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First Substitute S.B. 171
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7 Cosponsors:
8 Gregory S. Bell
9 Curtis S. Bramble
10 D. Chris Buttars
11 Margaret Dayton
12 Mike DmitrichDan R. Eastman
Scott K. Jenkins
Patricia W. Jones
Sheldon L. Killpack
Peter C. Knudson
Mark B. MadsenWayne L. Niederhauser
Darin G. Peterson
John L. Valentine
Kevin T. VanTassell
Carlene M. Walker 13
14 LONG TITLE
15 General Description:
16 This bill amends the Corporate Franchise and Income Taxes chapter and the Individual
17 Income Tax Act to modify tax credits for research activities in the state.
18 Highlighted Provisions:
19 This bill:
20 . repeals a repeal date for tax credits for research activities in the state;
21 . increases the percentage of expenses or payments that serve as the basis for
22 calculating tax credits for research activities in the state;
23 . provides a nonrefundable tax credit equal to 5% of a taxpayer's qualified research
24 expenses for the current taxable year in addition to other tax credits for research
25 activities in the state allowed under current statute;
26 . provides that the tax credit for qualified research expenses may not be carried
27 forward;
28 . requires a review of the tax credits by the Utah Tax Review Commission; and
29 . makes technical changes.
30 Monies Appropriated in this Bill:
31 None
32 Other Special Clauses:
33 This bill has retrospective operation for taxable years beginning on or after January 1,
34 2007.
35 Utah Code Sections Affected:
36 AMENDS:
37 59-7-612, as last amended by Chapter 9, Laws of Utah 2001
38 59-10-1012, as renumbered and amended by Chapter 223, Laws of Utah 2006
39
40 Be it enacted by the Legislature of the state of Utah:
41 Section 1. Section 59-7-612 is amended to read:
42 59-7-612. Tax credits for research activities conducted in the state -- Carry
43 forward -- Commission to report modification or repeal of certain federal provisions --
44 Utah Tax Review Commission study.
45 (1) (a) [
46
47 may claim the following nonrefundable tax credits [
48
49 (i) a research tax credit of [
50 the current taxable year that exceed the base amount provided for under Subsection (4); [
51 (ii) a tax credit for payments to qualified organizations for basic research as provided
52 in Section 41(e), Internal Revenue Code, of [
53 the base amount provided for under Subsection (4)[
54 (iii) a tax credit equal to 5% of the taxpayer's qualified research expenses for the
55 current taxable year.
56 [
57
58 (b) (i) Except as provided in Subsection (1)(b)(ii), a taxpayer may:
59 [
60 immediately following the taxable year for which the taxpayer qualifies for the tax credit;
61 [
62 provided in Subsection [
63 [
64 as provided in Subsections (1)(b)(i)(A) and [
65 (ii) A taxpayer may not carry forward the tax credit allowed by Subsection (1)(a)(iii).
66 (c) The tax credits provided for in this section do not include the alternative
67 incremental credit provided for in Section 41(c)(4), Internal Revenue Code.
68 (2) For purposes of claiming a tax credit under this section, a unitary group as defined
69 in Section 59-7-101 is considered to be one taxpayer.
70 (3) Except as specifically provided for in this section:
71 (a) the tax credits authorized under Subsection (1) shall be calculated as provided in
72 Section 41, Internal Revenue Code; and
73 (b) the definitions provided in Section 41, Internal Revenue Code, apply in calculating
74 the tax credits authorized under Subsection (1).
75 (4) For purposes of this section:
76 (a) the base amount shall be calculated as provided in Sections 41(c) and 41(h),
77 Internal Revenue Code, except that:
78 (i) the base amount does not include the calculation of the alternative incremental
79 credit provided for in Section 41(c)(4), Internal Revenue Code;
80 (ii) a taxpayer's gross receipts include only those gross receipts attributable to sources
81 within this state as provided in Part 3, Allocation and Apportionment of Income -- Utah
82 UDITPA Provisions; and
83 (iii) notwithstanding Section 41(c), Internal Revenue Code, for purposes of calculating
84 the base amount, a taxpayer:
85 (A) may elect to be treated as a start-up company as provided in Section 41(c)(3)(B)
86 regardless of whether the taxpayer meets the requirements of Section 41(c)(3)(B)(i)(I) or (II);
87 and
88 (B) may not revoke an election to be treated as a start-up company under Subsection
89 (4)(a)(iii)(A);
90 (b) "basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except
91 that the term includes only basic research conducted in this state;
92 (c) "qualified research" is as defined in Section 41(d), Internal Revenue Code, except
93 that the term includes only qualified research conducted in this state;
94 (d) "qualified research expenses" is as defined and calculated in Section 41(b), Internal
95 Revenue Code, except that the term includes only [
96
97 (i) in-house research expenses incurred in this state; and
98 (ii) contract research expenses incurred in this state; and
99 (e) [
100
101
102 [
103
104 (5) If the amount of a tax credit claimed by a taxpayer under [
105 (1)(a)(i) or (ii) exceeds the taxpayer's tax liability under this chapter for a taxable year, the
106 amount of the tax credit exceeding the tax liability:
107 [
108 years; and
109 [
110 [
111 Act, the commission may make rules for purposes of this section prescribing a certification
112 process for qualified organizations to ensure that amounts paid to the qualified organizations
113 are for basic research conducted in this state.
114 [
115 is modified or repealed, the commission shall report the modification or repeal to the Utah Tax
116 Review Commission within 60 days after the day on which the modification or repeal becomes
117 effective.
118 [
119 Commission shall review the tax credits provided for in this section on or before [
120
121 (7) a modification or repeal of a [
122 Revenue Code[
123 (b) Notwithstanding Subsection [
124 required to review the tax credits provided for in this section if the only modification to a
125 [
126 the termination date provided for in Section 41(h), Internal Revenue Code.
127 (c) The Utah Tax Review Commission shall address in a review under this section
128 [
129 (i) the cost of the [
130 (ii) the purpose and effectiveness of the [
131 (iii) whether the [
132 state; and
133 (iv) whether the [
134 (A) continued;
135 (B) modified; or
136 (C) repealed.
137 (d) If the Utah Tax Review Commission reviews the tax credits provided for in this
138 section, the Utah Tax Review Commission shall report its findings to the Revenue and
139 Taxation Interim Committee on or before the November interim meeting of the year in which
140 the Utah Tax Review Commission reviews the tax credits.
141 Section 2. Section 59-10-1012 is amended to read:
142 59-10-1012. Tax credits for research activities conducted in the state -- Carry
143 forward -- Commission to report modification or repeal of certain federal provisions --
144 Utah Tax Review Commission study.
145 (1) (a) [
146
147 [
148
149 (i) a research tax credit of [
150 research expenses for the current taxable year that exceed the base amount provided for under
151 Subsection [
152 (ii) a tax credit for payments to qualified organizations for basic research as provided
153 in Section 41(e), Internal Revenue Code of [
154 the base amount provided for under Subsection [
155 (iii) a tax credit equal to 5% of the taxpayer's qualified research expenses for the
156 current taxable year.
157 (b) (i) [
158
159 or trust [
160 [
161 immediately following the taxable year for which the claimant, estate, or trust qualifies for the
162 tax credit;
163 [
164 provided in Subsection (4)[
165 [
166 as provided in Subsections (1)(b)(i)(A) and [
167 (ii) A taxpayer may not carry forward the tax credit allowed by Subsection (1)(a)(iii).
168 (c) The tax credits provided for in this section do not include the alternative
169 incremental credit provided for in Section 41(c)(4), Internal Revenue Code.
170 [
171
172 [
173 (a) the tax credits authorized under Subsection (1) shall be calculated as provided in
174 Section 41, Internal Revenue Code; and
175 (b) the definitions provided in Section 41, Internal Revenue Code, apply in calculating
176 the tax credits authorized under Subsection (1).
177 [
178 (a) the base amount shall be calculated as provided in Sections 41(c) and 41(h),
179 Internal Revenue Code, except that:
180 (i) the base amount does not include the calculation of the alternative incremental
181 credit provided for in Section 41(c)(4), Internal Revenue Code;
182 (ii) a claimant's, estate's, or trust's gross receipts include only those gross receipts
183 attributable to sources within this state as provided in Section 59-10-118 ; and
184 (iii) notwithstanding Section 41(c), Internal Revenue Code, for purposes of calculating
185 the base amount, a claimant, estate, or trust:
186 (A) may elect to be treated as a start-up company as provided in Section 41(c)(3)(B)
187 regardless of whether the claimant, estate, or trust meets the requirements of Section
188 41(c)(3)(B)(i)(I) or (II); and
189 (B) may not revoke an election to be treated as a start-up company under Subsection
190 (4)(a)(iii)(A);
191 (b) "basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except
192 that the term includes only basic research conducted in this state;
193 (c) "qualified research" is as defined in Section 41(d), Internal Revenue Code, except
194 that the term includes only qualified research conducted in this state;
195 (d) "qualified research expenses" is as defined and calculated in Section 41(b), Internal
196 Revenue Code, except that the term includes only [
197
198 (i) in-house research expenses incurred in this state; and
199 (ii) contract research expenses incurred in this state; and
200 (e) [
201
202
203 [
204
205 (4) If the amount of a tax credit claimed by a claimant, estate, or trust under [
206
207 this chapter for a taxable year, the amount of the tax credit exceeding the tax liability:
208 [
209 years; and
210 [
211 (5) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
212 commission may make rules for purposes of this section prescribing a certification process for
213 qualified organizations to ensure that amounts paid to the qualified organizations are for basic
214 research conducted in this state.
215 (6) If a [
216 modified or repealed, the commission shall report the modification or repeal to the Utah Tax
217 Review Commission within 60 days after the day on which the modification or repeal becomes
218 effective.
219 (7) (a) The Utah Tax Review Commission shall review the tax credits provided for in
220 this section on or before October 1 of the year after the year in which the commission reports
221 under Subsection (6) a modification or repeal of a provision of Section 41, Internal Revenue
222 Code.
223 (b) Notwithstanding Subsection (7)(a), the Utah Tax Review Commission is not
224 required to review the tax credits provided for in this section if the only modification to a
225 provision of Section 41, Internal Revenue Code, is the extension of the termination date
226 provided for in Section 41(h), Internal Revenue Code.
227 (c) The Utah Tax Review Commission shall address in a review under this section:
228 (i) the cost of the tax credits provided for in this section;
229 (ii) the purpose and effectiveness of the tax credits provided for in this section;
230 (iii) whether the tax credits provided for in this section benefit the state; and
231 (iv) whether the tax credits provided for in this section should be:
232 (A) continued;
233 (B) modified; or
234 (C) repealed.
235 (d) If the Utah Tax Review Commission reviews the tax credits provided for in this
236 section, the Utah Tax Review Commission shall report its findings to the Revenue and
237 Taxation Interim Committee on or before the November interim meeting of the year in which
238 the Utah Tax Review Commission reviews the tax credits.
239 Section 3. Retrospective operation.
240 This bill has retrospective operation for taxable years beginning on or after January 1,
241 2007.
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