ; and
294 (B) the subtractions required by:
295 (I) Section 59-10-202 ; and
296 (II) Section 59-10-209 ; or
297 (iii) for a nonresident estate or nonresident trust, the portion of taxable income as
298 determined under Section 641, Internal Revenue Code:
299 (A) for a taxable year;
300 (B) that the nonresident estate or nonresident trust would have had if the nonresident
301 estate or nonresident trust were a resident estate or resident trust;
302 (C) that is derived from Utah sources determined in accordance with the principles
303 established in Section 59-10-117 ; and
304 (D) after making the adjustments required by Section 59-10-207 .
305 [(v) "Taxable income" and "state taxable income" are defined as provided in Sections
306 59-10-111 , 59-10-112 , 59-10-116 , 59-10-201.1 , and 59-10-204 .]

307 [(w)] (p) "Taxpayer" means any individual, estate, or trust or beneficiary of an estate or
308 trust, whose income is subject in whole or part to the tax imposed by this chapter.
309 [(x)] (q) "Uintah and Ouray Reservation" means the lands recognized as being included
310 within the Uintah and Ouray Reservation in:
311 (i) Hagen v. Utah, 510 U.S. 399 (1994); and
312 (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
313 [(y) (i) "Utah small business corporation" means a corporation that:]
314 [(A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
315 Code;]
316 [(B) except as provided in Subsection (1)(y)(ii), meets the requirements of Section
317 1244(c)(1)(C), Internal Revenue Code; and]
318 [(C) has its commercial domicile in this state.]
319 [(ii) Notwithstanding Subsection (1)(y)(i)(B), the time period described in Section
320 1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the source of a
321 corporation's aggregate gross receipts shall end on the last day of the taxable year for which the
322 resident or nonresident individual makes a subtraction from federal taxable income in
323 accordance with Subsection 59-10-114 (2)(m).]
324 [(z)] (r) "Ute tribal member" means a person who is enrolled as a member of the Ute
325 Indian Tribe of the Uintah and Ouray Reservation.
326 [(aa)] (s) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
327 [(bb)] (t) "Wages" is as defined in Section 59-10-401 .
328 (2) (a) Any term used in this chapter has the same meaning as when used in
329 comparable context in the laws of the United States relating to federal income taxes unless a
330 different meaning is clearly required.
331 (b) Any reference to the Internal Revenue Code or to the laws of the United States shall
332 mean the Internal Revenue Code or other provisions of the laws of the United States relating to
333 federal income taxes that are in effect for the taxable year.
334 (c) Any reference to a specific section of the Internal Revenue Code or other provision
335 of the laws of the United States relating to federal income taxes shall include any
336 corresponding or comparable provisions of the Internal Revenue Code as hereafter amended,
337 redesignated, or reenacted.

338 Section 5. Section 59-10-104 is amended to read:
339 59-10-104. Tax basis -- Rate -- Exemption.
340 (1) Except as provided in Subsection [(4)] (2), for taxable years beginning on or after
341 January 1, [2001] 2006, a tax is imposed on the state taxable income[, as defined in Section
342 59-10-112 ,] of every resident individual as provided in this section at a rate of 5.74% of state
343 taxable income.
344 [(2) For an individual, other than a husband and wife or head of household required to
345 use the tax table under Subsection (3), the tax under this section is imposed in accordance with
346 the following table:]
347 [If the state taxable income is: The tax is:]
348 [Less than or equal to $863 2.3% of the state taxable income]
349 [Greater than $863 but less than or equal $20, plus 3.3% of state taxable]
350 [to $1,726 income greater than $863]
351 [Greater than $1,726 but less than or equal $48, plus 4.2% of state taxable]
352 [to $2,588 income greater than $1,726]
353 [Greater than $2,588 but less than or equal $85, plus 5.2% of state taxable]
354 [to $3,450 income greater than $2,588]
355 [Greater than $3,450 but less than or equal $129, plus 6% of state taxable]
356 [to $4,313 income greater than $3,450]
357 [Greater than $4,313 $181, plus 7% of state taxable]
358 [income greater than $4,313]
359 [(3) For a husband and wife filing a single return jointly, or a head of household as
360 defined in Section 2(b), Internal Revenue Code, filing a single return, the tax under this section
361 is imposed in accordance with the following table:]
362 [If the state taxable income is: The tax is:]
363 [Less than or equal to $1,726 2.3% of the state taxable income]
364 [Greater than $1,726 but less than or equal $40, plus 3.3% of state taxable]
365 [to $3,450 income greater than $1,726]
366 [Greater than $3,450 but less than or equal $97, plus 4.2% of state taxable]
367 [to $5,176 income greater than $3,450]
368 [Greater than $5,176 but less than or equal $169, plus 5.2% of state taxable]

369 [to $6,900 income greater than $5,176]
370 [Greater than $6,900 but less than or equal $259, plus 6% of state taxable]
371 [to $8,626 income greater than $6,900]
372 [Greater than $8,626 $362, plus 7% of state taxable]
373 [income greater than $8,626]
374 [(4)] (2) This section does not apply to a resident individual exempt from taxation
375 under Section 59-10-104.1 .
376 Section 6. Section 59-10-105 is amended to read:
377 59-10-105. Optional tax -- Calculation -- Commission authority to prescribe tax
378 tables -- Exemption.
379 (1) (a) Except as provided in Subsection (4), for taxable years beginning on or after
380 January 1, 2002, if the commission prescribes state individual income tax tables in accordance
381 with Subsection (2), a tax is imposed as provided in this section on the state taxable income of
382 an individual who elects to compute the individual's income tax in accordance with the state
383 individual income tax tables prescribed by the commission.
384 (b) An individual who pays a tax imposed by this section is not subject to the tax
385 imposed by Section 59-10-104 .
386 (2) The commission may prescribe state individual income tax tables:
387 (a) for a taxable year;
388 (b) for purposes of computing the tax authorized by this section; and
389 (c) if the state individual income tax tables are substantially in accordance with Section
390 3, Internal Revenue Code, except that the commission shall use:
391 (i) the tax [rates and tax brackets] rate provided for in Section 59-10-104 ;
392 (ii) state taxable income [as defined in Section 59-10-112 ]; and
393 (iii) any other provision of this chapter necessary to prescribe state individual income
394 tax tables under this section.
395 (3) An individual electing to compute the individual's income tax in accordance with
396 this section shall use the:
397 (a) standard deduction as provided in Section 63(c), Internal Revenue Code; and
398 (b) number and amount of exemptions allowed by Section 151, Internal Revenue Code.
399 (4) This section does not apply to an individual exempt from taxation under Section

400 59-10-104.1 .
401 Section 7. Section 59-10-114 is amended to read:
402 59-10-114. Subtractions from federal adjusted gross income of an individual.
403 [(1) There shall be added to federal taxable income of a resident or nonresident
404 individual:]
405 [(a) the amount of any income tax imposed by this or any predecessor Utah individual
406 income tax law and the amount of any income tax imposed by the laws of another state, the
407 District of Columbia, or a possession of the United States, to the extent deducted from federal
408 adjusted gross income, as defined by Section 62, Internal Revenue Code, in determining federal
409 taxable income;]
410 [(b) a lump sum distribution that the taxpayer does not include in adjusted gross
411 income on the taxpayer's federal individual income tax return for the taxable year;]
412 [(c) for taxable years beginning on or after January 1, 2002, the amount of a child's
413 income calculated under Subsection (5) that:]
414 [(i) a parent elects to report on the parent's federal individual income tax return for the
415 taxable year; and]
416 [(ii) the parent does not include in adjusted gross income on the parent's federal
417 individual income tax return for the taxable year;]
418 [(d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
419 Code;]
420 [(e) a withdrawal from a medical care savings account and any penalty imposed in the
421 taxable year if:]
422 [(i) the taxpayer did not deduct or include the amounts on the taxpayer's federal
423 individual income tax return pursuant to Section 220, Internal Revenue Code; and]
424 [(ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2);]
425 [(f) the amount refunded to a participant under Title 53B, Chapter 8a, Higher
426 Education Savings Incentive Program, in the year in which the amount is refunded;]
427 [(g) except as provided in Subsection (6), for taxable years beginning on or after
428 January 1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after
429 January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
430 one or more of the following entities:]

431 [(i) a state other than this state;]
432 [(ii) the District of Columbia;]
433 [(iii) a political subdivision of a state other than this state; or]
434 [(iv) an agency or instrumentality of an entity described in Subsections (1)(g)(i)
435 through (iii);]
436 [(h) any distribution received by a resident beneficiary of a resident trust of income that
437 was taxed at the trust level for federal tax purposes, but was subtracted from state taxable
438 income of the trust pursuant to Subsection 59-10-202 (2)(c); and]
439 [(i) any distribution received by a resident beneficiary of a nonresident trust of income
440 that was taxed at the trust level for federal tax purposes, but was not taxed at the trust level by
441 any state.]
442 [(2)] (1) There shall be subtracted from federal [taxable] adjusted gross income of a
443 resident or nonresident individual:
444 (a) the interest or dividends on obligations or securities of the United States and its
445 possessions or of any authority, commission, or instrumentality of the United States, to the
446 extent includable in gross income for federal income tax purposes but exempt from state
447 income taxes under the laws of the United States, but the amount subtracted under this
448 Subsection [(2)] (1)(a) shall be reduced by any interest on indebtedness incurred or continued
449 to purchase or carry the obligations or securities described in this Subsection [(2)] (1)(a), and
450 by any expenses incurred in the production of interest or dividend income described in this
451 Subsection [(2)] (1)(a) to the extent that such expenses, including amortizable bond premiums,
452 are deductible in determining federal taxable income;
453 (b) (i) except as provided in Subsection [(2)] (1)(b)(ii), [1/2 of] the net amount of any
454 income tax paid or payable to the United States after all allowable credits, as reported on the
455 United States individual income tax return of the taxpayer for the same taxable year; and
456 (ii) notwithstanding Subsection [(2)] (1)(b)(i), for taxable years beginning on or after
457 January 1, 2001, the amount of a credit or an advance refund amount reported on a resident or
458 nonresident individual's United States individual income tax return allowed as a result of the
459 acceleration of the income tax rate bracket benefit for 2001 in accordance with Section 101,
460 Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, may not be
461 used in calculating the amount described in Subsection [(2)] (1)(b)(i);

462 [(c) the amount of adoption expenses for one of the following taxable years as elected
463 by the resident or nonresident individual:]
464 [(i) regardless of whether a court issues an order granting the adoption, the taxable year
465 in which the adoption expenses are:]
466 [(A) paid; or]
467 [(B) incurred;]
468 [(ii) the taxable year in which a court issues an order granting the adoption; or]
469 [(iii) any year in which the resident or nonresident individual may claim the federal
470 adoption expenses credit under Section 23, Internal Revenue Code;]
471 [(d) amounts received by taxpayers under age 65 as retirement income which, for
472 purposes of this section, means pensions and annuities, paid from an annuity contract
473 purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
474 Internal Revenue Code, or purchased by an employee under a plan which meets the
475 requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
476 political subdivision thereof, or the District of Columbia, to the employee involved or the
477 surviving spouse;]
478 [(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
479 personal retirement exemption;]
480 [(f) 75% of the amount of the personal exemption, as defined and calculated in the
481 Internal Revenue Code, for each dependent child with a disability and adult with a disability
482 who is claimed as a dependent on a taxpayer's return;]
483 [(g) any amount included in federal taxable income that was received pursuant to any
484 federal law enacted in 1988 to provide reparation payments, as damages for human suffering,
485 to United States citizens and resident aliens of Japanese ancestry who were interned during
486 World War II;]
487 [(h) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
488 taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:]
489 [(i) for:]
490 [(A) the taxpayer;]
491 [(B) the taxpayer's spouse; and]
492 [(C) the taxpayer's dependents; and]

493 [(ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
494 213, Internal Revenue Code, in determining federal taxable income for the taxable year;]
495 [(i) (i) except as otherwise provided in this Subsection (2)(i), the amount of a
496 contribution made during the taxable year on behalf of the taxpayer to a medical care savings
497 account and interest earned on a contribution to a medical care savings account established
498 pursuant to Title 31A, Chapter 32a, Medical Care Savings Account Act, to the extent the
499 contribution is accepted by the account administrator as provided in the Medical Care Savings
500 Account Act, and if the taxpayer did not deduct or include amounts on the taxpayer's federal
501 individual income tax return pursuant to Section 220, Internal Revenue Code; and]
502 [(ii) a contribution deductible under this Subsection (2)(i) may not exceed either of the
503 following:]
504 [(A) the maximum contribution allowed under the Medical Care Savings Account Act
505 for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is
506 covered by health care insurance as defined in Section 31A-1-301 or self-funded plan that
507 covers the other spouse, and each spouse has a medical care savings account; or]
508 [(B) the maximum contribution allowed under the Medical Care Savings Account Act
509 for the tax year for taxpayers:]
510 [(I) who do not file a joint return; or]
511 [(II) who file a joint return, but do not qualify under Subsection (2)(i)(ii)(A);]
512 [(j) the amount included in federal taxable income that was derived from money paid
513 by the taxpayer to the program fund under Title 53B, Chapter 8a, Higher Education Savings
514 Incentive Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d), and
515 investment income earned on participation agreements under Subsection 53B-8a-106 (1) that is
516 included in federal taxable income, but only when the funds are used for qualified higher
517 education costs of the beneficiary;]
518 [(k) for taxable years beginning on or after January 1, 2000, any amounts paid for
519 premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
520 amounts paid for long-term care insurance were not deducted under Section 213, Internal
521 Revenue Code, in determining federal taxable income;]
522 [(l)] (c) for taxable years beginning on or after January 1, 2000, if the conditions of
523 Subsection [(4)] (2)(a) are met, the amount of income derived by a Ute tribal member:

524 (i) during a time period that the Ute tribal member resides on homesteaded land
525 diminished from the Uintah and Ouray Reservation; and
526 (ii) from a source within the Uintah and Ouray Reservation;
527 (d) the amount a resident or nonresident individual subtracts for a taxable year under
528 Section 170, Internal Revenue Code, on the resident or nonresident individual's federal
529 individual income tax return for that taxable year;
530 (e) the amount a resident or nonresident individual subtracts for a taxable year under
531 Section 163(h)(3), Internal Revenue Code, as qualified residence interest, on the resident or
532 nonresident individual's federal individual income tax return for that taxable year; and
533 (f) 50% of the total amount of personal exemptions a resident or nonresident individual
534 subtracts for the taxable year under Section 151, Internal Revenue Code.
535 [(m) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
536 resident or nonresident individual's short-term capital gain or long-term capital gain on a
537 capital gain transaction:]
538 [(A) that occurs on or after January 1, 2003;]
539 [(B) if 70% or more of the gross proceeds of the capital gain transaction are expended:]
540 [(I) to purchase qualifying stock in a Utah small business corporation; and]
541 [(II) within a 12-month period after the day on which the capital gain transaction
542 occurs; and]
543 [(C) if, prior to the purchase of the qualifying stock described in Subsection
544 (2)(m)(i)(B)(I), the resident or nonresident individual did not have an ownership interest in the
545 Utah small business corporation that issued the qualifying stock; and]
546 [(ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
547 the commission may make rules:]
548 [(A) defining the term "gross proceeds"; and]
549 [(B) for purposes of Subsection (2)(m)(i)(C), prescribing the circumstances under
550 which a resident or nonresident individual has an ownership interest in a Utah small business
551 corporation; and]
552 [(n) (i) except as provided in Subsection (2)(n)(ii), for the taxable year beginning on or
553 after January 1, 2004, but beginning on or before December 31, 2004, income a resident or
554 nonresident individual receives:]

555 [(A) for qualifying military service; and]
556 [(B) to the extent that income is included in adjusted gross income on that resident or
557 nonresident individual's federal individual income tax return for that taxable year;]
558 [(ii) notwithstanding Subsection (2)(n)(i), a subtraction from federal taxable income is
559 not allowed under Subsection (2)(n)(i) for income included in adjusted gross income on a
560 resident or nonresident individual's federal individual income tax return for that taxable year if
561 that income is received from a source that constitutes a:]
562 [(A) pension; or]
563 [(B) survivor benefit; and]
564 [(iii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
565 for purposes of Subsections (1)(n)(i) and (ii), the commission may by rule define what
566 constitutes income:]
567 [(A) a resident or nonresident individual receives for qualifying military service; or]
568 [(B) received from a source that constitutes a:]
569 [(I) pension; or]
570 [(II) survivor benefit.]
571 [(3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted
572 for taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
573 $4,800, except that:]
574 [(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
575 earned over $32,000, the amount of the retirement income exemption that may be subtracted
576 shall be reduced by 50 cents;]
577 [(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
578 earned over $16,000, the amount of the retirement income exemption that may be subtracted
579 shall be reduced by 50 cents; and]
580 [(iii) for individual taxpayers, for each $1 of adjusted gross income earned over
581 $25,000, the amount of the retirement income exemption that may be subtracted shall be
582 reduced by 50 cents.]
583 [(b) For purposes of Subsection (2)(e), the amount of the personal retirement
584 exemption shall be further reduced according to the following schedule:]
585 [(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income

586 earned over $32,000, the amount of the personal retirement exemption shall be reduced by 50
587 cents;]
588 [(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
589 earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
590 cents; and]
591 [(iii) for individual taxpayers, for each $1 of adjusted gross income earned over
592 $25,000, the amount of the personal retirement exemption shall be reduced by 50 cents.]
593 [(c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be
594 calculated by adding to federal adjusted gross income any interest income not otherwise
595 included in federal adjusted gross income.]
596 [(d) For purposes of determining ownership of items of retirement income common
597 law doctrine will be applied in all cases even though some items may have originated from
598 service or investments in a community property state. Amounts received by the spouse of a
599 living retiree because of the retiree's having been employed in a community property state are
600 not deductible as retirement income of such spouse.]
601 [(e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
602 insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:]
603 [(i) for an amount that is reimbursed or funded in whole or in part by the federal
604 government, the state, or an agency or instrumentality of the federal government or the state;
605 and]
606 [(ii) for a taxpayer who is eligible to participate in a health plan maintained and funded
607 in whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.]
608 [(4)] (2) (a) A subtraction for an amount described in Subsection [(2)(l)] (1)(c) is
609 allowed only if:
610 (i) the taxpayer is a Ute tribal member; and
611 (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
612 requirements of this Subsection [(4)] (2).
613 (b) The agreement described in Subsection [(4)] (2)(a):
614 (i) may not:
615 (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
616 (B) provide a subtraction under this section greater than or different from the

617 subtraction described in Subsection [(2)(l)] (1)(c); or
618 (C) affect the power of the state to establish rates of taxation; and
619 (ii) shall:
620 (A) provide for the implementation of the subtraction described in Subsection [(2)(l)]
621 (1)(c);
622 (B) be in writing;
623 (C) be signed by:
624 (I) the governor; and
625 (II) the chair of the Business Committee of the Ute tribe;
626 (D) be conditioned on obtaining any approval required by federal law; and
627 (E) state the effective date of the agreement.
628 (c) (i) The governor shall report to the commission by no later than February 1 of each
629 year regarding whether or not an agreement meeting the requirements of this Subsection [(4)]
630 (2) is in effect.
631 (ii) If an agreement meeting the requirements of this Subsection [(4)] (2) is terminated,
632 the subtraction permitted under Subsection [(2)(l)] (1)(c) is not allowed for taxable years
633 beginning on or after the January 1 following the termination of the agreement.
634 (d) For purposes of Subsection [(2)(l)] (1)(c) and in accordance with Title 63, Chapter
635 46a, Utah Administrative Rulemaking Act, the commission may make rules:
636 (i) for determining whether income is derived from a source within the Uintah and
637 Ouray Reservation; and
638 (ii) that are substantially similar to how federal adjusted gross income derived from
639 Utah sources is determined under Section 59-10-117 .
640 [(5) (a) For purposes of this Subsection (5), "Form 8814" means:]
641 [(i) the federal individual income tax Form 8814, Parents' Election To Report Child's
642 Interest and Dividends; or]
643 [(ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by
644 the commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to
645 2000 Form 8814 if for purposes of federal individual income taxes the information contained
646 on 2000 Form 8814 is reported on a form other than Form 8814; and]
647 [(B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter

648 46a, Utah Administrative Rulemaking Act, the commission may make rules designating a form
649 as being substantially similar to 2000 Form 8814 if for purposes of federal individual income
650 taxes the information contained on 2000 Form 8814 is reported on a form other than Form
651 8814.]
652 [(b) The amount of a child's income added to adjusted gross income under Subsection
653 (1)(c) is equal to the difference between:]
654 [(i) the lesser of:]
655 [(A) the base amount specified on Form 8814; and]
656 [(B) the sum of the following reported on Form 8814:]
657 [(I) the child's taxable interest;]
658 [(II) the child's ordinary dividends; and]
659 [(III) the child's capital gain distributions; and]
660 [(ii) the amount not taxed that is specified on Form 8814.]
661 [(6) Notwithstanding Subsection (1)(g), interest from bonds, notes, and other evidences
662 of indebtedness issued by an entity described in Subsections (1)(g)(i) through (iv) may not be
663 added to federal taxable income of a resident or nonresident individual if, as annually
664 determined by the commission:]
665 [(a) for an entity described in Subsection (1)(g)(i) or (ii), the entity and all of the
666 political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
667 income on any part of the bonds, notes, and other evidences of indebtedness of this state; or]
668 [(b) for an entity described in Subsection (1)(g)(iii) or (iv), the following do not impose
669 a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
670 this state:]
671 [(i) the entity; or]
672 [(ii) (A) the state in which the entity is located; or]
673 [(B) the District of Columbia, if the entity is located within the District of Columbia.]
674 Section 8. Section 59-10-115 is amended to read:
675 59-10-115. Equitable adjustments.
676 (1) If any provision of the Internal Revenue Code requires the inclusion of an item of
677 gross income or the allowance of an item of deduction from gross income in the computation
678 of federal [taxable] adjusted gross income of the taxpayer for any taxable year beginning on or

679 after the effective date of this chapter, and if such item has been taken into account in
680 computing the state taxable income of the taxpayer for state income tax purposes for any prior
681 taxable year, the commission shall make or allow such adjustments to the taxpayer's state
682 taxable income as are necessary to prevent the inclusion for a second time or the deduction for
683 a second time of such item for state income tax purposes.
684 (2) If in a return filed for any taxable year beginning on or after the effective date of
685 this chapter, the taxpayer reports gain or loss from the disposition of property or claims a
686 deduction for depreciation of property, and if his basis for gain or loss on the disposition of
687 such property or for allowance of the depreciation deduction for the exhaustion, wear, and tear
688 [thereof (] of the property, including a reasonable allowance for obsolescence[)], is different for
689 federal income tax purposes than it would be for state income tax purposes if the provisions of
690 former Title 59, Chapter 14, were applicable to such taxable year, the commission shall
691 [(anything in this chapter to the contrary], notwithstanding[)] any other provision of this
692 chapter, allow or make such adjustment to state taxable income of the taxpayer for such taxable
693 year as will result in the use by the taxpayer of the same basis, for such purpose, that [he] the
694 taxpayer would be allowed or required to use in reporting such gain or loss or claiming such
695 depreciation deduction if the provisions of former Title 59, Chapter 14, were applicable to the
696 taxable year.
697 (3) If the taxpayer receives, in any taxable year beginning on or after the effective date
698 of this chapter, a distribution from an electing small business corporation, as defined by
699 Section 1371(b) [of the], Internal Revenue Code, of a net share of the corporation's
700 undistributed taxable income for a taxable year or years prior to the taxable year in which such
701 distribution is made, the commission shall make such adjustment to state taxable income as
702 will prevent escape from taxation by this state of such undistributed taxable income previously
703 taxed to the taxpayer for federal income tax purposes but not for state income tax purposes.
704 (4) The commission shall by rule prescribe for adjustments to state taxable income of
705 the taxpayer in circumstances other than those specified by Subsections (1), (2), and (3) of this
706 section where, solely by reason of the enactment of this chapter, the taxpayer would otherwise
707 receive or have received a double tax benefit or suffer or have suffered a double tax detriment.
708 Anything in this section or this chapter to the contrary notwithstanding, the commission may
709 not make any adjustment pursuant to this section which will result in an increase or decrease of

710 tax liability the amount of which is less than $25.
711 Section 9. Section 59-10-116 is amended to read:
712 59-10-116. Definitions -- Tax on nonresident individual -- Calculation --
713 Exemption.
714 (1) For purposes of this section:
715 (a) "military service" is as defined in Pub. L. No. 108-189, Sec. 101;
716 (b) "servicemember" is as defined in Pub. L. No. 108-189, Sec. 101;
717 (c) "state income tax percentage" means a percentage equal to a nonresident
718 individual's federal adjusted gross income for the taxable year received from Utah sources, as
719 determined under Section 59-10-117 , divided by the difference between:
720 (i) the nonresident individual's total federal adjusted gross income for that taxable year;
721 and
722 (ii) if the nonresident individual described in Subsection (1)(c)(i) is a servicemember,
723 the compensation the servicemember receives for military service if the servicemember is
724 serving in compliance with military orders; and
725 (d) "unapportioned state tax" means the product of the:
726 (i) difference between:
727 (A) a nonresident individual's [federal taxable income, as defined in Section
728 59-10-111 , with the modifications, subtractions, and adjustments provided for in Section
729 59-10-114 ] state taxable income; and
730 (B) if the nonresident individual described in Subsection (1)(d)(i)(A) is a
731 servicemember, compensation the servicemember receives for military service if the
732 servicemember is serving in compliance with military orders; and
733 (ii) tax rate imposed under Section 59-10-104 .
734 (2) Except as provided in Subsection (3), a tax is imposed on a nonresident individual
735 in an amount equal to the product of the nonresident individual's:
736 (a) unapportioned state tax; and
737 (b) state income tax percentage.
738 (3) This section does not apply to a nonresident individual exempt from taxation under
739 Section 59-10-104.1 .
740 (4) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, for

741 purposes of Subsection (1), the commission may by rule define what constitutes compensation.
742 Section 10. Section 59-10-120 is amended to read:
743 59-10-120. Change of status as resident or nonresident.
744 (1) If an individual changes [his] the individual's status during [his] a taxable year from
745 resident to nonresident or from nonresident to resident, the commission may by rule require
746 [him] the individual to file one return for the portion of the year during which [he] the
747 individual is a resident and another return for the portion of the year during which [he] the
748 individual is a nonresident.
749 (2) Except as provided in Subsection (3), the state taxable income of the individual
750 described in Subsection (1) shall be determined as provided in this chapter for residents and for
751 nonresidents as if the individual's taxable year for federal income tax purposes were limited to
752 the period of [his] the individual's resident and nonresident status respectively.
753 (3) There shall be included in determining state taxable income from sources within or
754 without this state, as the case may be, income, gain, loss, or deduction accrued prior to the
755 change of status, even though not otherwise includable or allowable in respect of the period
756 prior to such change, but the taxation or deduction of items received or accrued prior to the
757 change of status shall not be affected by the change.
758 Section 11. Section 59-10-201 is amended to read:
759 59-10-201. Taxation of resident trusts and estates.
760 (1) A tax determined in accordance with the [rates] rate prescribed by Section
761 59-10-104 [for individuals filing separately] is imposed for each taxable year on the state
762 taxable income of each resident estate or trust, except for trusts taxed as corporations.
763 (2) A resident estate or trust shall be allowed the credit provided in Section 59-10-106 ,
764 relating to an income tax imposed by another state, except that the limitation shall be computed
765 by reference to the taxable income of the estate or trust.
766 (3) The property of the trusts established in Title 53B, Chapter 8a, Higher Education
767 Savings Incentive Program, and Chapter 8b, Higher Education Supplemental Savings Incentive
768 Program, and their income from operations and investments are exempt from all taxation by
769 the state under this chapter.
770 Section 12. Section 59-10-202 is amended to read:
771 59-10-202. Additions to and subtractions from state taxable income of resident or

772 nonresident estate or trust.
773 (1) There shall be added to federal taxable income of a resident or nonresident estate or
774 trust[:] 50% of the total amount of a personal exemption that the resident or nonresident estate
775 or trust subtracts in accordance with Section 642(b), Internal Revenue Code.
776 [(a) the amount of any income tax imposed by this or any predecessor Utah individual
777 income tax law and the amount of any income tax imposed by the laws of another state, the
778 District of Columbia, or a possession of the United States, to the extent deducted from federal
779 adjusted total income as defined in Section 62, Internal Revenue Code, in determining federal
780 taxable income;]
781 [(b) a lump sum distribution allowable as a deduction under Section 402(d)(3) of the
782 Internal Revenue Code, to the extent deductible under Section 62(a)(8) of the Internal Revenue
783 Code in determining federal adjusted gross income; and]
784 [(c) the amount of any gain as defined in Section 644(b) of the Internal Revenue Code,
785 to the extent deductible under Section 641(c) of the Internal Revenue Code in determining the
786 federal taxable income of a trust.]
787 (2) There shall be subtracted from federal taxable income of a resident or nonresident
788 estate or trust:
789 (a) the interest or dividends on obligations or securities of the United States and its
790 possessions or of any authority, commission, or instrumentality of the United States, to the
791 extent includable in gross income for federal income tax purposes but exempt from state
792 income taxes under the laws of the United States, but the amount subtracted under this
793 Subsection (2)(a) shall be reduced by any interest on indebtedness incurred or continued to
794 purchase or carry the obligations or securities described in this Subsection (2)(a), and by any
795 expenses incurred in the production of interest or dividend income described in this Subsection
796 (2)(a) to the extent that such expenses, including amortizable bond premiums, are deductible in
797 determining federal taxable income;
798 (b) [1/2 of] the net amount of any income tax paid or payable to the United States after
799 all allowable credits, as per the United States fiduciary income tax return of the taxpayer for the
800 same taxable year; and
801 (c) income of an irrevocable resident trust if:
802 (i) the income would not be treated as state taxable income [derived from Utah sources

803 under Section 59-10-204 ] if received by a nonresident trust;
804 (ii) the trust first became a resident trust on or after January 1, 2004;
805 (iii) no assets of the trust were held, at any time after January 1, 2003, in another
806 resident irrevocable trust created by the same settlor or the spouse of the same settlor;
807 (iv) the trustee of the trust is a trust company as defined in Subsection 7-5-1 (1)(d);
808 (v) the amount subtracted under this Subsection (2)(c) is reduced to the extent the
809 settlor or any other person is treated as an owner of any portion of the trust under Subtitle A,
810 Subchapter J, Subpart E of the Internal Revenue Code; and
811 (vi) the amount subtracted under this Subsection (2)(c) is reduced by any interest on
812 indebtedness incurred or continued to purchase or carry the assets generating the income
813 described in this Subsection (2)(c), and by any expenses incurred in the production of income
814 described in this Subsection (2)(c), to the extent that those expenses, including amortizable
815 bond premiums, are deductible in determining federal taxable income.
816 Section 13. Section 59-10-205 is amended to read:
817 59-10-205. Tax on income derived from Utah sources.
818 (1) A tax is imposed on the state taxable income[, as defined in Section 59-10-204 ,] of
819 every nonresident estate or nonresident trust in accordance with the [rates] rate prescribed in
820 Section 59-10-104 [for individuals filing separately].
821 (2) The tax imposed by Subsection (1) shall only be applied to income derived from
822 Utah sources as adjusted by Section 59-10-207 , including such items from another estate or
823 trust of which the first estate or trust is a beneficiary.
824 Section 14. Section 59-10-210 is amended to read:
825 59-10-210. Fiduciary adjustments -- Allocation -- Rulemaking authority.
826 (1) The fiduciary [adjustments are] adjustment is the [amounts] amount of the
827 [modifications] subtraction described in [Subsections] Subsection 59-10-202 [(1)(a) and] (2)(a),
828 including such items from another estate or trust of which the first estate or trust is a
829 beneficiary.
830 (2) The respective shares of an estate or trust and its beneficiaries, [(]including solely
831 for the purpose of this allocation, nonresident beneficiaries[)], in the state fiduciary adjustments
832 shall be in proportion to their respective shares of federal distributable net income of the estate
833 or trust. If the estate or trust has no federal distributable net income for the taxable year, the

834 share of each beneficiary in the fiduciary adjustments shall be in proportion to [his] the
835 beneficiary's share of the estate or trust income for such year, which is, under state law or the
836 governing instrument, required to be distributed currently plus any other amounts of such
837 income distributed in such year. Any balance of the fiduciary adjustments shall be allocated to
838 the estate or trust.
839 (3) The commission may by rule and upon such terms and conditions as it may
840 prescribe, authorize the use of such other appropriate and equitable method or methods for
841 determining attribution and allocation of the fiduciary adjustments. The fiduciary may elect to
842 use any other methods prescribed in this subsection only when the allocation of such respective
843 fiduciary adjustments under this section would result in an inequity in the allocation which is
844 substantial both in amount and in relation to the total amount of the modifications referred to in
845 Subsection (1).
846 (4) The state taxable income of an estate or trust shall be adjusted by the deduction of
847 the income of that estate or trust to the extent of and for so long as such income is distributed
848 or is distributable to or otherwise accrues to the benefit of a person who has been declared by a
849 court of competent jurisdiction to be mentally incompetent. The commission may promulgate
850 rules necessary to provide for this adjustment.
851 Section 15. Section 72-12-107 is amended to read:
852 72-12-107. Benefits of ride-sharing driver not taxable income.
853 Money and other benefits, other than salary, received by a driver in a ride-sharing
854 arrangement does not constitute income for the purpose of computing [gross] state taxable
855 income under Title 59, Chapter 10, Individual Income Tax Act.
856 Section 16. Repealer.
857 This bill repeals:
858 Section 31A-32a-101, Title and scope.
859 Section 31A-32a-102, Definitions.
860 Section 31A-32a-103, Establishing medical care savings accounts.
861 Section 31A-32a-104, Administration of medical care savings account.
862 Section 31A-32a-105, Withdrawals -- Termination -- Transfers.
863 Section 31A-32a-106, Regulation of account administrators -- Administration of
864 tax deductions.

865 Section 31A-32a-107, Penalties for noncompliance with tax requirements.
866 Section 59-10-111, Federal taxable income defined.
867 Section 59-10-112, State taxable income of resident individual.
868 Section 59-10-201.1, State taxable income of resident estate or trust defined.
869 Section 59-10-204, State taxable income of nonresident estate or trust defined.
870 Section 17. Effective date.
871 This bill takes effect for taxable years beginning on or after January 1, 2006.




Legislative Review Note
as of 1-26-05 4:44 PM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel