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S.B. 13 Enrolled

                 

INDIVIDUAL INCOME TAX SUBTRACTION

                 
FOR CERTAIN MILITARY INCOME

                 
2005 GENERAL SESSION

                 
STATE OF UTAH

                 
Chief Sponsor: Howard A. Stephenson

                 
House Sponsor: Gregory H. Hughes

                 
                  LONG TITLE
                  General Description:
                      This bill amends the Individual Income Tax Act relating to a subtraction for certain
                  military income.
                  Highlighted Provisions:
                      This bill:
                      .    provides and amends definitions;
                      .    amends a subtraction for certain military income; and
                      .    makes technical changes.
                  Monies Appropriated in this Bill:
                      None
                  Other Special Clauses:
                      This bill has retrospective operation for the taxable year beginning on or after January
                  1, 2005, but beginning on or before December 31, 2005.
                  Utah Code Sections Affected:
                  AMENDS:
                      59-10-103, as last amended by Chapter 2, Laws of Utah 2004, Fourth Special Session
                      59-10-114, as last amended by Chapter 2, Laws of Utah 2004, Fourth Special Session
                 
                  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.
                      (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.
                      (c) (i) For purposes of Subsection 59-10-114 (2)(m), "capital gain transaction" means a
                  transaction that results in a:
                      (A) short-term capital gain; or
                      (B) long-term capital gain.
                      (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
                  commission may by rule define the term "transaction."
                      (d) "Commercial domicile" means the principal place from which the trade or business of
                  a Utah small business corporation is directed or managed.
                      (e) "Corporation" includes:
                      (i) associations;
                      (ii) joint stock companies; and
                      (iii) insurance companies.


                      (f) "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
                  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.
                      (g) "Employee" is as defined in Section 59-10-401 .


                      (h) "Employer" is as defined in Section 59-10-401 .
                      (i) "Fiduciary" means:
                      (i) a guardian;
                      (ii) a trustee;
                      (iii) an executor;
                      (iv) an administrator;
                      (v) a receiver;
                      (vi) a conservator; or
                      (vii) any person acting in any fiduciary capacity for any individual.
                      (j) "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).
                      (k) "Individual" means a natural person and includes aliens and minors.
                      (l) "Irrevocable trust" means a trust in which the settlor may not revoke or terminate all
                  or part of the trust without the consent of a person who has a substantial beneficial interest in the
                  trust and the interest would be adversely affected by the exercise of the settlor's power to revoke
                  or terminate all or part of the trust.
                      (m) For purposes of Subsection 59-10-114 (2)(m), "long-term capital gain" is as defined
                  in Section 1222, Internal Revenue Code.
                      (n) "Nonresident individual" means an individual who is not a resident of this state.
                      (o) "Nonresident trust" or "nonresident estate" means a trust or estate which is not a
                  resident estate or trust.
                      (p) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
                  unincorporated organization:
                      (A) through or by means of which any business, financial operation, or venture is carried
                  on; and
                      (B) which is not, within the meaning of this chapter:
                      (I) a trust;


                      (II) an estate; or
                      (III) a corporation.
                      (ii) "Partnership" does not include any organization not included under the definition of
                  "partnership" in Section 761, Internal Revenue Code.
                      (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
                  organization described in Subsection (1)(p)(i).
                      (q) "Qualifying military service member" means[: (i) in the case of] a member of:
                      (i) The Utah Army National Guard;
                      (ii) The Utah Air National Guard; or
                      (iii) the following if the member is assigned to a unit that is located in the state:
                      (A) The Army Reserve[,];
                      (B) The Naval Reserve[,];
                      (C) The Air Force Reserve[,];
                      (D) The Marine Corps Reserve[,]; or
                      (E) The Coast Guard Reserve[, active duty in accordance with an order received under:].
                      [(A) 10 U.S.C. Sec. 12301;]
                      [(B) 10 U.S.C. Sec. 12302;]
                      [(C) 10 U.S.C. Sec. 12303; or]
                      [(D) 10 U.S.C. Sec. 12304; or]
                      [(ii) in the case of a member of The Army National Guard of the United States or The
                  Air National Guard of the United States:]
                      [(A) active duty in accordance with an order received under:]
                      [(I) 10 U.S.C. Sec. 12301;]
                      [(II) 10 U.S.C. Sec. 12302;]
                      [(III) 10 U.S.C. Sec. 12303; or]
                      [(IV) 10 U.S.C. Sec. 12304; or]
                      [(B) service under a call to active service:]
                      [(I) authorized by the:]


                      [(Aa) President of the United States; or]
                      [(Bb) Secretary of Defense of the United States;]
                      [(II) for a period of more than 30 consecutive days;]
                      [(III) in accordance with an order received under 32 U.S.C. Sec. 502(f); and]
                      [(IV) for purposes of responding to a national emergency:]
                      [(Aa) declared by the President of the United States; and]
                      [(Bb) supported by federal funds.]
                      (r) "Qualifying stock" means stock that is:
                      (i) (A) common; or
                      (B) preferred;
                      (ii) as defined by the commission by rule, originally issued to:
                      (A) a resident or nonresident individual; or
                      (B) a partnership if the resident or nonresident individual making a subtraction from
                  federal taxable income in accordance with Subsection 59-10-114 (2)(m):
                      (I) was a partner when the stock was issued; and
                      (II) remains a partner until the last day of the taxable year for which the resident or
                  nonresident individual makes the subtraction from federal taxable income in accordance with
                  Subsection 59-10-114 (2)(m); and
                      (iii) issued:
                      (A) by a Utah small business corporation;
                      (B) on or after January 1, 2003; and
                      (C) for:
                      (I) money; or
                      (II) other property, except for stock or securities.
                      (s) (i) "Resident individual" means:
                      (A) an individual who is domiciled in this state for any period of time during the taxable
                  year, but only for the duration of the period during which the individual is domiciled in this state;
                  or


                      (B) an individual who is not domiciled in this state but:
                      (I) maintains a permanent place of abode in this state; and
                      (II) spends in the aggregate 183 or more days of the taxable year in this state.
                      (ii) For purposes of Subsection (1)(s)(i)(B), a fraction of a calendar day shall be counted
                  as a whole day.
                      (t) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
                      (u) For purposes of Subsection 59-10-114 (2)(m), "short-term capital gain" is as defined
                  in Section 1222, Internal Revenue Code.
                      (v) "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 .
                      (w) "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.
                      (x) "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).
                      (y) (i) "Utah small business corporation" means a corporation that:
                      (A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
                  Code;
                      (B) except as provided in Subsection (1)(y)(ii), meets the requirements of Section
                  1244(c)(1)(C), Internal Revenue Code; and
                      (C) has its commercial domicile in this state.
                      (ii) Notwithstanding Subsection (1)(y)(i)(B), the time period described in Section
                  1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the source of a
                  corporation's aggregate gross receipts shall end on the last day of the taxable year for which the
                  resident or nonresident individual makes a subtraction from federal taxable income in accordance
                  with Subsection 59-10-114 (2)(m).
                      (z) "Ute tribal member" means a person who is enrolled as a member of the Ute Indian


                  Tribe of the Uintah and Ouray Reservation.
                      (aa) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
                      (bb) "Wages" is as defined in Section 59-10-401 .
                      (2) (a) 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.
                      (b) 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 that are in effect for the taxable year.
                      (c) 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
                  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 the taxpayer's federal individual
                  income 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;
                      (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);
                      (h) any distribution received by a resident beneficiary of a resident trust of income that
                  was taxed at the trust level for federal tax purposes, but was subtracted from state taxable income
                  of the trust pursuant to Subsection 59-10-202 (2)(c); and
                      (i) any distribution received by a resident beneficiary of a nonresident trust of income
                  that was taxed at the trust level for federal tax purposes, but was not taxed at the trust level by
                  any state.
                      (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;
                      (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 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
                  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
                  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)(ii)(A);
                      (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;
                      (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;
                      (m) (i) for taxable years beginning on or after January 1, 2003, the total amount of a


                  resident or nonresident individual's short-term capital gain or long-term capital gain on a capital
                  gain transaction:
                      (A) that occurs on or after January 1, 2003;
                      (B) if 70% or more of the gross proceeds of the capital gain transaction are expended:
                      (I) to purchase qualifying stock in a Utah small business corporation; and
                      (II) within a 12-month period after the day on which the capital gain transaction occurs;
                  and
                      (C) if, prior to the purchase of the qualifying stock described in Subsection
                  (2)(m)(i)(B)(I), the resident or nonresident individual did not have an ownership interest in the
                  Utah small business corporation that issued the qualifying stock; and
                      (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
                  commission may make rules:
                      (A) defining the term "gross proceeds"; and
                      (B) for purposes of Subsection (2)(m)(i)(C), prescribing the circumstances under which a
                  resident or nonresident individual has an ownership interest in a Utah small business corporation;
                  and
                      (n) [(i) except as provided in Subsection (2)(n)(ii),] for the taxable year beginning on or
                  after January 1, [2004] 2005, but beginning on or before December 31, [2004,] 2005, the first
                  $2,200 of income a [resident or nonresident individual] qualifying military service member
                  receives:
                      [(A)] (i) for [qualifying military] service[; and]:
                      (A) as a qualifying military service member; or
                      (B) under an order into active service in accordance with Section 39-1-5 ; and
                      [(B)] (ii) to the extent that income is included in adjusted gross income on that resident
                  or nonresident individual's federal individual income tax return for that taxable year[;].
                      [(ii) notwithstanding Subsection (2)(n)(i), a subtraction from federal taxable income is
                  not allowed under Subsection (2)(n)(i) for income included in adjusted gross income on a
                  resident or nonresident individual's federal individual income tax return for that taxable year if


                  that income is received from a source that constitutes a:]
                      [(A) pension; or]
                      [(B) survivor benefit; and]
                      [(iii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, for
                  purposes of Subsections (1) (2)(n)(i) and (ii), the commission may by rule define what constitutes
                  income:]
                      [(A) a resident or nonresident individual receives for qualifying military service; or]
                      [(B) received from a source that constitutes a:]
                      [(I) pension; or]
                      [(II) survivor benefit.]
                      (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
                  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.
                      (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
                      (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
                  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. Retrospective operation.
                      This bill has retrospective operation for the taxable year beginning on or after January 1,
                  2005, but beginning on or before December 31, 2005.


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