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H.B. 52

This document includes House Committee Amendments incorporated into the bill on Tue, Jan 22, 2008 at 4:46 PM by jeyring. -->              1     

RESEARCH ACTIVITIES TAX CREDITS

             2     
AMENDMENTS

             3     
2008 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: John Dougall

             6     
Senate Sponsor: Wayne L. Niederhauser

             7     
             8      LONG TITLE
             9      Committee Note:
             10          The Revenue and Taxation Interim Committee recommended this bill.
             11      General Description:
             12          This bill amends the Corporate Franchise and Income Taxes chapter and the Individual
             13      Income Tax Act to address tax credits for research activities.
             14      Highlighted Provisions:
             15          This bill:
             16          .    addresses the taxable year for which certain tax credits for research activities may
             17      be claimed;
             18          .    addresses Utah Tax Review Commission study requirements for the tax credits; and
             19          .    makes technical changes.
             20      Monies Appropriated in this Bill:
             21          None
             22      Other Special Clauses:
             23          This bill has retrospective operation for taxable years beginning on or after January 1,
             24      2008.
             25      Utah Code Sections Affected:
             26      AMENDS:
             27          59-7-612, as last amended by Laws of Utah 2007, Chapter 288


             28          59-7-613, as last amended by Laws of Utah 1999, Chapter 59
             29          59-10-1012, as last amended by Laws of Utah 2007, Chapter 288
             30          59-10-1013, as renumbered and amended by Laws of Utah 2006, Chapter 223
             31     
             32      Be it enacted by the Legislature of the state of Utah:
             33          Section 1. Section 59-7-612 is amended to read:
             34           59-7-612. Tax credits for research activities conducted in the state -- Carry
             35      forward -- Commission to report modification or repeal of certain federal provisions --
             36      Utah Tax Review Commission study.
             37          (1) (a) A taxpayer meeting the requirements of this section may claim the following
             38      nonrefundable tax credits:
             39          (i) a research tax credit of H. [ 7% ] 5% .H of the taxpayer's qualified research
             39a      expenses for the
             40      current taxable year that exceed the base amount provided for under Subsection (4);
             41          (ii) a tax credit for [payments] a payment to a qualified [organizations] organization for
             42      basic research as provided in Section 41(e), Internal Revenue Code, of H. [ 7% ] 5% .H
             42a      for the current
             43      taxable year that exceed the base amount provided for under Subsection (4); and
             44          (iii) a tax credit equal to H. :
             44a          (A) for the taxable year beginning on or after January 1, 2008, but beginning on or
             44b      before December 31, 2008, .H 5% of the taxpayer's qualified research expenses for the
             45      current taxable year H. [ . ] ;
             45a          (B) for the taxable year beginning on or after January 1, 2009, but beginning on or
             45b      before December 31, 2009, 6.3% of the taxpayer's qualified research expenses for the current
             45c      taxable year; or
             45d          (C) for taxable years beginning on or after January 1, 2010, 9.2% of the taxpayer's
             45e      qualified research expenses for the current taxable year. .H
             46          [(b) (i) Except as provided in Subsection (1)(b)(ii), a taxpayer may:]
             47          [(A) claim the tax credit or a portion of the tax credit for the taxable year immediately
             48      following the taxable year for which the taxpayer qualifies for the tax credit;]
             49          [(B) carry forward the tax credit or a portion of the tax credit as provided in Subsection
             50      (5); or]
             51          [(C) claim a portion of the tax credit and carry forward a portion of the tax credit as
             52      provided in Subsections (1)(b)(i)(A) and (B).]


             53          [(ii) A taxpayer may not carry forward the tax credit allowed by Subsection (1)(a)(iii).]
             54          (b) Subject to Subsection (5), a taxpayer may claim a tax credit under:
             55          (i) Subsection (1)(a)(i) or (1)(a)(iii), for the taxable year for which the taxpayer incurs
             56      the qualified research expenses; or
             57          (ii) Subsection (1)(a)(ii), for the taxable year for which the taxpayer makes the payment
             58      to the qualified organization.


             59          (c) The tax credits provided for in this section do not include the alternative
             60      incremental credit provided for in Section 41(c)(4), Internal Revenue Code.
             61          (2) For purposes of claiming a tax credit under this section, a unitary group as defined
             62      in Section 59-7-101 is considered to be one taxpayer.
             63          (3) Except as specifically provided for in this section:
             64          (a) the tax credits authorized under Subsection (1) shall be calculated as provided in
             65      Section 41, Internal Revenue Code; and
             66          (b) the definitions provided in Section 41, Internal Revenue Code, apply in calculating
             67      the tax credits authorized under Subsection (1).
             68          (4) For purposes of this section:
             69          (a) the base amount shall be calculated as provided in Sections 41(c) and 41(h),
             70      Internal Revenue Code, except that:
             71          (i) the base amount does not include the calculation of the alternative incremental
             72      credit provided for in Section 41(c)(4), Internal Revenue Code;
             73          (ii) a taxpayer's gross receipts include only those gross receipts attributable to sources
             74      within this state as provided in Part 3, Allocation and Apportionment of Income -- Utah
             75      UDITPA Provisions; and
             76          (iii) notwithstanding Section 41(c), Internal Revenue Code, for purposes of calculating
             77      the base amount, a taxpayer:
             78          (A) may elect to be treated as a start-up company as provided in Section 41(c)(3)(B)
             79      regardless of whether the taxpayer meets the requirements of Section 41(c)(3)(B)(i)(I) or (II);
             80      and
             81          (B) may not revoke an election to be treated as a start-up company under Subsection
             82      (4)(a)(iii)(A);
             83          (b) "basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except
             84      that the term includes only basic research conducted in this state;
             85          (c) "qualified research" is as defined in Section 41(d), Internal Revenue Code, except
             86      that the term includes only qualified research conducted in this state;
             87          (d) "qualified research expenses" is as defined and calculated in Section 41(b), Internal
             88      Revenue Code, except that the term includes only:
             89          (i) in-house research expenses incurred in this state; and


             90          (ii) contract research expenses incurred in this state; and
             91          (e) a tax credit provided for in this section is not terminated if a credit terminates under
             92      Section 41, Internal Revenue Code.
             93          (5) (a) If the amount of a tax credit claimed by a taxpayer under Subsection (1)(a)(i) or
             94      (ii) exceeds the taxpayer's tax liability under this chapter for a taxable year, the amount of the
             95      tax credit exceeding the tax liability:
             96          [(a)] (i) may be carried forward for a period that does not exceed the next 14 taxable
             97      years; and
             98          [(b)] (ii) may not be carried back to a taxable year preceding the current taxable year.
             99          (b) A taxpayer may not carry forward the tax credit allowed by Subsection (1)(a)(iii).
             100          (6) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             101      commission may make rules for purposes of this section prescribing a certification process for
             102      qualified organizations to ensure that amounts paid to the qualified organizations are for basic
             103      research conducted in this state.
             104          (7) If a provision of Section 41, Internal Revenue Code, is modified or repealed, the
             105      commission shall report the modification or repeal to the Utah Tax Review Commission within
             106      60 days after the day on which the modification or repeal becomes effective.
             107          (8) (a) The Utah Tax Review Commission shall review the tax credits provided for in
             108      this section on or before October 1 of the year after the year in which the commission reports
             109      under Subsection (7) a modification or repeal of a provision of Section 41, Internal Revenue
             110      Code.
             111          (b) Notwithstanding Subsection (8)(a), the Utah Tax Review Commission is not
             112      required to review the tax credits provided for in this section if the only modification to a
             113      provision of Section 41, Internal Revenue Code, is the extension of the termination date
             114      provided for in Section 41(h), Internal Revenue Code.
             115          (c) The Utah Tax Review Commission shall address in a review under this section:
             116          (i) the cost of the tax credits provided for in this section;
             117          (ii) the purpose and effectiveness of the tax credits provided for in this section;
             118          (iii) whether the tax credits provided for in this section benefit the state; and
             119          (iv) whether the tax credits provided for in this section should be:
             120          (A) continued;


             121          (B) modified; or
             122          (C) repealed.
             123          (d) If the Utah Tax Review Commission reviews the tax credits provided for in this
             124      section, the Utah Tax Review Commission shall report its findings to the Revenue and
             125      Taxation Interim Committee on or before the November interim meeting of the year in which
             126      the Utah Tax Review Commission reviews the tax credits.
             127          Section 2. Section 59-7-613 is amended to read:
             128           59-7-613. Tax credits for machinery, equipment, or both primarily used for
             129      conducting qualified research or basic research -- Carry forward -- Commission to report
             130      modification or repeal of certain federal provisions -- Utah Tax Review Commission
             131      study.
             132          (1) As used in this section:
             133          (a) "Basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except
             134      that the term includes only basic research conducted in this state.
             135          (b) "Equipment" includes:
             136          (i) [computers] a computer;
             137          (ii) computer equipment; and
             138          (iii) computer software.
             139          (c) "Purchase price":
             140          (i) includes the cost of installing an item of machinery or equipment; and
             141          (ii) does not include [sales or use taxes] a tax imposed under Chapter 12, Sales and Use
             142      Tax Act, on an item of machinery or equipment.
             143          (d) "Qualified organization" is as defined in Section 41(e)(6), Internal Revenue Code.
             144          (e) "Qualified research" is as defined in Section 41(d), Internal Revenue Code, except
             145      that the term includes only qualified research conducted in this state.
             146          (2) (a) Except as provided in Subsection (2)(c), for taxable years beginning on or after
             147      January 1, 1999, but beginning before December 31, 2010, a taxpayer [shall qualify for]
             148      meeting the requirements of this section may claim the following nonrefundable tax credits [for
             149      the taxable year in which the machinery, equipment, or both, meets the requirements of either
             150      Subsection (2)(a)(i) or (2)(a)(ii)]:
             151          (i) a tax credit of 6% of the purchase price of [either] machinery, equipment, or both:


             152          (A) purchased by the taxpayer during the taxable year;
             153          (B) that is [not exempt from sales or use taxes] subject to a tax under Chapter 12, Sales
             154      and Use Tax Act; and
             155          (C) that is primarily used to conduct qualified research in this state; and
             156          (ii) a tax credit of 6% of the purchase price of [either] machinery, equipment, or both:
             157          (A) purchased by the taxpayer during the taxable year;
             158          (B) that is [not exempt from sales or use taxes] subject to a tax under Chapter 12, Sales
             159      and Use Tax Act;
             160          (C) that is donated to a qualified organization; and
             161          (D) that is primarily used to conduct basic research in this state.
             162          [(b) If a taxpayer qualifying for a credit under Subsection (2)(a) seeks to claim the
             163      credit, the taxpayer shall:]
             164          [(i) claim the credit or a portion of the credit for the taxable year immediately
             165      following the taxable year for which the taxpayer qualifies for the credit;]
             166          [(ii) carry the credit or a portion of the credit forward as provided in Subsection (5); or]
             167          [(iii) claim a portion of the credit and carry forward a portion of the credit as provided
             168      in Subsections (2)(b)(i) and (ii).]
             169          [(c) Notwithstanding Subsection (2)(a), if]
             170          (b) Subject to Subsection (5), a taxpayer may claim a tax credit under this section for
             171      the taxable year for which the taxpayer purchases the machinery, equipment, or both.
             172          (c) If a taxpayer qualifies for a tax credit under Subsection (2)(a) for a purchase of
             173      machinery, equipment, or both, the taxpayer may not claim the tax credit or carry the tax credit
             174      forward if the machinery, equipment, or both, is primarily used to conduct qualified research in
             175      the state for a time period that is less than 12 consecutive months.
             176          (3) For purposes of claiming a tax credit under this section, a unitary group as defined
             177      in Section 59-7-101 is considered to be one taxpayer.
             178          (4) Notwithstanding [the provisions of] Section 41(h), Internal Revenue Code, [the
             179      credits] a tax credit provided for in this section [shall not terminate if the credits terminate] is
             180      not terminated if a credit terminates under Section 41, Internal Revenue Code.
             181          (5) [Notwithstanding the provisions of Sections 39 and 41(g), Internal Revenue Code,
             182      governing the carry forward and carry back of federal tax credits, if] If the amount of a tax


             183      credit claimed by a taxpayer under this section exceeds the taxpayer's tax liability under this
             184      chapter for a taxable year, the amount of the tax credit exceeding the tax liability:
             185          (a) may be carried forward for a period that does not exceed the next 14 taxable years;
             186      and
             187          (b) may not be carried back to a taxable year preceding the current taxable year.
             188          (6) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             189      commission may make rules for purposes of this section prescribing a certification process for
             190      qualified organizations to ensure that [either] machinery, equipment, or both provided to the
             191      qualified organization is to be primarily used to conduct basic research in this state.
             192          (7) If a [federal tax credit under] provision of Section 41, Internal Revenue Code, is
             193      modified or repealed, the commission shall report the modification or repeal to the Utah Tax
             194      Review Commission within 60 days after the day on which the modification or repeal becomes
             195      effective.
             196          (8) (a) [Except as provided in Subsection (8)(b), the] The Utah Tax Review
             197      Commission shall review the tax credits provided for in this section on or before [the earlier of:
             198      (i)] October 1 of the year after the year in which the commission reports under Subsection (7) a
             199      modification or repeal of a [federal tax credit under] provision of Section 41, Internal Revenue
             200      Code[; or].
             201          [(ii) October 1, 2004.]
             202          (b) Notwithstanding Subsection (8)(a), the Utah Tax Review Commission is not
             203      required to review the tax credits provided for in this section if the only modification to a
             204      [federal tax credit under] provision of Section 41, Internal Revenue Code, is the extension of
             205      the termination date provided for in Section 41(h), Internal Revenue Code.
             206          (c) The Utah Tax Review Commission shall address in a review under this section the:
             207          (i) cost of the [credit] tax credits provided for in this section;
             208          (ii) purpose and effectiveness of the [credit] tax credits provided for in this section;
             209          (iii) whether the [credit benefits] tax credits provided for in this section benefit the
             210      state; and
             211          (iv) whether the [credit] tax credits provided for in this section should be:
             212          (A) continued;
             213          (B) modified; or


             214          (C) repealed.
             215          (d) If the Utah Tax Review Commission reviews the tax credits provided for in this
             216      section, the Utah Tax Review Commission shall report its findings to the Revenue and
             217      Taxation Interim Committee on or before the November interim meeting of the year in which
             218      the Utah Tax Review Commission reviews the tax credits.
             219          Section 3. Section 59-10-1012 is amended to read:
             220           59-10-1012. Tax credits for research activities conducted in the state -- Carry
             221      forward -- Commission to report modification or repeal of certain federal provisions --
             222      Utah Tax Review Commission study.
             223          (1) (a) A claimant, estate, or trust meeting the requirements of this section may claim
             224      the following nonrefundable tax credits:
             225          (i) a research tax credit of H. [ 7% ] 5% .H of the claimant's, estate's, or trust's
             225a      qualified research
             226      expenses for the current taxable year that exceed the base amount provided for under
             227      Subsection (3);
             228          (ii) a tax credit for [payments] a payment to a qualified [organizations] organization for
             229      basic research as provided in Section 41(e), Internal Revenue Code of H. [ 7% ] 5% .H for
             229a      the current
             230      taxable year that exceed the base amount provided for under Subsection (3); and
             231          (iii) a tax credit equal to H. :
             231a          (A) for the taxable year beginning on or after January 1, 2008, but beginning on or
             231b      before December 31, 2008, .H 5% of the claimant's, estate's, or trust's qualified research
             232      expenses for the current taxable year H. [ . ] ;
             232a          (B) for the taxable year beginning on or after January 1, 2009, but beginning on or
             232b      before December 31, 2009, 6.3% of the claimant's, estate's, or trust's qualified research
             232c      expenses for the current taxable year; or
             232d          (C) for taxable years beginning on or after January 1, 2010, 9.2% of the claimant's,
             232e      estate's, or trust's qualified research expenses for the current taxable year. .H
             233          [(b) (i) Except as provided in Subsection (1)(b)(ii), a claimant, estate, or trust may:]
             234          [(A) claim the tax credit or a portion of the tax credit for the taxable year immediately
             235      following the taxable year for which the claimant, estate, or trust qualifies for the tax credit;]
             236          [(B) carry forward the tax credit or a portion of the tax credit as provided in Subsection
             237      (4); or]
             238          [(C) claim a portion of the tax credit and carry forward a portion of the tax credit as


             239      provided in Subsections (1)(b)(i)(A) and (B).]
             240          [(ii) A claimant, estate, or trust may not carry forward the tax credit allowed by
             241      Subsection (1)(a)(iii).]
             242          (b) Subject to Subsection (4), a claimant, estate, or trust may claim a tax credit under:
             243          (i) Subsection (1)(a)(i) or (1)(a)(iii), for the taxable year for which the claimant, estate,
             244      or trust incurs the qualified research expenses; or


             245          (ii) Subsection (1)(a)(ii), for the taxable year for which the claimant, estate, or trust
             246      makes the payment to the qualified organization.
             247          (c) The tax credits provided for in this section do not include the alternative
             248      incremental credit provided for in Section 41(c)(4), Internal Revenue Code.
             249          (2) Except as specifically provided for in this section:
             250          (a) the tax credits authorized under Subsection (1) shall be calculated as provided in
             251      Section 41, Internal Revenue Code; and
             252          (b) the definitions provided in Section 41, Internal Revenue Code, apply in calculating
             253      the tax credits authorized under Subsection (1).
             254          (3) For purposes of this section:
             255          (a) the base amount shall be calculated as provided in Sections 41(c) and 41(h),
             256      Internal Revenue Code, except that:
             257          (i) the base amount does not include the calculation of the alternative incremental
             258      credit provided for in Section 41(c)(4), Internal Revenue Code;
             259          (ii) a claimant's, estate's, or trust's gross receipts include only those gross receipts
             260      attributable to sources within this state as provided in Section 59-10-118 ; and
             261          (iii) notwithstanding Section 41(c), Internal Revenue Code, for purposes of calculating
             262      the base amount, a claimant, estate, or trust:
             263          (A) may elect to be treated as a start-up company as provided in Section 41(c)(3)(B)
             264      regardless of whether the claimant, estate, or trust meets the requirements of Section
             265      41(c)(3)(B)(i)(I) or (II); and
             266          (B) may not revoke an election to be treated as a start-up company under Subsection
             267      (3)(a)(iii)(A);
             268          (b) "basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except
             269      that the term includes only basic research conducted in this state;
             270          (c) "qualified research" is as defined in Section 41(d), Internal Revenue Code, except
             271      that the term includes only qualified research conducted in this state;
             272          (d) "qualified research expenses" is as defined and calculated in Section 41(b), Internal
             273      Revenue Code, except that the term includes only:
             274          (i) in-house research expenses incurred in this state; and
             275          (ii) contract research expenses incurred in this state; and


             276          (e) a tax credit provided for in this section is not terminated if a credit terminates under
             277      Section 41, Internal Revenue Code.
             278          (4) (a) If the amount of a tax credit claimed by a claimant, estate, or trust under
             279      Subsection (1)(a)(i) or (ii) exceeds the claimant's, estate's, or trust's tax liability under this
             280      chapter for a taxable year, the amount of the tax credit exceeding the tax liability:
             281          [(a)] (i) may be carried forward for a period that does not exceed the next 14 taxable
             282      years; and
             283          [(b)] (ii) may not be carried back to a taxable year preceding the current taxable year.
             284          (b) A claimant, estate, or trust may not carry forward the tax credit allowed by
             285      Subsection (1)(a)(iii).
             286          (5) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             287      commission may make rules for purposes of this section prescribing a certification process for
             288      qualified organizations to ensure that amounts paid to the qualified organizations are for basic
             289      research conducted in this state.
             290          (6) If a provision of Section 41, Internal Revenue Code, is modified or repealed, the
             291      commission shall report the modification or repeal to the Utah Tax Review Commission within
             292      60 days after the day on which the modification or repeal becomes effective.
             293          (7) (a) The Utah Tax Review Commission shall review the tax credits provided for in
             294      this section on or before October 1 of the year after the year in which the commission reports
             295      under Subsection (6) a modification or repeal of a provision of Section 41, Internal Revenue
             296      Code.
             297          (b) Notwithstanding Subsection (7)(a), the Utah Tax Review Commission is not
             298      required to review the tax credits provided for in this section if the only modification to a
             299      provision of Section 41, Internal Revenue Code, is the extension of the termination date
             300      provided for in Section 41(h), Internal Revenue Code.
             301          (c) The Utah Tax Review Commission shall address in a review under this section:
             302          (i) the cost of the tax credits provided for in this section;
             303          (ii) the purpose and effectiveness of the tax credits provided for in this section;
             304          (iii) whether the tax credits provided for in this section benefit the state; and
             305          (iv) whether the tax credits provided for in this section should be:
             306          (A) continued;


             307          (B) modified; or
             308          (C) repealed.
             309          (d) If the Utah Tax Review Commission reviews the tax credits provided for in this
             310      section, the Utah Tax Review Commission shall report its findings to the Revenue and
             311      Taxation Interim Committee on or before the November interim meeting of the year in which
             312      the Utah Tax Review Commission reviews the tax credits.
             313          Section 4. Section 59-10-1013 is amended to read:
             314           59-10-1013. Tax credits for machinery, equipment, or both primarily used for
             315      conducting qualified research or basic research -- Carry forward -- Commission to report
             316      modification or repeal of certain federal provisions -- Utah Tax Review Commission
             317      study.
             318          (1) As used in this section:
             319          (a) "Basic research" is as defined in Section 41(e)(7), Internal Revenue Code, except
             320      that the term includes only basic research conducted in this state.
             321          (b) "Equipment" includes:
             322          (i) [computers] a computer;
             323          (ii) computer equipment; and
             324          (iii) computer software.
             325          (c) "Purchase price":
             326          (i) includes the cost of installing an item of machinery or equipment; and
             327          (ii) does not include [sales or use taxes] a tax imposed under Chapter 12, Sales and Use
             328      Tax Act, on an item of machinery or equipment.
             329          (d) "Qualified organization" is as defined in Section 41(e)(6), Internal Revenue Code.
             330          (e) "Qualified research" is as defined in Section 41(d), Internal Revenue Code, except
             331      that the term includes only qualified research conducted in this state.
             332          (2) (a) Except as provided in Subsection (2)(c), for taxable years beginning on or after
             333      January 1, 1999, but beginning before December 31, 2010, a claimant, estate, or trust [shall
             334      qualify for] meeting the requirements of this section may claim the following nonrefundable
             335      tax credits [for the taxable year in which the machinery, equipment, or both, meets the
             336      requirements of either Subsection (2)(a)(i) or (2)(a)(ii)]:
             337          (i) a tax credit of 6% of the purchase price of [either] machinery, equipment, or both:


             338          (A) purchased by the claimant, estate, or trust during the taxable year;
             339          (B) that is [not exempt from sales or use taxes] subject to a tax under Chapter 12, Sales
             340      and Use Tax Act; and
             341          (C) that is primarily used to conduct qualified research in this state; and
             342          (ii) a tax credit of 6% of the purchase price paid by the claimant, estate, or trust for
             343      [either] machinery, equipment, or both:
             344          (A) purchased by the claimant, estate, or trust during the taxable year;
             345          (B) that is [not exempt from sales or use taxes] subject to a tax under Chapter 12, Sales
             346      and Use Tax Act;
             347          (C) that is donated to a qualified organization; and
             348          (D) that is primarily used to conduct basic research in this state.
             349          [(b) If a claimant, estate, or trust qualifying for a tax credit under Subsection (2)(a)
             350      seeks to claim the tax credit, the claimant, estate, or trust shall:]
             351          [(i) claim the tax credit or a portion of the tax credit for the taxable year immediately
             352      following the taxable year for which the claimant, estate, or trust qualifies for the tax credit;]
             353          [(ii) carry the tax credit or a portion of the tax credit forward as provided in Subsection
             354      (5); or]
             355          [(iii) claim a portion of the tax credit and carry forward a portion of the tax credit as
             356      provided in Subsections (2)(b)(i) and (ii).]
             357          [(c) Notwithstanding Subsection (2)(a), if]
             358          (b) Subject to Subsection (4), a claimant, estate, or trust may claim a tax credit under
             359      this section for the taxable year for which the claimant, estate, or trust purchases the machinery,
             360      equipment, or both.
             361          (c) If a claimant, estate, or trust qualifies for a tax credit under Subsection (2)(a) for a
             362      purchase of machinery, equipment, or both, the claimant, estate, or trust may not claim the tax
             363      credit or carry the tax credit forward if the machinery, equipment, or both, is primarily used to
             364      conduct qualified research in the state for a time period that is less than 12 consecutive months.
             365          [(3) For purposes of claiming a tax credit under this section, a unitary group as defined
             366      in Section 59-7-101 is considered to be one claimant.]
             367          [(4)] (3) Notwithstanding [the provisions of] Section 41(h), Internal Revenue Code,
             368      [the tax credits] a tax credit provided for in this section [shall not terminate if the credits


             369      terminate] is not terminated if a credit terminates under Section 41, Internal Revenue Code.
             370          [(5)] (4) [Notwithstanding the provisions of Sections 39 and 41(g), Internal Revenue
             371      Code, governing the carry forward and carry back of federal tax credits, if] If the amount of a
             372      tax credit claimed by a claimant, estate, or trust under this section exceeds a claimant's, estate's,
             373      or trust's tax liability under this chapter for a taxable year, the amount of the tax credit
             374      exceeding the tax liability:
             375          (a) may be carried forward for a period that does not exceed the next 14 taxable years;
             376      and
             377          (b) may not be carried back to a taxable year preceding the current taxable year.
             378          [(6)] (5) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking
             379      Act, the commission may make rules for purposes of this section prescribing a certification
             380      process for qualified organizations to ensure that [either] machinery, equipment, or both
             381      provided to the qualified organization is to be primarily used to conduct basic research in this
             382      state.
             383          [(7)] (6) If a [federal credit under] provision of Section 41, Internal Revenue Code, is
             384      modified or repealed, the commission shall report the modification or repeal to the Utah Tax
             385      Review Commission within 60 days after the day on which the modification or repeal becomes
             386      effective.
             387          (7) (a) The Utah Tax Review Commission shall review the tax credits provided for in
             388      this section on or before October 1 of the year after the year in which the commission reports
             389      under Subsection (6) a modification or repeal of a provision of Section 41, Internal Revenue
             390      Code.
             391          (b) Notwithstanding Subsection (7)(a), the Utah Tax Review Commission is not
             392      required to review the tax credits provided for in this section if the only modification to a
             393      provision of Section 41, Internal Revenue Code, is the extension of the termination date
             394      provided for in Section 41(h), Internal Revenue Code.
             395          (c) The Utah Tax Review Commission shall address in a review under this section the:
             396          (i) cost of the tax credits provided for in this section;
             397          (ii) purpose and effectiveness of the tax credits provided for in this section;
             398          (iii) whether the tax credits provided for in this section benefit the state; and
             399          (iv) whether the tax credits provided for in this section should be:


             400          (A) continued;
             401          (B) modified; or
             402          (C) repealed.
             403          (d) If the Utah Tax Review Commission reviews the tax credits provided for in this
             404      section, the Utah Tax Review Commission shall report its findings to the Revenue and
             405      Taxation Interim Committee on or before the November interim meeting of the year in which
             406      the Utah Tax Review Commission reviews the tax credits.
             407          Section 5. Retrospective operation.
             408          This bill has retrospective operation for taxable years beginning on or after January 1,
             409      2008.




Legislative Review Note
    as of 11-15-07 4:18 PM


Office of Legislative Research and General Counsel


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