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Third Substitute H.B. 359

Senator Wayne L. Niederhauser proposes the following substitute bill:


             1     
TAX CHANGES

             2     
2008 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: John Dougall

             5     
Senate Sponsor: Wayne L. Niederhauser

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends the Corporate Franchise and Income Taxes chapter, the Individual
             10      Income Tax Act, the Sales and Use Tax Act, the Transportation Code, and related
             11      provisions to address the income taxation of individuals, estates, and trusts, including
             12      real estate investment trusts, a change in a state sales and use tax rate, a sales tax refund
             13      for qualified emergency food agencies, a sales and use tax exemption, and the
             14      expenditure of certain state sales and use tax revenues.
             15      Highlighted Provisions:
             16          This bill:
             17          .    defines terms;
             18          .    addresses the income taxation of a real estate investment trust or income from a real
             19      estate investment trust;
             20          .    repeals provisions imposing an individual income tax on the basis of graduated
             21      brackets and rates;
             22          .    provides that an individual income tax is imposed on the basis of a single tax rate,
             23      including:
             24              .    modifying and repealing definitions;
             25              .    modifying additions to and subtractions from adjusted gross income;


             26              .    addressing the taxation of a nonresident individual or part-year resident
             27      individual; and
             28              .    addressing provisions relating to the determination and reporting of income tax
             29      liability and information;
             30          .    addresses the apportionment of business income for purposes of the individual
             31      income tax;
             32          .    modifies the income taxation of estates and trusts, including:
             33              .    providing definitions;
             34              .    providing that the tax is calculated on the basis of unadjusted income;        
             35              .    modifying additions to and subtractions from unadjusted income; and
             36              .    addressing provisions relating to the determination and reporting of income tax
             37      liability and information;
             38          .    addresses the taxation of pass-through entities, including:
             39              .    providing definitions;    and
             40              .    renumbering and amending provisions relating to pass-through entities;
             41          .    renumbers and amends provisions relating to tax credits, including tax credits for:
             42              .    a taxpayer;
             43              .    an investment in the Utah Educational Savings Plan Trust; or
             44              .    retirement income;
             45          .    provides nonrefundable tax credits for:
             46              .    a trust or estate;
             47              .    a contribution to a medical care savings account;
             48              .    capital gain transactions;
             49              .    certain amounts paid for insurance under a health benefit plan; or
             50              .    certain solar projects;
             51          .    requires the Utah Tax Review Commission to study the solar projects tax credits;
             52          .    provides that a person may not claim a nonrefundable renewable energy systems tax
             53      credit for certain purchases for which the person claims a tax credit for certain solar
             54      projects;
             55          .    modifies the refundable renewable energy tax credit to clarify that an estate or trust
             56      may claim the tax credit;    


             57          .    addresses the apportionment of tax credits;    
             58          .    addresses the following relating to a medical care savings account:
             59              .    taxation;
             60              .    penalties; and
             61              .    interest;
             62          .    amends provisions relating to the taxation of an investment in the Utah Educational
             63      Savings Plan Trust;
             64          .    renumbers and amends the individual income tax contribution provisions;
             65          .    addresses the administration of income tax contributions;
             66          .    grants rulemaking authority to:
             67              .    the State Tax Commission; and
             68              .    the Insurance Department;
             69          .    increases a state sales and use tax rate from 4.65% to 4.70%;
             70          .    provides that a .025% tax rate on certain sales and use transactions shall be
             71      deposited into the Critical Highway Needs Fund and the Transportation Investment
             72      Fund of 2005;
             73          .    provides that a .025% tax rate on certain sales and use transactions shall be
             74      deposited into the Transportation Fund to be expended to address chokepoints in
             75      construction management;
             76          .    extends the expiration date for certain sales and use tax exemptions;
             77          .    provides a sales and use tax exemption for sales of fuel to a common carrier that is a
             78      railroad for use in a locomotive engine;
             79          .    provides that state sales and use tax revenues deposited into the Transportation
             80      Fund are not appropriated into the class B and class C roads account;
             81          .    modifies the statutes creating the Transportation Investment Fund of 2005 and the
             82      Critical Highway Needs Fund to address the sources of revenue that may be
             83      deposited into the funds; and
             84          .    makes technical changes.
             85      Monies Appropriated in this Bill:
             86          None
             87      Other Special Clauses:


             88          This bill provides effective dates.
             89          This bill coordinates with the following to provide for apportionment of tax credits:
             90          (1) H.B. 158, Tax Credit for Military Retired Pay;
             91          (2) H.B. 199, Tax Credits for Energy Efficient Residences;
             92          (3) H.B. 279, Tax Incentives for Military Members;
             93          (4) H.B. 351, Individual Income Tax - Health Insurance; and
             94          (5) H.B. 360, Individual Income Tax - Long-Term Care Insurance Premiums.
             95      Utah Code Sections Affected:
             96      AMENDS:
             97          9-4-802, as last amended by Laws of Utah 2003, Chapter 132
             98          9-4-803, as last amended by Laws of Utah 2003, Chapter 132
             99          23-14-13, as last amended by Laws of Utah 1995, Chapter 211
             100          23-14-14.1, as enacted by Laws of Utah 2003, Chapter 162
             101          26-18a-3, as last amended by Laws of Utah 1997, Chapter 1
             102          26-18a-4, as last amended by Laws of Utah 1997, Chapter 1
             103          26-48-102, as enacted by Laws of Utah 2006, Chapter 280
             104          31A-32a-101, as enacted by Laws of Utah 1999, Chapter 131
             105          31A-32a-103, as enacted by Laws of Utah 1999, Chapter 131
             106          31A-32a-104, as enacted by Laws of Utah 1999, Chapter 131
             107          31A-32a-105, as enacted by Laws of Utah 1999, Chapter 131
             108          31A-32a-106, as last amended by Laws of Utah 2001, Chapter 53
             109          31A-32a-107, as enacted by Laws of Utah 1999, Chapter 131
             110          48-2c-117, as enacted by Laws of Utah 2001, Chapter 260
             111          53B-8a-106, as last amended by Laws of Utah 2007, Chapter 100
             112          59-7-101, as last amended by Laws of Utah 2004, Chapter 54
             113          59-7-105, as last amended by Laws of Utah 2007, Chapter 100
             114          59-7-106, as last amended by Laws of Utah 2007, Chapter 100
             115          59-7-116.5, as enacted by Laws of Utah 1995, Chapter 311
             116          59-7-402, as last amended by Laws of Utah 2004, Chapter 54
             117          59-7-614, as repealed and reenacted by Laws of Utah 2007, Chapter 288
             118          59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2


             119          59-10-104, as last amended by Laws of Utah 2007, Chapter 288
             120          59-10-104.1, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             121          59-10-110, as renumbered and amended by Laws of Utah 1987, Chapter 2
             122          59-10-114, as last amended by Laws of Utah 2007, Chapter 100
             123          59-10-115, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             124          59-10-116, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             125          59-10-117, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             126          59-10-118, as last amended by Laws of Utah 1995, Chapter 311
             127          59-10-119, as renumbered and amended by Laws of Utah 1987, Chapter 2
             128          59-10-120, as renumbered and amended by Laws of Utah 1987, Chapter 2
             129          59-10-121, as renumbered and amended by Laws of Utah 1987, Chapter 2
             130          59-10-122, as renumbered and amended by Laws of Utah 1987, Chapter 2
             131          59-10-123, as renumbered and amended by Laws of Utah 1987, Chapter 2
             132          59-10-124, as renumbered and amended by Laws of Utah 1987, Chapter 2
             133          59-10-125, as renumbered and amended by Laws of Utah 1987, Chapter 2
             134          59-10-126, as last amended by Laws of Utah 1995, Chapter 311
             135          59-10-201, as last amended by Laws of Utah 2007, Chapter 100
             136          59-10-201.1, as last amended by Laws of Utah 2006, Chapter 223
             137          59-10-202, as last amended by Laws of Utah 2007, Chapter 100
             138          59-10-204, as last amended by Laws of Utah 2006, Chapter 223
             139          59-10-205, as last amended by Laws of Utah 2006, Chapter 223
             140          59-10-207, as last amended by Laws of Utah 2006, Chapter 223
             141          59-10-209.1, as enacted by Laws of Utah 2006, Chapter 223
             142          59-10-210, as last amended by Laws of Utah 2006, Chapter 223
             143          59-10-507, as last amended by Laws of Utah 2003, Chapter 198
             144          59-10-1014, as last amended by Laws of Utah 2007, Chapters 122 and 288
             145          59-10-1106, as enacted by Laws of Utah 2007, Chapter 288
             146          59-12-103, as last amended by Laws of Utah 2007, Chapters 9, 101, 126, 206, and 288
             147          59-12-104, as last amended by Laws of Utah 2007, Chapters 76, 195, 214, 224, 288,
             148      295, and 329
             149          72-2-107, as last amended by Laws of Utah 2007, Chapter 126


             150          72-2-124, as last amended by Laws of Utah 2006, Chapters 11 and 135
             151          72-2-125, as enacted by Laws of Utah 2007, Chapter 206
             152      ENACTS:
             153          59-7-614.2, Utah Code Annotated 1953
             154          59-10-1020, Utah Code Annotated 1953
             155          59-10-1021, Utah Code Annotated 1953
             156          59-10-1022, Utah Code Annotated 1953
             157          59-10-1023, Utah Code Annotated 1953
             158          59-10-1024, Utah Code Annotated 1953
             159          59-10-1301, Utah Code Annotated 1953
             160          59-10-1302, Utah Code Annotated 1953
             161          59-10-1303, Utah Code Annotated 1953
             162          59-10-1401, Utah Code Annotated 1953
             163          59-10-1402, Utah Code Annotated 1953
             164      RENUMBERS AND AMENDS:
             165          59-10-1002.1, (Renumbered from 59-10-1016, as renumbered and amended by Laws of
             166      Utah 2006, Chapter 223)
             167          59-10-1002.2, (Renumbered from 59-10-1206.9, as enacted by Laws of Utah 2007,
             168      Chapter 288)
             169          59-10-1017, (Renumbered from 59-10-1206.1, as enacted by Laws of Utah 2007,
             170      Chapter 100)
             171          59-10-1018, (Renumbered from 59-10-1206.2, as enacted by Laws of Utah 2007,
             172      Chapter 288)
             173          59-10-1019, (Renumbered from 59-10-1206.3, as enacted by Laws of Utah 2007,
             174      Chapter 288)
             175          59-10-1304, (Renumbered from 59-10-551, as last amended by Laws of Utah 2006,
             176      Chapter 280)
             177          59-10-1305, (Renumbered from 59-10-530, as last amended by Laws of Utah 1997,
             178      Chapter 12)
             179          59-10-1306, (Renumbered from 59-10-530.5, as last amended by Laws of Utah 2003,
             180      Chapter 132)


             181          59-10-1307, (Renumbered from 59-10-549, as last amended by Laws of Utah 2005,
             182      Chapter 208)
             183          59-10-1308, (Renumbered from 59-10-550, as last amended by Laws of Utah 1997,
             184      Chapters 1 and 12)
             185          59-10-1309, (Renumbered from 59-10-550.1, as enacted by Laws of Utah 2003,
             186      Chapter 162)
             187          59-10-1310, (Renumbered from 59-10-550.2, as enacted by Laws of Utah 2006,
             188      Chapter 280)
             189          59-10-1311, (Renumbered from 59-10-547, as last amended by Laws of Utah 1998,
             190      Chapter 269)
             191          59-10-1312, (Renumbered from 59-10-548, as last amended by Laws of Utah 2002,
             192      Chapters 107 and 256)
             193          59-10-1403, (Renumbered from 59-10-301, as renumbered and amended by Laws of
             194      Utah 1987, Chapter 2)
             195          59-10-1404, (Renumbered from 59-10-302, as renumbered and amended by Laws of
             196      Utah 1987, Chapter 2)
             197          59-10-1405, (Renumbered from 59-10-303, as last amended by Laws of Utah 2006,
             198      Fourth Special Session, Chapter 2)
             199      REPEALS:
             200          59-10-206, as last amended by Laws of Utah 1995, Chapter 345
             201          59-10-801, as last amended by Laws of Utah 1997, Chapter 159
             202          59-10-1201, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             203          59-10-1202, as last amended by Laws of Utah 2007, Chapters 100 and 288
             204          59-10-1203, as last amended by Laws of Utah 2007, Chapters 100 and 288
             205          59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             206          59-10-1205, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             207          59-10-1206, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             208          59-10-1207, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             209     
             210      Be it enacted by the Legislature of the state of Utah:
             211          Section 1. Section 9-4-802 is amended to read:


             212           9-4-802. Purposes of Homeless Coordinating Committee -- Uses of Pamela
             213      Atkinson Homeless Trust Account.
             214          (1) (a) The Homeless Coordinating Committee shall work to ensure that services
             215      provided to the homeless by state agencies, local governments, and private organizations are
             216      provided in a cost-effective manner.
             217          (b) Programs funded by the committee shall emphasize emergency housing and
             218      self-sufficiency, including placement in meaningful employment or occupational training
             219      activities and, where needed, special services to meet the unique needs of the homeless who
             220      have families with children, or who are mentally ill, disabled, or suffer from other serious
             221      challenges to employment and self-sufficiency.
             222          (c) The committee may also fund treatment programs to ameliorate the effects of
             223      substance abuse or a disability.
             224          (2) The committee members designated in Subsection 9-4-801 (2) shall:
             225          (a) award contracts funded by the Pamela Atkinson Homeless Trust Account with the
             226      advice and input of those designated in Subsection 9-4-801 (3);
             227          (b) consider need, diversity of geographic location, coordination with or enhancement
             228      of existing services, and the extensive use of volunteers; and
             229          (c) give priority for funding to programs that serve the homeless who are mentally ill
             230      and who are in families with children.
             231          (3) (a) In any fiscal year, no more than 80% of the funds in the Pamela Atkinson
             232      Homeless Trust Account may be allocated to organizations that provide services only in Salt
             233      Lake, Davis, Weber, and Utah Counties.
             234          (b) The committee may:
             235          (i) expend up to 3% of its annual appropriation for administrative costs associated with
             236      the allocation of funds from the Pamela Atkinson Homeless Trust Account, and up to 2% of its
             237      annual appropriation for marketing the account and soliciting donations to the account; and
             238          (ii) pay for the initial costs of the State Tax Commission in implementing Section
             239      [ 59-10-530.5 ] 59-10-1306 from the account.
             240          (4) (a) The committee may not expend, except as provided in Subsection (4)(b), an
             241      amount equal to the greater of $50,000 or 20% of the amount donated to the Pamela Atkinson
             242      Homeless Trust Account during fiscal year 1988-89.


             243          (b) If there are decreases in contributions to the account, the committee may expend
             244      funds held in reserve to provide program stability, but the committee shall reimburse the
             245      amounts of those expenditures to the reserve fund.
             246          (5) The committee shall make an annual report to the Economic Development and
             247      Human Resources Appropriations Subcommittee regarding the programs and services funded
             248      by contributions to the Pamela Atkinson Homeless Trust Account.
             249          (6) The moneys in the Pamela Atkinson Homeless Trust Account shall be invested by
             250      the state treasurer according to the procedures and requirements of Title 51, Chapter 7, State
             251      Money Management Act, except that all interest or other earnings derived from the fund
             252      moneys shall be deposited in the fund.
             253          Section 2. Section 9-4-803 is amended to read:
             254           9-4-803. Creation of Pamela Atkinson Homeless Trust Account.
             255          (1) There is created a restricted account within the General Fund to be known as the
             256      Pamela Atkinson Homeless Trust Account.
             257          (2) Private contributions received under this section and Section [ 59-10-530.5 ]
             258      59-10-1306 shall be deposited into the account to be used only for programs described in
             259      Section 9-4-802 .
             260          (3) Money shall be appropriated from the account to the State Homeless Coordinating
             261      Committee in accordance with the Utah Budgetary Procedures Act.
             262          (4) The State Homeless Coordinating Committee may accept transfers, grants, gifts,
             263      bequests, or any money made available from any source to implement this part.
             264          Section 3. Section 23-14-13 is amended to read:
             265           23-14-13. Wildlife Resources Account.
             266          (1) The Wildlife Resources Account [within the General Fund] is established within
             267      the General Fund.
             268          (2) The following monies shall be deposited into the Wildlife Resources Account:
             269          (a) revenue from the sale of licenses, permits, tags, and certificates of registration
             270      issued under this title or a rule or proclamation of the Wildlife Board, except as otherwise
             271      provided by this title;
             272          (b) revenue from the sale, lease, rental, or other granting of rights of real or personal
             273      property acquired with revenue specified in Subsection (2)(a);


             274          (c) revenue from fines and forfeitures for violations of this title or any rule,
             275      proclamation, or order of the Wildlife Board, minus court costs not to exceed the schedule
             276      adopted by the Judicial Council;
             277          (d) funds appropriated from the General Fund by the Legislature pursuant to Section
             278      23-19-39 ;
             279          (e) other monies received by the division under any provision of this title, except as
             280      otherwise provided by this title; [and]
             281          (f) contributions made in accordance with Section 59-10-1305 ; and
             282          [(f)] (g) interest, dividends, or other income earned on account monies.
             283          (3) Monies in the Wildlife Resources Account shall be used for the administration of
             284      this title.
             285          Section 4. Section 23-14-14.1 is amended to read:
             286           23-14-14.1. Wolf Depredation and Management Restricted Account -- Interest --
             287      Use of contributions and interest.
             288          (1) There is created within the General Fund the Wolf Depredation and Management
             289      Restricted Account.
             290          (2) The account shall be funded by contributions deposited into the Wolf Depredation
             291      and Management Restricted Account in accordance with Section [ 59-10-550.1 ] 59-10-1309 .
             292          (3) (a) The Wolf Depredation and Management Restricted Account shall earn interest.
             293          (b) Interest earned on the Wolf Depredation and Management Restricted Account shall
             294      be deposited into the Wolf Depredation and Management Restricted Account.
             295          (4) (a) Subject to Subsection (4)(b), contributions and interest deposited into the Wolf
             296      Depredation and Management Restricted Account shall be used by the Division of Wildlife
             297      Resources for:
             298          (i) payments for livestock depredation by wolves; or
             299          (ii) wolf management.
             300          (b) Contributions and interest deposited into the Wolf Depredation and Management
             301      Restricted Account may be used for the purposes described in Subsection (4)(a) only to the
             302      extent permitted by federal law.
             303          Section 5. Section 26-18a-3 is amended to read:
             304           26-18a-3. Purpose of committee.


             305          (1) The committee shall work to:
             306          (a) provide financial assistance for initial medical expenses of children who need organ
             307      transplants;
             308          (b) obtain the assistance of volunteer and public service organizations; and
             309          (c) fund activities as the committee designates for the purpose of educating the public
             310      about the need for organ donors.
             311          (2) (a) The committee is responsible for awarding financial assistance funded by the
             312      trust account.
             313          (b) The financial assistance awarded by the committee under Subsection (1)(a) shall be
             314      in the form of interest free loans. The committee may establish terms for repayment of the
             315      loans, including a waiver of the requirement to repay any awards if, in the committee's
             316      judgment, repayment of the loan would impose an undue financial burden on the recipient.
             317          (c) In making financial awards under Subsection (1)(a), the committee shall consider:
             318          (i) need;
             319          (ii) coordination with or enhancement of existing services or financial assistance,
             320      including availability of insurance or other state aid;
             321          (iii) the success rate of the particular organ transplant procedure needed by the child;
             322      and
             323          (iv) the extent of the threat to the child's life without the organ transplant.
             324          (3) The committee may only provide the assistance described in this section to children
             325      who have resided in Utah, or whose legal guardians have resided in Utah for at least six months
             326      prior to the date of assistance under this section.
             327          (4) (a) The committee may expend up to 5% of its annual appropriation for
             328      administrative costs associated with the allocation of funds from the trust account.
             329          (b) The administrative costs shall be used for the costs associated with staffing the
             330      committee and for State Tax Commission costs in implementing Section [ 59-10-550 ]
             331      59-10-1308 .
             332          (5) The committee shall make an annual report to the Health and Human Services
             333      Appropriations Subcommittee regarding the programs and services funded by contributions to
             334      the trust account.
             335          Section 6. Section 26-18a-4 is amended to read:


             336           26-18a-4. Creation of Kurt Oscarson Children's Organ Transplant Trust
             337      Account.
             338          (1) There is created a restricted account within the General Fund pursuant to Section
             339      51-5-4 known as the Kurt Oscarson Children's Organ Transplant Trust Account. Private
             340      contributions received under this section and Section [ 59-10-550 ] 59-10-1308 shall be
             341      deposited into the trust account to be used only for the programs and purposes described in
             342      Section 26-18a-3 .
             343          (2) Money shall be appropriated from the trust account to the committee in accordance
             344      with Title 63, Chapter 38, Budgetary Procedures Act.
             345          (3) In addition to funds received under Section [ 59-10-550 ] 59-10-1308 , the committee
             346      may accept transfers, grants, gifts, bequests, or any money made available from any source to
             347      implement this chapter.
             348          Section 7. Section 26-48-102 is amended to read:
             349           26-48-102. Cat and Dog Community Spay and Neuter Program Restricted
             350      Account -- Interest -- Use of contributions and interest.
             351          (1) There is created within the General Fund the Cat and Dog Community Spay and
             352      Neuter Program Restricted Account.
             353          (2) The account shall be funded by contributions deposited into the Cat and Dog
             354      Community Spay and Neuter Program Restricted Account in accordance with Section
             355      [ 59-10-550.2 ] 59-10-1310 .
             356          (3) (a) The Cat and Dog Community Spay and Neuter Program Restricted Account
             357      shall earn interest.
             358          (b) Interest earned on the Cat and Dog Community Spay and Neuter Program
             359      Restricted Account shall be deposited into the Cat and Dog Community Spay and Neuter
             360      Program Restricted Account.
             361          (4) The department shall distribute contributions and interest deposited into the Cat and
             362      Dog Community Spay and Neuter Program Restricted Account to one or more organizations
             363      that:
             364          (a) are exempt from federal income taxation under Section 501(c)(3), Internal Revenue
             365      Code;
             366          (b) operate a mobile spay and neuter clinic for cats and dogs;


             367          (c) provide annual spay and neuter services at the mobile spay and neuter clinic
             368      described in Subsection (4)(b):
             369          (i) to one or more communities in at least 20 counties in the state; and
             370          (ii) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
             371      and
             372          (d) (i) spay and neuter cats and dogs owned by persons having low incomes; and
             373          (ii) have established written guidelines for determining what constitutes a person
             374      having a low income in accordance with any rules made by the department as authorized by
             375      Subsection (5)(c).
             376          (5) (a) An organization described in Subsection (4) may apply to the department to
             377      receive a distribution in accordance with Subsection (4).
             378          (b) An organization that receives a distribution from the department in accordance with
             379      Subsection (4):
             380          (i) shall expend the distribution only to spay or neuter dogs and cats:
             381          (A) owned by persons having low incomes;
             382          (B) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
             383          (C) through a statewide voucher program; and
             384          (D) at a location that:
             385          (I) is not a mobile spay and neuter clinic; and
             386          (II) does not receive any funding from a governmental entity; and
             387          (ii) may not expend the distribution for any administrative cost relating to an
             388      expenditure authorized by Subsection (5)(b)(i).
             389          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             390      department may make rules:
             391          (i) providing procedures and requirements for an organization to apply to the
             392      department to receive a distribution in accordance with Subsection (4); and
             393          (ii) to define what constitutes a person having a low income.
             394          Section 8. Section 31A-32a-101 is amended to read:
             395           31A-32a-101. Title and scope.
             396          (1) This chapter is known as the "Medical Care Savings Account Act."
             397          (2) (a) This chapter applies only to a medical care savings [accounts] account


             398      established for the purpose of seeking a tax [deduction] credit under Section [ 59-10-114 ]
             399      59-10-1021 .
             400          (b) This chapter does not apply to a medical care savings [accounts that will not be
             401      subject to tax deductions under Section 59-10-114 ] account with respect to which a tax credit is
             402      not claimed under Section 59-10-1021 .
             403          Section 9. Section 31A-32a-103 is amended to read:
             404           31A-32a-103. Establishing medical care savings accounts.
             405          [(1) For tax years beginning 1995, both of the following apply:]
             406          (1) For a taxable year beginning on or after January 1, 1995:
             407          (a) an employer, except as otherwise provided by contract or a collective bargaining
             408      agreement, may offer a medical care savings account program to the employer's employees;
             409      [and] or
             410          (b) a resident individual may establish a medical care savings account program for the
             411      individual or for the individual's dependents.
             412          (2) (a) A contribution into an account made by an employer on behalf of an employee,
             413      or made by an individual account holder may not exceed the greater of:
             414          [(a)] (i) $2,000 in any [tax] taxable year; or
             415          (ii) an amount of money equal to the sum of all eligible medical expenses paid by the
             416      employee or account holder [in] for that [tax] taxable year on behalf of the employee, account
             417      holder, or the employee's or account holder's spouse or dependents.
             418          (b) For purposes of Subsection (2)(a)(ii), eligible medical expenses [as defined in
             419      Subsection 31A-32a-102 (5),] are limited to expenses in [that tax year which] the taxable year
             420      that an insurance carrier has applied to the employee's or account holder's deductible.
             421          (3) An employer that offers a medical care savings account program shall, before
             422      making any contributions:
             423          (a) inform all employees in writing of the fact that these contributions may not be
             424      deductible under the federal tax laws; and
             425          (b) obtain from the employee a written election to participate in the medical care
             426      savings account program.
             427          (4) Except as provided in Sections 31A-32a-105 and 59-10-114 , principal contributed
             428      to and interest earned on a medical care savings account and money reimbursed to an employee


             429      or account holder for eligible medical expenses are exempt from taxation.
             430          (5) (a) An employer may select a single account administrator for all of the employer's
             431      employee's medical care savings accounts.
             432          (b) If a single account administrator is not selected, an employer may contribute
             433      directly to the account holder's individual medical care savings account.
             434          Section 10. Section 31A-32a-104 is amended to read:
             435           31A-32a-104. Administration of medical care savings account.
             436          (1) An account administrator shall administer the medical care savings account from
             437      which the payment of claims is made and has a fiduciary duty to the person for whose benefit
             438      the account administrator administers an account.
             439          (2) (a) Except as provided in Subsection 31A-32a-105 (1), the account administrator
             440      shall use the funds held in a medical care savings account solely for the purpose of paying or
             441      reimbursing the employee or account holder for eligible medical expenses of the employee or
             442      account holder or of the employee's or account holder's dependents.
             443          (b) The commissioner shall adopt rules concerning the coordination of benefits
             444      between a medical care savings account and medical expenses payable from automobile
             445      insurance policies, workers' compensation insurance policies, or other health care insurance
             446      policies or contracts.
             447          (3) The employee or account holder may submit documentation of eligible medical
             448      expenses paid by the employee or account holder in the [tax] taxable year to the account
             449      administrator, and the account administrator shall reimburse the employee or account holder
             450      from the employee's or account holder's account for eligible medical expenses.
             451          (4) If an employer makes contributions to a medical care savings account program on a
             452      periodic installment basis, the employer may advance to an employee an amount necessary to
             453      cover eligible medical expenses incurred that exceed the amount in the employee's medical
             454      care savings account at the time the expense is incurred if the employee agrees to repay the
             455      advance.
             456          Section 11. Section 31A-32a-105 is amended to read:
             457           31A-32a-105. Withdrawals -- Termination -- Transfers.
             458          (1) Subject to Subsection (3), if the employee or account holder withdraws money for
             459      any purpose other than a medical expense at any time in which the balance in the account is


             460      below $4,000 [all of the following apply]:
             461          (a) the amount of the withdrawal [is income for the purposes of Title 59, Chapter 10,
             462      Individual Income Tax Act] shall be added to adjusted gross income in accordance with
             463      Section 59-10-114 ; and
             464          (b) the administrator shall withhold from the amount of the withdrawal, and on behalf
             465      of the employee or account holder shall pay a penalty to the State Tax Commission equal to
             466      10% of the amount of the withdrawal.
             467          (2) If an employee or account holder withdraws money from the employee's or account
             468      holder's medical care savings account for any purpose other than a medical expense, but the
             469      withdrawal occurs when the balance in the medical care savings account is over $4,000, and
             470      the withdrawal will not result in the account balance dropping below $4,000, the amount of the
             471      withdrawal:
             472          (a) is not subject to the penalties described in Subsection (1)(b); and
             473          [(b) is subject to taxation as provided in Subsection (1)(a).]
             474          (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
             475          (3) The amount of a disbursement of any assets of a medical care savings account
             476      pursuant to a filing for protection under [Title 11 of the United States Code,] 11 U.S.C. Sec.
             477      101 to 1330, by an employee, account holder, or person for whose benefit the account was
             478      established:
             479          (a) is not considered a withdrawal for purposes of this section; and
             480          [(b) is subject to taxation under Title 59, Chapter 10, Individual Income Tax Act.]
             481          (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
             482          (4) (a) Upon the death of the employee or account holder, the account administrator
             483      shall distribute the principal and accumulated interest of the medical care savings account to
             484      the estate of the employee or account holder.
             485          (b) A distribution under this Subsection (4) is not subject to the penalties described in
             486      Subsection (1)(b).
             487          (5) (a) If an employee is no longer employed by an employer that participates in a
             488      medical care savings account program, and if the employee's account is administered by the
             489      employer's account administrator, the money in the medical care savings account may be used
             490      for the benefit of the employee or the employee's dependents in accordance with this chapter,


             491      and [remains exempt from taxation] may not be added to adjusted gross income under Section
             492      59-10-114 if the employee, not more than 60 days after the employee's final day of
             493      employment:
             494          (i) transfers the account to a new account administrator; or
             495          (ii) (A) requests in writing to the former employer's account administrator that the
             496      account remain with that administrator; and
             497          (B) the account administrator agrees to retain the account.
             498          (b) Not more than 30 days after the expiration of the 60 days described in Subsection
             499      (5)(a), if an account administrator has not accepted the former employee's account, the
             500      employer shall mail a check to the former employee at the employee's last-known address equal
             501      to the amount in the account on that day.
             502          (c) The amount mailed to the employee [is subject to taxation pursuant to Subsection
             503      (1)(a)] under Subsection (5)(b) shall be added to adjusted gross income in accordance with
             504      Section 59-10-114 , but is not subject to the penalties under Subsection (1)(b).
             505          (d) If an employee becomes employed with a different employer that participates in a
             506      medical care savings account program, the employee may transfer the employee's medical care
             507      savings account to that new employer's account administrator.
             508          (e) If an account holder becomes an employee of an employer that participates in a
             509      medical care savings account program, the account holder may transfer the account holder's
             510      account to the employer's account administrator.
             511          Section 12. Section 31A-32a-106 is amended to read:
             512           31A-32a-106. Regulation of account administrators -- Administration of addition
             513      to adjusted gross income and tax credit -- Rulemaking authority.
             514          (1) The department shall regulate account administrators and may adopt rules
             515      necessary to administer this chapter.
             516          (2) The State Tax Commission may adopt rules necessary to monitor and implement
             517      the [tax deductions established by this chapter and Section 59-10-114 .]:
             518          (a) amounts required to be added to adjusted gross income in accordance with Sections
             519      31A-32a-105 and 59-10-114 ; or
             520          (b) amount claimed as a tax credit in accordance with Section 59-10-1021 .
             521          Section 13. Section 31A-32a-107 is amended to read:


             522           31A-32a-107. Penalties for noncompliance with tax provisions.
             523          (1) An account administrator who fails to comply with [the statutes and rules
             524      governing the tax deduction established by this chapter and Section 59-10-114 ] a provision
             525      described in Subsection (2) is subject to:
             526          [(1)] (a) the civil penalties provided in Section 59-1-401 ; and
             527          [(2)] (b) interest at the rate and in the manner provided in Section 59-1-402 .
             528          (2) The following provisions apply to Subsection (1):
             529          (a) a provision of this chapter relating to:
             530          (i) an addition to income made in accordance with Section 59-10-114 ; or
             531          (ii) a tax credit allowed by Section 59-10-1021 ; or
             532          (b) a provision of Title 59, Chapter 10, Individual Income Tax Act, relating to:
             533          (i) an addition to income made in accordance with Section 59-10-114 ; or
             534          (ii) a tax credit allowed by Section 59-10-1021 .
             535          Section 14. Section 48-2c-117 is amended to read:
             536           48-2c-117. Taxation of limited liability companies.
             537          A company established under this chapter or a foreign company transacting business in
             538      this state shall be taxed as provided in [Section 59-10-801 ] Subsection 59-10-1403 (4).
             539          Section 15. Section 53B-8a-106 is amended to read:
             540           53B-8a-106. Account agreements.
             541          The Utah Educational Savings Plan Trust may enter into account agreements with
             542      account owners on behalf of beneficiaries under the following terms and agreements:
             543          (1) (a) An account agreement may require an account owner to agree to invest a
             544      specific amount of money in the Utah Educational Savings Plan Trust for a specific period of
             545      time for the benefit of a specific beneficiary, not to exceed an amount determined by the
             546      program administrator.
             547          (b) Account agreements may be amended to provide for adjusted levels of payments
             548      based upon changed circumstances or changes in educational plans.
             549          (c) An account owner may make additional optional payments as long as the total
             550      payments for a specific beneficiary do not exceed the total estimated higher education costs as
             551      determined by the program administrator.
             552          (d) Subject to Subsection (1)(f), the maximum amount of a qualified investment that a


             553      corporation that is an account owner may subtract from unadjusted income for a taxable year in
             554      accordance with Title 59, Chapter 7, Corporate Franchise and Income Taxes, is [$1,560]
             555      $1,650 for each individual beneficiary for the taxable year beginning on or after January 1,
             556      [2006] 2008, but beginning on or before December 31, [2006] 2008.
             557          (e) Subject to Subsection (1)(f), the maximum amount of a qualified investment that
             558      may be [subtracted from federal taxable income of a resident or nonresident individual for a
             559      taxable year in accordance with Section 59-10-114 , a resident or nonresident estate or trust for
             560      a taxable year in accordance with Section 59-10-202 , or] used as the basis for claiming a tax
             561      credit [for a taxable year by a resident or nonresident individual] in accordance with Section
             562      [ 59-10-1206.1 ] 59-10-1017 , is:
             563          (i) for a resident or nonresident estate or trust that is an account owner, [$1,560] $1,650
             564      for each individual beneficiary for the taxable year beginning on or after January 1, [2006]
             565      2008, but beginning on or before December 31, [2006] 2008;
             566          (ii) for a resident or nonresident individual that is an account owner, other than a
             567      husband and wife who are account owners and file a single return jointly under Title 59,
             568      Chapter 10, Individual Income Tax Act, [$1,560] $1,650 for each individual beneficiary for the
             569      taxable year beginning on or after January 1, [2006] 2008, but beginning on or before
             570      December 31, [2006] 2008; or
             571          (iii) for a husband and wife who are account owners and file a single return jointly
             572      under Title 59, Chapter 10, Individual Income Tax Act, [$3,120] $3,300 for each individual
             573      beneficiary:
             574          (A) for the taxable year beginning on or after January 1, [2006] 2008, but beginning on
             575      or before December 31, [2006] 2008; and
             576          (B) regardless of whether the Utah Educational Savings Plan Trust has entered into:
             577          (I) a separate account agreement with each spouse; or
             578          (II) a single account agreement with both spouses jointly.
             579          (f) (i) For taxable years beginning on or after January 1, [2007] 2009, the program
             580      administrator shall increase or decrease the maximum amount of a qualified investment
             581      described in Subsections (1)(d) and (1)(e)(i) and (ii), by a percentage equal to the percentage
             582      difference between the consumer price index for the preceding calendar year and the consumer
             583      price index for the calendar year [2005] 2007.


             584          (ii) After making an increase or decrease required by Subsection (1)(f)(i), the program
             585      administrator shall:
             586          (A) round the maximum amount of the qualified investments described in Subsections
             587      (1)(d) and (1)(e)(i) and (ii) increased or decreased under Subsection (1)(f)(i) to the nearest ten
             588      dollar increment; and
             589          (B) increase or decrease the maximum amount of the qualified investment described in
             590      Subsection (1)(e)(iii) so that the maximum amount of the qualified investment described in
             591      Subsection (1)(e)(iii) is equal to the product of:
             592          (I) the maximum amount of the qualified investment described in Subsection (1)(e)(ii)
             593      as rounded under Subsection (1)(f)(ii)(A); and
             594          (II) two.
             595          (iii) For purposes of Subsections (1)(f)(i) and (ii), the program administrator shall
             596      calculate the consumer price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue
             597      Code.
             598          (2) (a) (i) Beneficiaries designated in account agreements must be designated after
             599      birth and before age 19 for an account owner to:
             600          (A) subtract a qualified investment from income under[:(I)] Title 59, Chapter 7,
             601      Corporate Franchise and Income Taxes; or
             602          [(II) Section 59-10-114 ; or]
             603          [(III) Section 59-10-202 ; or]
             604          (B) use a qualified investment as the basis for claiming a tax credit in accordance with
             605      Section [ 59-10-1206.1 ] 59-10-1017 .
             606          (ii) If the beneficiary is designated after birth and before age 19, the payment of
             607      benefits provided under the account agreement must begin not later than the beneficiary's 27th
             608      birthday.
             609          (b) (i) Account owners may designate [beneficiaries] a beneficiary age 19 or older, but
             610      investments for [those beneficiaries] that beneficiary are not eligible [for subtraction from
             611      federal taxable income.] to be:
             612          (A) subtracted from income under Title 59, Chapter 7, Corporate Franchise and Income
             613      Taxes; or
             614          (B) used as the basis for claiming a tax credit in accordance with Section 59-10-1017 .


             615          (ii) If a beneficiary age 19 or older is designated, the payment of benefits provided
             616      under the account agreement must begin not later than ten years from the account agreement
             617      date.
             618          (3) Each account agreement shall state clearly that there are no guarantees regarding
             619      moneys in the Utah Educational Savings Plan Trust as to the return of principal and that losses
             620      could occur.
             621          (4) Each account agreement shall provide that:
             622          (a) [no] a contributor to, or designated beneficiary under, an account agreement may
             623      not direct the investment of any contributions or earnings on contributions;
             624          (b) [no] any part of the money in any account may not be used as security for a loan;
             625      and
             626          (c) [no] an account owner may not borrow from the Utah Educational Savings Plan
             627      Trust.
             628          (5) The execution of an account agreement by the trust may not guarantee in any way
             629      that higher education costs will be equal to projections and estimates provided by the Utah
             630      Educational Savings Plan Trust or that the beneficiary named in any participation agreement
             631      will:
             632          (a) be admitted to an institution of higher education;
             633          (b) if admitted, be determined a resident for tuition purposes by the institution of
             634      higher education, unless the account agreement is vested;
             635          (c) be allowed to continue attendance at the institution of higher education following
             636      admission; or
             637          (d) graduate from the institution of higher education.
             638          (6) [Beneficiaries] A beneficiary may be changed as permitted by the rules and
             639      regulations of the board upon written request of the account owner prior to the date of
             640      admission of any beneficiary under an account agreement by an institution of higher education
             641      so long as the substitute beneficiary is eligible for participation.
             642          (7) [Account agreements] An account agreement may be freely amended throughout
             643      [their terms] the term of the account agreement in order to enable [account owners] an account
             644      owner to increase or decrease the level of participation, change the designation of beneficiaries,
             645      and carry out similar matters as authorized by rule.


             646          (8) Each account agreement shall provide that:
             647          (a) the account agreement may be canceled upon the terms and conditions, and upon
             648      payment of the fees and costs set forth and contained in the board's rules and regulations; and
             649          (b) the program administrator may amend the agreement unilaterally and retroactively,
             650      if necessary, to maintain the Utah Educational Savings Plan Trust as a qualified tuition
             651      program under Section 529, Internal Revenue Code.
             652          Section 16. Section 59-7-101 is amended to read:
             653           59-7-101. Definitions.
             654          As used in this chapter:
             655          (1) "Adjusted income" means unadjusted income as modified by Sections 59-7-105
             656      and 59-7-106 .
             657          (2) (a) "Affiliated group" means one or more chains of corporations that are connected
             658      through stock ownership with a common parent corporation that meet the following
             659      requirements:
             660          (i) at least 80% of the stock of each of the corporations in the group, excluding the
             661      common parent corporation, is owned by one or more of the other corporations in the group;
             662      and
             663          (ii) the common parent directly owns at least 80% of the stock of at least one of the
             664      corporations in the group.
             665          (b) "Affiliated group" does not include corporations that are qualified to do business
             666      but are not otherwise doing business in this state.
             667          (c) For purposes of this Subsection (2), "stock" does not include nonvoting stock which
             668      is limited and preferred as to dividends.
             669          (3) "Apportionable income" means adjusted income less nonbusiness income net of
             670      related expenses, to the extent included in adjusted income.
             671          (4) "Apportioned income" means apportionable income multiplied by the
             672      apportionment fraction as determined in Section 59-7-311 .
             673          (5) "Business income" is as defined in Section 59-7-302 .
             674          (6) (a) "Captive real estate investment trust" means a real estate investment trust if:
             675          (i) the shares or beneficial interests of the real estate investment trust are not regularly
             676      traded on an established securities market; and


             677          (ii) more than 50% of the voting power or value of the shares or beneficial interests of
             678      the real estate investment trust are directly, indirectly, or constructively:
             679          (A) owned by a controlling entity of the real estate investment trust; or
             680          (B) controlled by a controlling entity of the real estate investment trust.
             681          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             682      commission may make rules defining "established securities market."
             683          (7) (a) "Controlling entity of a captive real estate investment trust" means an entity
             684      that:
             685          (i) is treated as an association taxable as a corporation under the Internal Revenue
             686      Code;
             687          (ii) is not exempt from federal income taxation under Section 501(a), Internal Revenue
             688      Code; and
             689          (iii) directly, indirectly, or constructively holds more than 50% of:
             690          (A) the voting power of a captive real estate investment trust; or
             691          (B) the value of the shares or beneficial interests of a captive real estate investment
             692      trust.
             693          (b) "Controlling entity of a captive real estate investment trust" does not include:
             694          (i) a real estate investment trust, except for a captive real estate investment trust;
             695          (ii) a qualified real estate investment subsidiary described in Section 856(i), Internal
             696      Revenue Code, except for a qualified real estate investment trust subsidiary of a captive real
             697      estate investment trust; or
             698          (iii) a foreign real estate investment trust.
             699          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             700      commission may make rules defining "established securities market."
             701          [(7)] (8) (a) "Common ownership" means the direct or indirect control or ownership of
             702      more than 50% of the outstanding voting stock of:
             703          (i) a parent-subsidiary controlled group as defined in Section 1563, Internal Revenue
             704      Code, except that 50% shall be substituted for 80%;
             705          (ii) a brother-sister controlled group as defined in Section 1563, Internal Revenue
             706      Code, except that 50% shall be substituted for 80%; or
             707          (iii) three or more corporations each of which is a member of a group of corporations


             708      described in Subsection (2)(a)(i) or (2)(a)(ii), and one of which is:
             709          (A) a common parent corporation included in a group of corporations described in
             710      Subsection (2)(a)(i); and
             711          (B) included in a group of corporations described in Subsection (2)(a)(ii).
             712          (b) Ownership of outstanding voting stock shall be determined by Section 1563,
             713      Internal Revenue Code.
             714          [(6)] (9) "Corporate return" or "return" includes a combined report.
             715          [(8)] (10) "Corporation" includes:
             716          (a) entities defined as corporations under Sections 7701(a) and 7704, Internal Revenue
             717      Code; and
             718          (b) other organizations that are taxed as corporations for federal income tax purposes
             719      under the Internal Revenue Code.
             720          [(9)] (11) "Dividend" means any distribution, including money or other type of
             721      property, made by a corporation to its shareholders out of its earnings or profits accumulated
             722      after December 31, 1930.
             723          [(10)] (12) (a) "Doing business" includes any transaction in the course of its business
             724      by a domestic corporation, or by a foreign corporation qualified to do or doing intrastate
             725      business in this state.
             726          (b) Except as provided in Subsection 59-7-102 (2), "doing business" includes:
             727          (i) the right to do business through incorporation or qualification;
             728          (ii) the owning, renting, or leasing of real or personal property within this state; and
             729          (iii) the participation in joint ventures, working and operating agreements, the
             730      performance of which takes place in this state.
             731          [(11)] (13) "Domestic corporation" means a corporation that is incorporated or
             732      organized under the laws of this state.
             733          [(12)] (14) (a) "Farmers' cooperative" means an association, corporation, or other
             734      organization that is:
             735          (i) (A) an association, corporation, or other organization of:
             736          (I) farmers; or
             737          (II) fruit growers; or
             738          (B) an association, corporation, or other organization that is similar to an association,


             739      corporation, or organization described in Subsection [(12)] (14)(a)(i)(A); and
             740          (ii) organized and operated on a cooperative basis to:
             741          (A) (I) market the products of members of the cooperative or the products of other
             742      producers; and
             743          (II) return to the members of the cooperative or other producers the proceeds of sales
             744      less necessary marketing expenses on the basis of the quantity of the products of a member or
             745      producer or the value of the products of a member or producer; or
             746          (B) (I) purchase supplies and equipment for the use of members of the cooperative or
             747      other persons; and
             748          (II) turn over the supplies and equipment described in Subsection [(12)]
             749      (14)(a)(ii)(B)(I) at actual costs plus necessary expenses to the members of the cooperative or
             750      other persons.
             751          (b) (i) Subject to Subsection [(12)] (14)(b)(ii), for purposes of this Subsection [(12)]
             752      (14), the commission by rule, made in accordance with Title 63, Chapter 46a, Utah
             753      Administrative Rulemaking Act, shall define:
             754          (A) the terms:
             755          (I) "member"; and
             756          (II) "producer"; and
             757          (B) what constitutes an association, corporation, or other organization that is similar to
             758      an association, corporation, or organization described in Subsection [(12)] (14)(a)(i)(A).
             759          (ii) The rules made under this Subsection [(12)] (14)(b) shall be consistent with the
             760      filing requirements under federal law for a farmers' cooperative.
             761          [(13)] (15) "Foreign corporation" means a corporation that is not incorporated or
             762      organized under the laws of this state.
             763          [(14)] (16) (a) "Foreign operating company" means a corporation that:
             764          (i) is incorporated in the United States; and
             765          (ii) 80% or more of whose business activity, as determined under Section 59-7-401 , is
             766      conducted outside the United States.
             767          (b) "Foreign operating company" does not include a corporation that qualifies for the
             768      Puerto Rico and Possession Tax Credit as provided in Section 936, Internal Revenue Code.
             769          (17) (a) "Foreign real estate investment trust" means:


             770          (i) a business entity organized outside the laws of the United States if:
             771          (A) at least 75% of the business entity's total asset value at the close of the business
             772      entity's taxable year is represented by:
             773          (I) real estate assets, as defined in Section 856(c)(5)(B), Internal Revenue Code;
             774          (II) cash or cash equivalents; or
             775          (III) one or more securities issued or guaranteed by the United States;
             776          (B) the business entity is:
             777          (I) not subject to income taxation:
             778          (Aa) on amounts distributed to the business entity's beneficial owners; and
             779          (Bb) in the jurisdiction in which the business entity is organized; or
             780          (II) exempt from income taxation on an entity level in the jurisdiction in which the
             781      business entity is organized;
             782          (C) the business entity distributes at least 85% of the business entity's taxable income,
             783      as computed in the jurisdiction in which the business entity is organized, to the holders of the
             784      business entity's:
             785          (I) shares or beneficial interests; and
             786          (II) on an annual basis;
             787          (D) (I) not more than 10% of the following is held directly, indirectly, or constructively
             788      by a single person:
             789          (Aa) the voting power of the business entity; or
             790          (Bb) the value of the shares or beneficial interests of the business entity; or
             791          (II) the shares of the business entity are regularly traded on an established securities
             792      market; and
             793          (E) the business entity is organized in a country that has a tax treaty with the United
             794      States; or
             795          (ii) a listed Australian property trust.
             796          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             797      commission may make rules defining:
             798          (i) "cash or cash equivalents";
             799          (ii) "established securities market"; or
             800          (iii) "listed Australian property trust."


             801          [(15)] (18) "Income" includes losses.
             802          [(16)] (19) "Internal Revenue Code" means Title 26 of the United States Code as
             803      effective during the year in which Utah taxable income is determined.
             804          [(17)] (20) "Nonbusiness income" is as defined in Section 59-7-302 .
             805          [(18)] (21) "Nonresident shareholder" means any shareholder of an S corporation who
             806      on the last day of the taxable year of the S corporation, is:
             807          (a) an individual not domiciled in Utah; or
             808          (b) a nonresident trust or nonresident estate, as defined in Section 59-10-103 .
             809          (22) "Real estate investment trust" is as defined in Section 856, Internal Revenue Code.
             810          [(19)] (23) "Related expenses" means:
             811          (a) expenses directly attributable to nonbusiness income; and
             812          (b) the portion of interest or other expense indirectly attributable to both nonbusiness
             813      and business income which bears the same ratio to the aggregate amount of such interest or
             814      other expense, determined without regard to this Subsection [(19)] (23), as the average amount
             815      of the asset producing the nonbusiness income bears to the average amount of all assets of the
             816      taxpayer within the taxable year.
             817          [(20)] (24) "Resident shareholder" means any shareholder of an S corporation who is
             818      not a nonresident shareholder.
             819          [(22)] (25) "Safe harbor lease" means a lease that qualified as a safe harbor lease under
             820      Section 168, Internal Revenue Code.
             821          [(21)] (26) "S corporation" means an S corporation as defined in Section 1361, Internal
             822      Revenue Code.
             823          [(23)] (27) "State of the United States" includes any of the 50 states or the District of
             824      Columbia [and "United States" includes the 50 states and the District of Columbia].
             825          [(24)] (28) (a) "Taxable year" means the calendar year or the fiscal year ending during
             826      such calendar year upon the basis of which the adjusted income is computed.
             827          (b) In the case of a return made for a fractional part of a year under this chapter or
             828      under rules prescribed by the commission, "taxable year" includes the period for which such
             829      return is made.
             830          [(25)] (29) "Taxpayer" means any corporation subject to the tax imposed by this
             831      chapter.


             832          [(26)] (30) "Threshold level of business activity" means business activity in the United
             833      States equal to or greater than 20% of the corporation's total business activity as determined
             834      under Section 59-7-401 .
             835          [(27)] (31) "Unadjusted income" means federal taxable income as determined on a
             836      separate return basis before intercompany eliminations as determined by the Internal Revenue
             837      Code, before the net operating loss deduction and special deductions for dividends received.
             838          [(28)] (32) (a) "Unitary group" means a group of corporations that:
             839          (i) are related through common ownership; and
             840          (ii) by a preponderance of the evidence as determined by a court of competent
             841      jurisdiction or the commission, are economically interdependent with one another as
             842      demonstrated by the following factors:
             843          (A) centralized management;
             844          (B) functional integration; and
             845          (C) economies of scale.
             846          (b) "Unitary group" includes a captive real estate investment trust.
             847          [(b)] (c) "Unitary group" does not include an S [corporations] corporation.
             848          (33) "United States" includes the 50 states and the District of Columbia.
             849          [(29)] (34) "Utah net loss" means the current year Utah taxable income before Utah net
             850      loss deduction, if determined to be less than zero.
             851          [(30)] (35) "Utah net loss deduction" means the amount of Utah net losses from other
             852      taxable years that may be carried back or carried forward to the current taxable year in
             853      accordance with Section 59-7-110 .
             854          [(31)] (36) (a) "Utah taxable income" means Utah taxable income before net loss
             855      deduction less Utah net loss deduction.
             856          (b) "Utah taxable income" includes income from tangible or intangible property located
             857      or having situs in this state, regardless of whether carried on in intrastate, interstate, or foreign
             858      commerce.
             859          [(32)] (37) "Utah taxable income before net loss deduction" means apportioned income
             860      plus nonbusiness income allocable to Utah net of related expenses.
             861          [(33)] (38) (a) "Water's edge combined report" means a report combining the income
             862      and activities of:


             863          (i) all members of a unitary group that are:
             864          (A) corporations organized or incorporated in the United States, including those
             865      corporations qualifying for the Puerto Rico and Possession Tax Credit as provided in Section
             866      936, Internal Revenue Code, in accordance with Subsection [(33)] (38)(b); and
             867          (B) corporations organized or incorporated outside of the United States meeting the
             868      threshold level of business activity; and
             869          (ii) an affiliated group electing to file a water's edge combined report under Subsection
             870      59-7-402 (2).
             871          (b) There is a rebuttable presumption that a corporation which qualifies for the Puerto
             872      Rico and Possession Tax Credit provided in Section 936, Internal Revenue Code, is part of a
             873      unitary group.
             874          [(34)] (39) "Worldwide combined report" means the combination of the income and
             875      activities of all members of a unitary group irrespective of the country in which the
             876      corporations are incorporated or conduct business activity.
             877          Section 17. Section 59-7-105 is amended to read:
             878           59-7-105. Additions to unadjusted income.
             879          In computing adjusted income the following amounts shall be added to unadjusted
             880      income:
             881          (1) interest from bonds, notes, and other evidences of indebtedness issued by any state
             882      of the United States, including any agency and instrumentality of a state of the United States;
             883          (2) the amount of any deduction taken on a corporation's federal return for taxes paid
             884      by a corporation:
             885          (a) to Utah for taxes imposed by this chapter; and
             886          (b) to another state of the United States, a foreign country, a United States possession,
             887      or the Commonwealth of Puerto Rico for taxes imposed for the privilege of doing business, or
             888      exercising its corporate franchise, including income, franchise, corporate stock and business
             889      and occupation taxes;
             890           (3) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(a) and
             891      (2)(a);
             892          (4) capital losses that have been deducted on a Utah corporate return in previous years;
             893          (5) any deduction on the federal return that has been previously deducted on the Utah


             894      return;
             895          (6) the amount of contributions claimed as a tax credit pursuant to Section 59-7-602 ;
             896          (7) the amount of the deduction taken pursuant to Section 59-7-603 for sophisticated
             897      technological equipment;
             898          (8) charitable contributions, to the extent deducted on the federal return when
             899      determining federal taxable income;
             900          (9) the amount of gain or loss determined under Section 59-7-114 relating to a target
             901      corporation under Section 338, Internal Revenue Code, unless such gain or loss has already
             902      been included in the unadjusted income of the target corporation;
             903          (10) the amount of gain or loss determined under Section 59-7-115 relating to
             904      corporations treated for federal purposes as having disposed of its assets under Section 336(e),
             905      Internal Revenue Code, unless such gain or loss has already been included in the unadjusted
             906      income of the target corporation;
             907          (11) adjustments to gains, losses, depreciation expense, amortization expense, and
             908      similar items due to a difference between basis for federal purposes and basis as computed
             909      under Section 59-7-107 ; [and]
             910          (12) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             911      Incentive Program, from the account of a corporation that is an account owner as defined in
             912      Section 53B-8a-102 , for the taxable year for which the amount is withdrawn, if that amount
             913      withdrawn from the account of the corporation that is the account owner:
             914          (a) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             915          (b) is subtracted by the corporation:
             916          (i) that is the account owner; and
             917          (ii) in accordance with Subsection 59-7-106 (18)[.]; and
             918          (13) the amount of the deduction for dividends paid, as defined in Section 561, Internal
             919      Revenue Code, that is allowed under Section 857(b)(2)(B), Internal Revenue Code, in
             920      computing the taxable income of a captive real estate investment trust, if that captive real estate
             921      investment trust is subject to federal income taxation.
             922          Section 18. Section 59-7-106 is amended to read:
             923           59-7-106. Subtractions from unadjusted income.
             924          In computing adjusted income the following amounts shall be subtracted from


             925      unadjusted income:
             926          (1) the foreign dividend gross-up included in gross income for federal income tax
             927      purposes under Section 78, Internal Revenue Code;
             928          (2) the net capital loss, as defined for federal purposes, if the taxpayer elects to deduct
             929      the loss on the current Utah return. The deduction shall be made by claiming the deduction on
             930      the current Utah return which shall be filed by the due date of the return, including extensions.
             931      For the purposes of this Subsection (2) all capital losses in a given year must be:
             932          (a) deducted in the year incurred; or
             933          (b) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue
             934      Code;
             935          (3) the decrease in salary expense deduction for federal income tax purposes due to
             936      claiming the federal jobs credit under Section 51, Internal Revenue Code;
             937          (4) the decrease in qualified research and basic research expense deduction for federal
             938      income tax purposes due to claiming the federal research and development credit under Section
             939      41, Internal Revenue Code;
             940          (5) the decrease in qualified clinical testing expense deduction for federal income tax
             941      purposes due to claiming the federal orphan drug credit under Section 28, Internal Revenue
             942      Code;
             943          (6) any decrease in any expense deduction for federal income tax purposes due to
             944      claiming any other federal credit;
             945          (7) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(b) and
             946      (2)(b);
             947          (8) any income on the federal corporate return that has been previously taxed by Utah;
             948          (9) amounts included in federal taxable income that are due to refunds of taxes
             949      imposed for the privilege of doing business, or exercising a corporate franchise, including
             950      income, franchise, corporate stock and business and occupation taxes paid by the corporation to
             951      Utah, another state of the United States, a foreign country, a United States possession, or the
             952      Commonwealth of Puerto Rico to the extent that the taxes were added to unadjusted income
             953      under Section 59-7-105 ;
             954          (10) charitable contributions, to the extent allowed as a subtraction under Section
             955      59-7-109 ;


             956          (11) (a) 50% of the dividends deemed received or received from subsidiaries which are
             957      members of the unitary group and are organized or incorporated outside of the United States
             958      unless such subsidiaries are included in a combined report under Section 59-7-402 or 59-7-403 .
             959      In arriving at the amount of the dividend exclusion, the taxpayer shall first deduct from the
             960      dividends deemed received or received, the expense directly attributable to those dividends.
             961      Interest expense attributable to excluded dividends shall be determined by multiplying interest
             962      expense by a fraction, the numerator of which is the taxpayer's average investment in such
             963      dividend paying subsidiaries, and the denominator of which is the taxpayer's average total
             964      investment in assets;
             965          (b) in determining income apportionable to this state, a portion of the factors of a
             966      foreign subsidiary whose dividends are partially excluded under Subsection (11)(a) shall be
             967      included in the combined report factors. The portion to be included shall be determined by
             968      multiplying each factor of the foreign subsidiary by a fraction, but not to exceed 100%, the
             969      numerator of which is the amount of the dividend paid by the foreign subsidiary which is
             970      included in adjusted income, and the denominator of which is the current year earnings and
             971      profits of the foreign subsidiary as determined under the Internal Revenue Code;
             972          (12) (a) 50% of the adjusted income of a foreign operating company unless the
             973      taxpayer has elected to file a worldwide combined report as provided in Section 59-7-403 . For
             974      purposes of this Subsection (12), when calculating the adjusted income of a foreign operating
             975      company, a foreign operating company may not deduct the subtractions allowable under this
             976      Subsection (12) and Subsection (11);
             977          (b) in determining income apportionable to this state, the factors for a foreign operating
             978      company shall be included in the combined report factors in the same percentage its adjusted
             979      income is included in the combined adjusted income;
             980          (13) the amount of gain or loss which is included in unadjusted income but not
             981      recognized for federal purposes on stock sold or exchanged by a member of a selling
             982      consolidated group as defined in Section 338, Internal Revenue Code, if an election has been
             983      made pursuant to Section 338(h)(10), Internal Revenue Code;
             984          (14) the amount of gain or loss which is included in unadjusted income but not
             985      recognized for federal purposes on stock sold, exchanged, or distributed by a corporation
             986      pursuant to Section 336(e), Internal Revenue Code, if an election under Section 336(e), Internal


             987      Revenue Code, has been made for federal purposes;
             988          (15) (a) adjustments to gains, losses, depreciation expense, amortization expense, and
             989      similar items due to a difference between basis for federal purposes and basis as computed
             990      under Section 59-7-107 ; and
             991          (b) if there has been a reduction in federal basis for a federal tax credit where there is
             992      no corresponding Utah tax credit, the amount of the reduction in basis shall be allowed as an
             993      expense in the year of the federal credit;
             994          (16) any interest expense not deducted on the federal corporate return under Section
             995      265(b) or 291(e), Internal Revenue Code;
             996          (17) 100% of the dividends received from subsidiaries which are insurance companies
             997      exempt from this chapter under Subsection 59-7-102 (1)(c) and are under "common ownership"
             998      as defined by Subsection 59-7-101 [(7)](8); [and]
             999          (18) subject to Subsection 59-7-105 (12), the amount of a qualified investment as
             1000      defined in Section 53B-8a-102 that:
             1001          (a) a corporation that is an account owner as defined in Section 53B-8a-102 makes
             1002      during the taxable year;
             1003          (b) the corporation described in Subsection (18)(a) does not deduct on a federal
             1004      corporation income tax return; and
             1005          (c) does not exceed the maximum amount of the qualified investment that may be
             1006      subtracted from unadjusted income for a taxable year in accordance with Subsections
             1007      53B-8a-106 (1)(d) and (f)[.]; and
             1008          (19) for purposes of income included in a combined report under Part 4, Combined
             1009      Reporting, the entire amount of the dividends a member of a unitary group receives or is
             1010      considered to receive from a captive real estate investment trust.
             1011          Section 19. Section 59-7-116.5 is amended to read:
             1012           59-7-116.5. Real estate investment trusts.
             1013          (1) A real estate investment trust[, as defined in Section 856, Internal Revenue Code,]
             1014      that is not a captive real estate investment trust shall be taxed on the same income taxed for
             1015      federal purposes under the Internal Revenue Code.
             1016          (2) Any income taxable under this section shall be taxed at the same rate and in the
             1017      same manner provided for in this chapter.


             1018          Section 20. Section 59-7-402 is amended to read:
             1019           59-7-402. Water's edge combined report.
             1020          (1) Except as provided in Section 59-7-403 , if any corporation listed in Subsection
             1021      59-7-101 [(33)](38)(a) is doing business in Utah, the unitary group shall file a water's edge
             1022      combined report.
             1023          (2) (a) A group of corporations that are not otherwise a unitary group may elect to file a
             1024      water's edge combined report if each member of the group is:
             1025          (i) doing business in Utah;
             1026          (ii) part of the same affiliated group; and
             1027          (iii) qualified, under Section 1501, Internal Revenue Code, to file a federal
             1028      consolidated return.
             1029          (b) Each corporation within the affiliated group that is doing business in Utah must
             1030      consent to filing a combined report. If an affiliated group elects to file a combined report, each
             1031      corporation within the affiliated group that is doing business in Utah must file a combined
             1032      report.
             1033          (c) Corporations that elect to file a water's edge combined report under this section may
             1034      not thereafter elect to file a separate return without the consent of the commission.
             1035          Section 21. Section 59-7-614 is amended to read:
             1036           59-7-614. Renewable energy systems tax credit -- Definitions -- Limitations --
             1037      State tax credit in addition to allowable federal credits -- Certification -- Rulemaking
             1038      authority.
             1039          (1) As used in this section:
             1040          (a) "Active solar system":
             1041          (i) means a system of equipment capable of collecting and converting incident solar
             1042      radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
             1043      by a separate apparatus to storage or to the point of use; and
             1044          (ii) includes water heating, space heating or cooling, and electrical or mechanical
             1045      energy generation.
             1046          (b) "Biomass system" means any system of apparatus and equipment for use in
             1047      converting material into biomass energy, as defined in Section 59-12-102 , and transporting that
             1048      energy by separate apparatus to the point of use or storage.


             1049          (c) "Business entity" means any sole proprietorship, estate, trust, partnership,
             1050      association, corporation, cooperative, or other entity under which business is conducted or
             1051      transacted.
             1052          (d) "Commercial energy system" means any active solar, passive solar, geothermal
             1053      electricity, direct-use geothermal, geothermal heat-pump system, wind, hydroenergy, or
             1054      biomass system used to supply energy to a commercial unit or as a commercial enterprise.
             1055          (e) "Commercial enterprise" means a business entity whose purpose is to produce
             1056      electrical, mechanical, or thermal energy for sale from a commercial energy system.
             1057          (f) (i) "Commercial unit" means any building or structure that a business entity uses to
             1058      transact its business.
             1059          (ii) Notwithstanding Subsection (1)(f)(i):
             1060          (A) in the case of an active solar system used for agricultural water pumping or a wind
             1061      system, each individual energy generating device shall be a commercial unit; and
             1062          (B) if an energy system is the building or structure that a business entity uses to
             1063      transact its business, a commercial unit is the complete energy system itself.
             1064          (g) "Direct-use geothermal system" means a system of apparatus and equipment
             1065      enabling the direct use of thermal energy, generally between 100 and 300 degrees Fahrenheit,
             1066      that is contained in the earth to meet energy needs, including heating a building, an industrial
             1067      process, and aquaculture.
             1068          (h) "Geothermal electricity" means energy contained in heat that continuously flows
             1069      outward from the earth that is used as a sole source of energy to produce electricity.
             1070          (i) "Geothermal heat-pump system" means a system of apparatus and equipment
             1071      enabling the use of thermal properties contained in the earth at temperatures well below 100
             1072      degrees Fahrenheit to help meet heating and cooling needs of a structure.
             1073          (j) "Hydroenergy system" means a system of apparatus and equipment capable of
             1074      intercepting and converting kinetic water energy into electrical or mechanical energy and
             1075      transferring this form of energy by separate apparatus to the point of use or storage.
             1076          (k) "Individual taxpayer" means any person who is a taxpayer as defined in Section
             1077      59-10-103 and an individual as defined in Section 59-10-103 .
             1078          (l) "Passive solar system":
             1079          (i) means a direct thermal system that utilizes the structure of a building and its


             1080      operable components to provide for collection, storage, and distribution of heating or cooling
             1081      during the appropriate times of the year by utilizing the climate resources available at the site;
             1082      and
             1083          (ii) includes those portions and components of a building that are expressly designed
             1084      and required for the collection, storage, and distribution of solar energy.
             1085          (m) "Residential energy system" means any active solar, passive solar, biomass,
             1086      direct-use geothermal, geothermal heat-pump system, wind, or hydroenergy system used to
             1087      supply energy to or for any residential unit.
             1088          (n) "Residential unit" means any house, condominium, apartment, or similar dwelling
             1089      unit that serves as a dwelling for a person, group of persons, or a family but does not include
             1090      property subject to a fee under:
             1091          (i) Section 59-2-404 ;
             1092          (ii) Section 59-2-405 ;
             1093          (iii) Section 59-2-405.1 ;
             1094          (iv) Section 59-2-405.2 ; or
             1095          (v) Section 59-2-405.3 .
             1096          (o) "Utah Geological Survey" means the Utah Geological Survey established in Section
             1097      63-73-5 .
             1098          (p) "Wind system" means a system of apparatus and equipment capable of intercepting
             1099      and converting wind energy into mechanical or electrical energy and transferring these forms of
             1100      energy by a separate apparatus to the point of use, sale, or storage.
             1101          (2) (a) (i) For taxable years beginning on or after January 1, 2007, a business entity that
             1102      purchases and completes or participates in the financing of a residential energy system to
             1103      supply all or part of the energy required for a residential unit owned or used by the business
             1104      entity and situated in Utah is entitled to a nonrefundable tax credit as provided in this
             1105      Subsection (2)(a).
             1106          (ii) (A) A business entity is entitled to a tax credit equal to 25% of the reasonable costs
             1107      of each residential energy system installed with respect to each residential unit it owns or uses,
             1108      including installation costs, against any tax due under this chapter for the taxable year in which
             1109      the energy system is completed and placed in service.
             1110          (B) The total amount of each credit under this Subsection (2)(a) may not exceed $2,000


             1111      per residential unit.
             1112          (C) The credit under this Subsection (2)(a) is allowed for any residential energy system
             1113      completed and placed in service on or after January 1, 2007.
             1114          (iii) If a business entity sells a residential unit to an individual taxpayer before making
             1115      a claim for the tax credit under this Subsection (2)(a), the business entity may:
             1116          (A) assign its right to this tax credit to the individual taxpayer; and
             1117          (B) if the business entity assigns its right to the tax credit to an individual taxpayer
             1118      under Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the
             1119      individual taxpayer had completed or participated in the costs of the residential energy system
             1120      under Section 59-10-1014 .
             1121          (b) (i) For taxable years beginning on or after January 1, 2007, a business entity that
             1122      purchases or participates in the financing of a commercial energy system situated in Utah is
             1123      entitled to a refundable tax credit as provided in this Subsection (2)(b) if the commercial
             1124      energy system does not use wind, geothermal electricity, or biomass equipment capable of
             1125      producing a total of 660 or more kilowatts of electricity, and:
             1126          (A) the commercial energy system supplies all or part of the energy required by
             1127      commercial units owned or used by the business entity; or
             1128          (B) the business entity sells all or part of the energy produced by the commercial
             1129      energy system as a commercial enterprise.
             1130          (ii) (A) A business entity is entitled to a tax credit of up to 10% of the reasonable costs
             1131      of any commercial energy system installed, including installation costs, against any tax due
             1132      under this chapter for the taxable year in which the commercial energy system is completed and
             1133      placed in service.
             1134          (B) Notwithstanding Subsection (2)(b)(ii)(A), the total amount of the credit under this
             1135      Subsection (2)(b) may not exceed $50,000 per commercial unit.
             1136          (C) The credit under this Subsection (2)(b) is allowed for any commercial energy
             1137      system completed and placed in service on or after January 1, 2007.
             1138          (iii) A business entity that leases a commercial energy system installed on a
             1139      commercial unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can
             1140      confirm that the lessor irrevocably elects not to claim the credit.
             1141          (iv) Only the principal recovery portion of the lease payments, which is the cost


             1142      incurred by a business entity in acquiring a commercial energy system, excluding interest
             1143      charges and maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
             1144          (v) A business entity that leases a commercial energy system is eligible to use the tax
             1145      credit under this Subsection (2)(b) for a period no greater than seven years from the initiation
             1146      of the lease.
             1147          (vi) A tax credit allowed by this Subsection (2)(b) may not be carried forward or
             1148      carried back.
             1149          (c) (i) For taxable years beginning on or after January 1, 2007, a business entity that
             1150      owns a commercial energy system situated in Utah using wind, geothermal electricity, or
             1151      biomass equipment capable of producing a total of 660 or more kilowatts of electricity is
             1152      entitled to a refundable tax credit as provided in this Subsection (2)(c) if:
             1153          (A) the commercial energy system supplies all or part of the energy required by
             1154      commercial units owned or used by the business entity; or
             1155          (B) the business entity sells all or part of the energy produced by the commercial
             1156      energy system as a commercial enterprise.
             1157          (ii) (A) A business entity is entitled to a tax credit under this section equal to the
             1158      product of:
             1159          (I) 0.35 cents; and
             1160          (II) the kilowatt hours of electricity produced and either used or sold during the taxable
             1161      year.
             1162          (B) (I) The credit calculated under Subsection (2)(c)(ii)(A) may be claimed for
             1163      production occurring during a period of 48 months beginning with the month in which the
             1164      commercial energy system is placed in commercial service.
             1165          (II) The credit allowed by this Subsection (2)(c) for each year may not be carried
             1166      forward or carried back.
             1167          (C) The credit under this Subsection (2)(c) is allowed for any commercial energy
             1168      system completed and placed in service on or after January 1, 2007.
             1169          (iii) A business entity that leases a commercial energy system installed on a
             1170      commercial unit is eligible for the tax credit under this Subsection (2)(c) if the lessee can
             1171      confirm that the lessor irrevocably elects not to claim the credit.
             1172          (d) (i) A tax credit under Subsection (2)(a) or (b) may be claimed for the taxable year


             1173      in which the energy system is completed and placed in service.
             1174          (ii) Additional energy systems or parts of energy systems may be claimed for
             1175      subsequent years.
             1176          (iii) If the amount of a tax credit under Subsection (2)(a) exceeds a business entity's tax
             1177      liability under this chapter for a taxable year, the amount of the credit exceeding the liability
             1178      may be carried forward for a period which does not exceed the next four taxable years.
             1179          (3) (a) [The] Except as provided in Subsection (3)(b), the tax credits provided for
             1180      under Subsection (2) are in addition to any tax credits provided under the laws or rules and
             1181      regulations of the United States.
             1182          (b) A purchaser of one or more solar units that claims a tax credit under Section
             1183      59-7-614.2 for the purchase of the one or more solar units may not claim a tax credit under this
             1184      section for that purchase.
             1185          [(b)] (c) (i) The Utah Geological Survey may set standards for residential and
             1186      commercial energy systems claiming a credit under Subsections (2)(a) and (b) that cover the
             1187      safety, reliability, efficiency, leasing, and technical feasibility of the systems to ensure that the
             1188      systems eligible for the tax credit use the state's renewable and nonrenewable energy resources
             1189      in an appropriate and economic manner.
             1190          (ii) The Utah Geological Survey may set standards for residential and commercial
             1191      energy systems that establish the reasonable costs of an energy system, as used in Subsections
             1192      (2)(a)(ii)(A) and (2)(b)(ii)(A), as an amount per unit of energy production.
             1193          (iii) A tax credit may not be taken under Subsection (2) until the Utah Geological
             1194      Survey has certified that the energy system has been completely installed and is a viable system
             1195      for saving or production of energy from renewable resources.
             1196          [(c)] (d) The Utah Geological Survey and the commission may make rules in
             1197      accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, that are
             1198      necessary to implement this section.
             1199          (4) (a) On or before October 1, 2012, and every five years thereafter, the Utah Tax
             1200      Review Commission shall review each tax credit provided by this section and make
             1201      recommendations to the Revenue and Taxation Interim Committee concerning whether the
             1202      credit should be continued, modified, or repealed.
             1203          (b) The Utah Tax Review Commission's report under Subsection (4)(a) shall include


             1204      information concerning the cost of the credit, the purpose and effectiveness of the credit, and
             1205      the state's benefit from the credit.
             1206          Section 22. Section 59-7-614.2 is enacted to read:
             1207          59-7-614.2. Nonrefundable tax credit for qualifying solar projects.
             1208          (1) As used in this section:
             1209          (a) "Active solar system" is as defined in Section 59-7-614 .
             1210          (b) "Purchaser" means a taxpayer that purchases one or more solar units from a
             1211      qualifying political subdivision.
             1212          (c) "Qualifying political subdivision" means:
             1213          (i) a city or town in this state;
             1214          (ii) an interlocal entity created under Title 11, Chapter 13, Interlocal Cooperation Act;
             1215      or
             1216          (iii) a special service district created under Title 17A, Chapter 2, Part 13, Utah Special
             1217      Service District Act.
             1218          (d) "Qualifying solar project" means the portion of an active solar system:
             1219          (i) that a qualifying political subdivision:
             1220          (A) constructs;
             1221          (B) controls; or
             1222          (C) owns;
             1223          (ii) with respect to which the qualifying political subdivision described in Subsection
             1224      (1)(c)(i) sells one or more solar units; and
             1225          (iii) that generates electrical output that is furnished:
             1226          (A) to one or more residential units; or
             1227          (B) for the benefit of one or more residential units.
             1228          (e) "Residential unit" is as defined in Section 59-7-614 .
             1229          (f) "Solar unit" means a portion of the electrical output:
             1230          (i) of a qualifying solar project;
             1231          (ii) that a qualifying political subdivision sells to a purchaser; and
             1232          (iii) the purchase of which requires that the purchaser agree to bear a proportionate
             1233      share of the expense of the qualifying solar project:
             1234          (A) in accordance with a written agreement between the purchaser and the qualifying


             1235      political subdivision;
             1236          (B) in exchange for a credit on the purchaser's electrical bill; and
             1237          (C) as determined by a formula established by the qualifying political subdivision.
             1238          (2) Subject to Subsection (3), for taxable years beginning on or after January 1, 2008, a
             1239      purchaser may claim a nonrefundable tax credit equal to the product of:
             1240          (a) the amount the purchaser pays to purchase one or more solar units during the
             1241      taxable year; and
             1242          (b) 25%.
             1243          (3) For a taxable year, a tax credit under this section may not exceed $2,000 on a
             1244      return.
             1245          (4) A purchaser may carry forward a tax credit under this section for a period that does
             1246      not exceed the next four taxable years if:
             1247          (a) the purchaser is allowed to claim a tax credit under this section for a taxable year;
             1248      and
             1249          (b) the amount of the tax credit exceeds the purchaser's tax liability under this chapter
             1250      for that taxable year.
             1251          (5) Subject to Section 59-7-614 , a tax credit under this section is in addition to any
             1252      other tax credit allowed by this chapter.
             1253          (6) (a) On or before October 1, 2012, and every five years after October 1, 2012, the
             1254      Utah Tax Review Commission shall review the tax credit allowed by this section and make
             1255      recommendations to the Revenue and Taxation Interim Committee concerning whether the tax
             1256      credit should be continued, modified, or repealed.
             1257          (b) The Utah Tax Review Commission's report under Subsection (6)(a) shall include
             1258      information concerning the cost of the tax credit, the purpose and effectiveness of the tax
             1259      credit, and the state's benefit from the tax credit.
             1260          Section 23. Section 59-10-103 is amended to read:
             1261           59-10-103. Definitions.
             1262          (1) As used in this chapter:
             1263          (a) "Adjusted gross income":
             1264          (i) for a resident or nonresident individual, is as defined in Section 62, Internal
             1265      Revenue Code; or


             1266          (ii) for a resident or nonresident estate or trust, is as calculated in Section 67(e),
             1267      Internal Revenue Code.
             1268          [(b) "Adoption expenses" means:]
             1269          [(i) any actual medical and hospital expenses of the mother of the adopted child which
             1270      are incident to the child's birth;]
             1271          [(ii) any welfare agency fees or costs;]
             1272          [(iii) any child placement service fees or costs;]
             1273          [(iv) any legal fees or costs; or]
             1274          [(v) any other fees or costs relating to an adoption.]
             1275          [(c) "Adult with a disability" means an individual who:]
             1276          [(i) is 18 years of age or older;]
             1277          [(ii) is eligible for services under Title 62A, Chapter 5, Services for People with
             1278      Disabilities; and]
             1279          [(iii) is not enrolled in:]
             1280          [(A) an education program for students with disabilities that is authorized under
             1281      Section 53A-15-301 ; or]
             1282          [(B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.]
             1283          [(d) (i) For purposes of Subsection 59-10-114 (2)(l), "capital gain transaction" means a
             1284      transaction that results in a:]
             1285          [(A) short-term capital gain; or]
             1286          [(B) long-term capital gain.]
             1287          [(ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1288      the commission may by rule define the term "transaction."]
             1289          [(e) "Commercial domicile" means the principal place from which the trade or business
             1290      of a Utah small business corporation is directed or managed.]
             1291          [(f)] (b) "Corporation" includes:
             1292          (i) [associations] an association;
             1293          (ii) a joint stock [companies] company; and
             1294          (iii) an insurance [companies] company.
             1295          [(g) "Dependent child with a disability" means an individual 21 years of age or younger
             1296      who:]


             1297          [(i) (A) is diagnosed by a school district representative under rules adopted by the State
             1298      Board of Education as having a disability classified as:]
             1299          [(I) autism;]
             1300          [(II) deafness;]
             1301          [(III) preschool developmental delay;]
             1302          [(IV) dual sensory impairment;]
             1303          [(V) hearing impairment;]
             1304          [(VI) intellectual disability;]
             1305          [(VII) multidisability;]
             1306          [(VIII) orthopedic impairment;]
             1307          [(IX) other health impairment;]
             1308          [(X) traumatic brain injury; or]
             1309          [(XI) visual impairment;]
             1310          [(B) is not receiving residential services from:]
             1311          [(I) the Division of Services for People with Disabilities created under Section
             1312      62A-5-102 ; or]
             1313          [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             1314      and]
             1315          [(C) is enrolled in:]
             1316          [(I) an education program for students with disabilities that is authorized under Section
             1317      53A-15-301 ; or]
             1318          [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             1319      or]
             1320          [(ii) is identified under guidelines of the Department of Health as qualified for:]
             1321          [(A) Early Intervention; or]
             1322          [(B) Infant Development Services.]
             1323          [(h)] (c) "Distributable net income" is as defined in Section 643, Internal Revenue
             1324      Code.
             1325          [(i)] (d) "Employee" is as defined in Section 59-10-401 .
             1326          [(j)] (e) "Employer" is as defined in Section 59-10-401 .
             1327          [(k)] (f) "Federal taxable income":


             1328          (i) for a resident or nonresident individual, means taxable income as defined by Section
             1329      63, Internal Revenue Code; or
             1330          (ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
             1331      (b), Internal Revenue Code.
             1332          [(l)] (g) "Fiduciary" means:
             1333          (i) a guardian;
             1334          (ii) a trustee;
             1335          (iii) an executor;
             1336          (iv) an administrator;
             1337          (v) a receiver;
             1338          (vi) a conservator; or
             1339          (vii) any person acting in any fiduciary capacity for any individual.
             1340          (h) "Guaranteed annuity interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
             1341          [(m)] (i) "Homesteaded land diminished from the Uintah and Ouray Reservation"
             1342      means the homesteaded land that was held to have been diminished from the Uintah and Ouray
             1343      Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
             1344          [(n)] (j) "Individual" means a natural person and includes aliens and minors.
             1345          [(o)] (k) "Irrevocable trust" means a trust in which the settlor may not revoke or
             1346      terminate all or part of the trust without the consent of a person who has a substantial beneficial
             1347      interest in the trust and the interest would be adversely affected by the exercise of the settlor's
             1348      power to revoke or terminate all or part of the trust.
             1349          [(p) For purposes of Subsection 59-10-114 (2)(l), "long-term capital gain" is as defined
             1350      in Section 1222, Internal Revenue Code.]
             1351          (l) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.
             1352          [(q)] (m) "Nonresident individual" means an individual who is not a resident of this
             1353      state.
             1354          [(r)] (n) "Nonresident trust" or "nonresident estate" means a trust or estate which is not
             1355      a resident estate or trust.
             1356          [(s)] (o) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
             1357      unincorporated organization:
             1358          (A) through or by means of which any business, financial operation, or venture is


             1359      carried on; and
             1360          (B) which is not, within the meaning of this chapter:
             1361          (I) a trust;
             1362          (II) an estate; or
             1363          (III) a corporation.
             1364          (ii) "Partnership" does not include any organization not included under the definition of
             1365      "partnership" in Section 761, Internal Revenue Code.
             1366          (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
             1367      organization described in Subsection (1)[(s)](o)(i).
             1368          [(t) "Qualifying military servicemember" means a member of:]
             1369          [(i) The Utah Army National Guard;]
             1370          [(ii) The Utah Air National Guard; or]
             1371          [(iii) the following if the member is assigned to a unit that is located in the state:]
             1372          [(A) The Army Reserve;]
             1373          [(B) The Naval Reserve;]
             1374          [(C) The Air Force Reserve;]
             1375          [(D) The Marine Corps Reserve; or]
             1376          [(E) The Coast Guard Reserve.]
             1377          [(u) "Qualifying stock" means stock that is:]
             1378          [(i) (A) common; or]
             1379          [(B) preferred;]
             1380          [(ii) as defined by the commission by rule, originally issued to:]
             1381          [(A) a resident or nonresident individual; or]
             1382          [(B) a partnership if the resident or nonresident individual making a subtraction from
             1383      federal taxable income in accordance with Subsection 59-10-114 (2)(l):]
             1384          [(I) was a partner when the stock was issued; and]
             1385          [(II) remains a partner until the last day of the taxable year for which the resident or
             1386      nonresident individual makes the subtraction from federal taxable income in accordance with
             1387      Subsection 59-10-114 (2)(l); and]
             1388          [(iii) issued:]
             1389          [(A) by a Utah small business corporation;]


             1390          [(B) on or after January 1, 2003; and]
             1391          [(C) for:]
             1392          [(I) money; or]
             1393          [(II) other property, except for stock or securities.]
             1394          (p) "Qualified nongrantor charitable lead trust" means a trust:
             1395          (i) that is irrevocable;
             1396          (ii) that has a trust term measured by:
             1397          (A) a fixed term of years; or
             1398          (B) the life of a person living on the day on which the trust is created;
             1399          (iii) under which:
             1400          (A) a portion of the value of the trust assets is distributed during the trust term:
             1401          (I) to an organization described in Section 170(c), Internal Revenue Code; and
             1402          (II) as a:
             1403          (Aa) guaranteed annuity interest; or
             1404          (Bb) unitrust interest; and
             1405          (B) assets remaining in the trust at the termination of the trust term are distributed to a
             1406      beneficiary:
             1407          (I) designated in the trust; and
             1408          (II) that is not an organization described in Section 170(c), Internal Revenue Code;
             1409          (iv) for which the trust is allowed a deduction under Section 642(c), Internal Revenue
             1410      Code; and
             1411          (v) under which the grantor of the trust is not treated as the owner of any portion of the
             1412      trust for federal income tax purposes.
             1413          [(v)] (q) (i) "Resident individual" means:
             1414          (A) an individual who is domiciled in this state for any period of time during the
             1415      taxable year, but only for the duration of the period during which the individual is domiciled in
             1416      this state; or
             1417          (B) an individual who is not domiciled in this state but:
             1418          (I) maintains a permanent place of abode in this state; and
             1419          (II) spends in the aggregate 183 or more days of the taxable year in this state.
             1420          (ii) For purposes of Subsection (1)[(v)] (q)(i)(B), a fraction of a calendar day shall be


             1421      counted as a whole day.
             1422          [(w)] (r) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
             1423          [(x) For purposes of Subsection 59-10-114 (2)(l), "short-term capital gain" is as defined
             1424      in Section 1222, Internal Revenue Code.]
             1425          (s) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.
             1426          (t) "State income tax percentage for a nonresident estate or trust" means a percentage
             1427      equal to a nonresident estate's or trust's state taxable income for the taxable year divided by the
             1428      nonresident estate's or trust's total adjusted gross income for that taxable year after making the
             1429      adjustments required by:
             1430          (i) Section 59-10-202 ;
             1431          (ii) Section 59-10-207 ;
             1432          (iii) Section 59-10-209.1 ; or
             1433          (iv) Section 59-10-210 ;
             1434          (u) "State income tax percentage for a nonresident individual" means a percentage
             1435      equal to a nonresident individual's state taxable income for the taxable year divided by the
             1436      difference between:
             1437          (i) the nonresident individual's total adjusted gross income for that taxable year, after
             1438      making the:
             1439          (A) additions and subtractions required by Section 59-10-114 ; and
             1440          (B) adjustments required by Section 59-10-115 ; and
             1441          (ii) if the nonresident individual described in Subsection (1)(u)(i) is a servicemember,
             1442      the compensation the servicemember receives for military service if the servicemember is
             1443      serving in compliance with military orders.
             1444          (v) "State income tax percentage for a part-year resident individual" means, for a
             1445      taxable year, a fraction:
             1446          (i) the numerator of which is the sum of:
             1447          (A) subject to Subsections 59-10-1404 (3) and (4), for the time period during the
             1448      taxable year that the part-year resident individual is a resident, the part-year resident
             1449      individual's total adjusted gross income for that time period, after making the:
             1450          (I) additions and subtractions required by Section 59-10-114 ; and
             1451          (II) adjustments required by Section 59-10-115 ; and


             1452          (B) for the time period during the taxable year that the part-year resident individual is a
             1453      nonresident, an amount calculated by:
             1454          (I) determining the part-year resident individual's adjusted gross income for that time
             1455      period, after making the:
             1456          (Aa) additions and subtractions required by Section 59-10-114 ; and
             1457          (Bb) adjustments required by Section 59-10-115 ; and
             1458          (II) calculating the portion of the amount determined under Subsection (1)(v)(i)(B)(I)
             1459      that is derived from Utah sources in accordance with Section 59-10-117 ; and
             1460          (ii) the denominator of which is the difference between:
             1461          (A) the part-year resident individual's total adjusted gross income for that taxable year,
             1462      after making the:
             1463          (I) additions and subtractions required by Section 59-10-114 ; and
             1464          (II) adjustments required by Section 59-10-115 ; and
             1465          (B) if the part-year resident individual is a servicemember, any compensation the
             1466      servicemember receives for military service during the portion of the taxable year that the
             1467      servicemember is a nonresident if the servicemember is serving in compliance with military
             1468      orders.
             1469          [(y)] (w) "Taxable income" or "state taxable income":
             1470          (i) subject to Subsection [ 59-10-302 (2)] 59-10-1404 (3), for a resident individual [other
             1471      than a resident individual described in Subsection (1)(y)(iii)], means the resident individual's
             1472      [federal taxable] adjusted gross income after making the:
             1473          (A) additions and subtractions required by Section 59-10-114 ; and
             1474          (B) adjustments required by Section 59-10-115 ;
             1475          (ii) for a nonresident individual [other than a nonresident individual described in
             1476      Subsection (1)(y)(iii), is as defined in Section 59-10-116 ;], is an amount calculated by:
             1477          (A) determining the nonresident individual's adjusted gross income for the taxable
             1478      year, after making the:
             1479          (I) additions and subtractions required by Section 59-10-114 ; and
             1480          (II) adjustments required by Section 59-10-115 ; and
             1481          (B) calculating the portion of the amount determined under Subsection (1)(w)(ii)(A)
             1482      that is derived from Utah sources in accordance with Section 59-10-117 ;


             1483          [(iii) for a resident or nonresident individual that collects and pays a tax described in
             1484      Part 12, Single Rate Individual Income Tax Act, is as defined in Section 59-10-1202 ;]
             1485          [(iv)] (iii) for a resident estate or trust, is as calculated under Section 59-10-201.1 ; and
             1486          [(v)] (iv) for a nonresident estate or trust, is as calculated under Section 59-10-204 .
             1487          [(z)] (x) "Taxpayer" means any individual, estate, [or] trust, or beneficiary of an estate
             1488      or trust, [whose income is] that has income subject in whole or part to the tax imposed by this
             1489      chapter.
             1490          (y) "Trust term" means a time period:
             1491          (i) beginning on the day on which a qualified nongrantor charitable lead trust is
             1492      created; and
             1493          (ii) ending on the day on which the qualified nongrantor charitable lead trust described
             1494      in Subsection (1)(y)(i) terminates.
             1495          [(aa)] (z) "Uintah and Ouray Reservation" means the lands recognized as being
             1496      included within the Uintah and Ouray Reservation in:
             1497          (i) Hagen v. Utah, 510 U.S. 399 (1994); and
             1498          (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
             1499          [(bb) (i) "Utah small business corporation" means a corporation that:]
             1500          [(A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
             1501      Code;]
             1502          [(B) except as provided in Subsection (1)(bb)(ii), meets the requirements of Section
             1503      1244(c)(1)(C), Internal Revenue Code; and]
             1504          [(C) has its commercial domicile in this state.]
             1505          [(ii) Notwithstanding Subsection (1)(bb)(i)(B), the time period described in Section
             1506      1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the source of a
             1507      corporation's aggregate gross receipts shall end on the last day of the taxable year for which the
             1508      resident or nonresident individual makes a subtraction from federal taxable income in
             1509      accordance with Subsection 59-10-114 (2)(l).]
             1510          (aa) "Unadjusted income" means an amount equal to the difference between:
             1511          (i) the total income required to be reported by a resident or nonresident estate or trust
             1512      on the resident or nonresident estate's or trust's federal income tax return for estates and trusts
             1513      for the taxable year; and


             1514          (ii) the sum of the following:
             1515          (A) fees paid or incurred to the fiduciary of a resident or nonresident estate or trust:
             1516          (I) for administering the resident or nonresident estate or trust; and
             1517          (II) that the resident or nonresident estate or trust deducts as allowed on the resident or
             1518      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             1519      year;
             1520          (B) the income distribution deduction that a resident or nonresident estate or trust
             1521      deducts under Section 651 or 661, Internal Revenue Code, as allowed on the resident or
             1522      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             1523      year;
             1524          (C) the amount that a resident or nonresident estate or trust deducts as a deduction for
             1525      estate tax or generation skipping transfer tax under Section 691(c), Internal Revenue Code, as
             1526      allowed on the resident or nonresident estate's or trust's federal income tax return for estates
             1527      and trusts for the taxable year; and
             1528          (D) the amount that a resident or nonresident estate or trust deducts as a personal
             1529      exemption under Section 642(b), Internal Revenue Code, as allowed on the resident or
             1530      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             1531      year.
             1532          (bb) "Unitrust interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
             1533          (cc) "Ute tribal member" means a person who is enrolled as a member of the Ute
             1534      Indian Tribe of the Uintah and Ouray Reservation.
             1535          (dd) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
             1536          (ee) "Wages" is as defined in Section 59-10-401 .
             1537          (2) (a) Any term used in this chapter has the same meaning as when used in
             1538      comparable context in the laws of the United States relating to federal income taxes unless a
             1539      different meaning is clearly required.
             1540          (b) Any reference to the Internal Revenue Code or to the laws of the United States shall
             1541      mean the Internal Revenue Code or other provisions of the laws of the United States relating to
             1542      federal income taxes that are in effect for the taxable year.
             1543          (c) Any reference to a specific section of the Internal Revenue Code or other provision
             1544      of the laws of the United States relating to federal income taxes shall include any


             1545      corresponding or comparable provisions of the Internal Revenue Code as [hereafter] amended,
             1546      redesignated, or reenacted.
             1547          Section 24. Section 59-10-104 is amended to read:
             1548           59-10-104. Tax basis -- Tax rate -- Exemption.
             1549          (1) [Except as provided in Subsection (5) or Part 12, Single Rate Individual Income
             1550      Tax Act, for] For taxable years beginning on or after January 1, [2006] 2008, [but beginning on
             1551      or before December 31, 2007,] a tax is imposed on the state taxable income of [every] a
             1552      resident individual as provided in this section.
             1553          [(2) For an individual, other than a husband and wife or head of household required to
             1554      use the tax table under Subsection (3), the tax under this section is imposed in accordance with
             1555      the following income brackets:]
             1556      [If the state taxable income is:                The tax is:]
             1557      [Less than or equal to $1,000            2.3% of the state taxable income]
             1558      [Greater than $1,000 but less than        $23, plus 3.3% of state taxable]
             1559          [or equal to $2,000             income greater than $1,000]
             1560      [Greater than $2,000 but less than        $56, plus 4.2% of state taxable]
             1561          [or equal to $3,000             income greater than $2,000]
             1562      [Greater than $3,000 but less than        $98, plus 5.2% of state taxable]
             1563          [or equal to $4,000             income greater than $3,000]
             1564      [Greater than $4,000 but less than        $150, plus 6% of state taxable]
             1565          [or equal to $5,500             income greater than $4,000]
             1566      [Greater than $5,500                $240, plus 6.98% of state taxable]
             1567                               [income greater than $5,500]
             1568          [(3) For a husband and wife filing a single return jointly, or a head of household as
             1569      defined in Section 2(b), Internal Revenue Code, filing a single return, the tax under this section
             1570      is imposed in accordance with the following income brackets:]
             1571      [If the state taxable income is:                The tax is:]
             1572      [Less than or equal to $2,000            2.3% of the state taxable income]
             1573      [Greater than $2,000 but less than        $46, plus 3.3% of state taxable]
             1574          [or equal to $4,000             income greater than $2,000]
             1575      [Greater than $4,000 but less than        $112, plus 4.2% of state taxable]


             1576          [or equal to $6,000             income greater than $4,000]
             1577      [Greater than $6,000 but less than        $196, plus 5.2% of state taxable]
             1578          [or equal to $8,000             income greater than $6,000]
             1579      [Greater than $8,000 but less than        $300, plus 6% of state taxable]
             1580          [or equal to $11,000             income greater than $8,000]
             1581      [Greater than $11,000                $480, plus 6.98% of state taxable]
             1582                               [income greater than $11,000]
             1583          [(4) (a) For taxable years beginning on or after January 1, 2009, the commission shall:]
             1584          [(i) make the following adjustments to the income brackets under Subsection (2):]
             1585          [(A) increase or decrease the income brackets under Subsection (2) by a percentage
             1586      equal to the percentage difference between the consumer price index for the preceding calendar
             1587      year and the consumer price index for the calendar year 2007; and]
             1588          [(B) after making an increase or decrease under Subsection (4)(a)(i)(A), round the
             1589      income brackets under Subsection (2) to the nearest whole dollar;]
             1590          [(ii) after making the adjustments described in Subsection (4)(a)(i) to the income
             1591      brackets under Subsection (2), adjust the income brackets under Subsection (3) so that for each
             1592      income bracket under Subsection (2) there is a corresponding income bracket under Subsection
             1593      (3) that is equal to the product of:]
             1594          [(A) each income bracket under Subsection (2); and]
             1595          [(B) two; and]
             1596          [(iii) to the extent necessary to reflect an adjustment under Subsection (4)(a)(i) or (ii):]
             1597          [(A) increase or decrease the amount of tax under Subsection (2) or (3) prior to adding
             1598      in the portion of the tax calculated as a percentage of state taxable income; and]
             1599          [(B) after making an increase or decrease under Subsection (4)(a)(iii)(A), round the
             1600      amount of tax under Subsection (2) or (3) to the nearest whole dollar.]
             1601          [(b) The commission may not increase or decrease the tax rate percentages provided in
             1602      Subsection (2) or (3).]
             1603          [(c) For purposes of Subsection (4)(a)(i), the commission shall calculate the consumer
             1604      price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.]
             1605          (2) For purposes of Subsection (1), for a taxable year, the tax is an amount equal to the
             1606      product of:


             1607          (a) the resident individual's state taxable income for that taxable year; and
             1608          (b) 5%.
             1609          [(5)] (3) This section does not apply to a resident individual exempt from taxation
             1610      under Section 59-10-104.1 .
             1611          Section 25. Section 59-10-104.1 is amended to read:
             1612           59-10-104.1. Exemption from taxation.
             1613          (1) For purposes of this section:
             1614          (a) "Personal exemptions" means the total exemption amount an individual is allowed
             1615      to claim for the taxable year under Section 151, Internal Revenue Code, for:
             1616          (i) the individual;
             1617          (ii) the individual's spouse; and
             1618          (iii) the individual's dependents.
             1619          (b) "Standard deduction":
             1620          (i) [except as provided in Subsection (1)(b)(ii),] means the standard deduction an
             1621      individual is allowed to claim for the taxable year under Section 63, Internal Revenue Code;
             1622      and
             1623          (ii) notwithstanding Subsection (1)(b)(i), does not include an additional amount
             1624      allowed under Section 63(f), Internal Revenue Code, for an individual or an individual's spouse
             1625      who is:
             1626          (A) blind; or
             1627          (B) 65 years of age or older.
             1628          (2) For taxable years beginning on or after January 1, 2002, an individual is exempt
             1629      from a tax imposed by Section 59-10-104 or 59-10-116 [or described in Section 59-10-1203 ]
             1630      if the individual's adjusted gross income on the individual's federal individual income tax
             1631      return for the taxable year is less than or equal to the sum of the individual's:
             1632          (a) personal exemptions for that taxable year; and
             1633          (b) standard deduction for that taxable year.
             1634          Section 26. Section 59-10-110 is amended to read:
             1635           59-10-110. Disallowance of federal tax credits.
             1636          [No] A credit applied directly to the income tax calculated for federal income tax
             1637      purposes [pursuant to] in accordance with the Internal Revenue Code [shall] may not be


             1638      applied in calculating the tax due under this chapter.
             1639          Section 27. Section 59-10-114 is amended to read:
             1640           59-10-114. Additions to and subtractions from adjusted gross income of an
             1641      individual.
             1642          (1) There shall be added to [federal taxable] adjusted gross income of a resident or
             1643      nonresident individual:
             1644          [(a) the amount of any income tax imposed by this or any predecessor Utah individual
             1645      income tax law and the amount of any income tax imposed by the laws of another state, the
             1646      District of Columbia, or a possession of the United States, to the extent deducted from adjusted
             1647      gross income in determining federal taxable income;]
             1648          [(b)] (a) a lump sum distribution that the taxpayer does not include in adjusted gross
             1649      income on the taxpayer's federal individual income tax return for the taxable year;
             1650          [(c)] (b) [for taxable years beginning on or after January 1, 2002,] the amount of a
             1651      child's income calculated under Subsection [(5)] (4) that:
             1652          (i) a parent elects to report on the parent's federal individual income tax return for the
             1653      taxable year; and
             1654          (ii) the parent does not include in adjusted gross income on the parent's federal
             1655      individual income tax return for the taxable year;
             1656          [(d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
             1657      Code;]
             1658          [(e)] (c) (i) a withdrawal from a medical care savings account and any penalty imposed
             1659      [in] for the taxable year if:
             1660          [(i)] (A) the resident or nonresident individual [did] does not deduct [or include] the
             1661      amounts on the resident or nonresident individual's federal individual income tax return
             1662      [pursuant to] under Section 220, Internal Revenue Code;
             1663          [(ii)] (B) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2); and
             1664          [(iii)] (C) the withdrawal is [deducted by]:
             1665           (I) subtracted on a return the resident or nonresident individual [under Subsection
             1666      (2)(h);] files under this chapter for a taxable year beginning on or before December 31, 2007;
             1667      or
             1668          (II) used as the basis for a resident or nonresident individual to claim a tax credit under


             1669      Section 59-10-1021 ;
             1670          (ii) a disbursement required to be added to adjusted gross income in accordance with
             1671      Subsection 31A-32a-105 (3); or
             1672          (iii) an amount required to be added to adjusted gross income in accordance with
             1673      Subsection 31A-32a-105 (5)(c);
             1674          [(f)] (d) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             1675      Incentive Program, from the account of a resident or nonresident individual who is an account
             1676      owner as defined in Section 53B-8a-102 , for the taxable year for which the amount is
             1677      withdrawn, if that amount withdrawn from the account of the resident or nonresident individual
             1678      who is the account owner:
             1679          (i) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             1680          (ii) is:
             1681          (A) subtracted by the resident or nonresident individual:
             1682          (I) who is the account owner; and
             1683          [(II) in accordance with Subsection (2)(i); or]
             1684          (II) on the resident or nonresident individual's return filed under this chapter for a
             1685      taxable year beginning on or before December 31, 2007; or
             1686          (B) used as the basis for the resident or nonresident individual who is the account
             1687      owner to claim a tax credit under Section [ 59-10-1206.1 ] 59-10-1017 ;
             1688          [(g)] (e) except as provided in Subsection (6), [for taxable years beginning on or after
             1689      January 1, 2003,] for bonds, notes, and other evidences of indebtedness acquired on or after
             1690      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             1691      one or more of the following entities:
             1692          (i) a state other than this state;
             1693          (ii) the District of Columbia;
             1694          (iii) a political subdivision of a state other than this state; or
             1695          (iv) an agency or instrumentality of an entity described in Subsections (1)[(g)](e)(i)
             1696      through (iii);
             1697          [(h)] (f) subject to Subsection (2)[(n)](c), any distribution received by a resident
             1698      beneficiary of a resident trust of income that was taxed at the trust level for federal tax
             1699      purposes, but was subtracted from state taxable income of the trust pursuant to Subsection


             1700      59-10-202 (2)[(c)](b);
             1701          [(i)] (g) any distribution received by a resident beneficiary of a nonresident trust of
             1702      undistributed distributable net income realized by the trust on or after January 1, 2004, if that
             1703      undistributed distributable net income was taxed at the trust level for federal tax purposes, but
             1704      was not taxed at the trust level by any state, with undistributed distributable net income
             1705      considered to be distributed from the most recently accumulated undistributed distributable net
             1706      income; and
             1707          [(j)] (h) any adoption expense:
             1708          (i) for which a resident or nonresident individual receives reimbursement from another
             1709      person; and
             1710          (ii) to the extent to which the resident or nonresident individual [deducts] subtracts that
             1711      adoption expense:
             1712          [(A) under Subsection (2)(c); or]
             1713          (A) on a return filed under this chapter for a taxable year beginning on or before
             1714      December 31, 2007; or
             1715          (B) from federal taxable income on a federal individual income tax return.
             1716          (2) There shall be subtracted from [federal taxable] adjusted gross income of a resident
             1717      or nonresident individual:
             1718          (a) the difference between:
             1719          [(a)] (i) the interest or a dividend on [obligations or securities] an obligation or security
             1720      of the United States [and its possessions or of any] or an authority, commission, [or]
             1721      instrumentality, or possession of the United States, to the extent that interest or dividend is:
             1722          (A) included in adjusted gross income for federal income tax purposes for the taxable
             1723      year [but]; and
             1724          (B) exempt from state income taxes under the laws of the United States[, but the
             1725      amount subtracted under this Subsection (2)(a) shall be reduced by]; and
             1726          (ii) any interest on indebtedness incurred or continued to purchase or carry the
             1727      [obligations or securities] obligation or security described in [this] Subsection (2)(a)(i)[, and by
             1728      any expenses incurred in the production of interest or dividend income described in this
             1729      Subsection (2)(a) to the extent that such expenses, including amortizable bond premiums, are
             1730      deductible in determining federal taxable income];


             1731          [(b) 1/2 of the net amount of any income tax paid or payable to the United States after
             1732      all allowable credits, as reported on the United States individual income tax return of the
             1733      taxpayer for the same taxable year;]
             1734          [(c) the amount of adoption expenses for one of the following taxable years as elected
             1735      by the resident or nonresident individual:]
             1736          [(i) regardless of whether a court issues an order granting the adoption, the taxable year
             1737      in which the adoption expenses are:]
             1738          [(A) paid; or]
             1739          [(B) incurred;]
             1740          [(ii) the taxable year in which a court issues an order granting the adoption; or]
             1741          [(iii) any year in which the resident or nonresident individual may claim the federal
             1742      adoption expenses credit under Section 23, Internal Revenue Code;]
             1743          [(d) amounts received by taxpayers under age 65 as retirement income which, for
             1744      purposes of this section, means pensions and annuities, paid from an annuity contract
             1745      purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
             1746      Internal Revenue Code, or purchased by an employee under a plan which meets the
             1747      requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
             1748      political subdivision thereof, or the District of Columbia, to the employee involved or the
             1749      surviving spouse;]
             1750          [(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
             1751      personal retirement exemption;]
             1752          [(f) 75% of the amount of the personal exemption, as defined and calculated in the
             1753      Internal Revenue Code, for each dependent child with a disability and adult with a disability
             1754      who is claimed as a dependent on a taxpayer's return;]
             1755          [(g) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
             1756      taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:]
             1757          [(i) for:]
             1758          [(A) the taxpayer;]
             1759          [(B) the taxpayer's spouse; and]
             1760          [(C) the taxpayer's dependents; and]
             1761          [(ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or


             1762      213, Internal Revenue Code, in determining federal taxable income for the taxable year;]
             1763          [(h) (i) except as provided in this Subsection (2)(h), the amount of a contribution made
             1764      during the taxable year on behalf of the taxpayer to a medical care savings account and interest
             1765      earned on a contribution to a medical care savings account established pursuant to Title 31A,
             1766      Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is accepted by
             1767      the account administrator as provided in the Medical Care Savings Account Act, and if the
             1768      taxpayer did not deduct or include amounts on the taxpayer's federal individual income tax
             1769      return pursuant to Section 220, Internal Revenue Code; and]
             1770          [(ii) a contribution deductible under this Subsection (2)(h) may not exceed either of the
             1771      following:]
             1772          [(A) the maximum contribution allowed under the Medical Care Savings Account Act
             1773      for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is
             1774      covered by health care insurance as defined in Section 31A-1-301 or self-funded plan that
             1775      covers the other spouse, and each spouse has a medical care savings account; or]
             1776          [(B) the maximum contribution allowed under the Medical Care Savings Account Act
             1777      for the tax year for taxpayers:]
             1778          [(I) who do not file a joint return; or]
             1779          [(II) who file a joint return, but do not qualify under Subsection (2)(h)(ii)(A);]
             1780          [(i) subject to Subsection (1)(f), the amount of a qualified investment as defined in
             1781      Section 53B-8a-102 that:]
             1782          [(i) a resident or nonresident individual who is an account owner as defined in Section
             1783      53B-8a-102 makes during the taxable year;]
             1784          [(ii) the resident or nonresident individual described in Subsection (2)(i)(i) does not
             1785      deduct on a federal individual income tax return; and]
             1786          [(iii) does not exceed the maximum amount of the qualified investment that may be
             1787      subtracted from federal taxable income for a taxable year in accordance with Subsections
             1788      53B-8a-106 (1)(e) and (f);]
             1789          [(j) for taxable years beginning on or after January 1, 2000, any amounts paid for
             1790      premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
             1791      amounts paid for long-term care insurance were not deducted under Section 213, Internal
             1792      Revenue Code, in determining federal taxable income;]


             1793          [(k)] (b) for taxable years beginning on or after January 1, 2000, if the conditions of
             1794      Subsection [(4)] (3)(a) are met, the amount of income derived by a Ute tribal member:
             1795          (i) during a time period that the Ute tribal member resides on homesteaded land
             1796      diminished from the Uintah and Ouray Reservation; and
             1797          (ii) from a source within the Uintah and Ouray Reservation;
             1798          [(l) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
             1799      resident or nonresident individual's short-term capital gain or long-term capital gain on a
             1800      capital gain transaction:]
             1801          [(A) that occurs on or after January 1, 2003;]
             1802          [(B) if 70% or more of the gross proceeds of the capital gain transaction are expended:]
             1803          [(I) to purchase qualifying stock in a Utah small business corporation; and]
             1804          [(II) within a 12-month period after the day on which the capital gain transaction
             1805      occurs; and]
             1806          [(C) if, prior to the purchase of the qualifying stock described in Subsection
             1807      (2)(l)(i)(B)(I), the resident or nonresident individual did not have an ownership interest in the
             1808      Utah small business corporation that issued the qualifying stock; and]
             1809          [(ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1810      the commission may make rules:]
             1811          [(A) defining the term "gross proceeds"; and]
             1812          [(B) for purposes of Subsection (2)(l)(i)(C), prescribing the circumstances under which
             1813      a resident or nonresident individual has an ownership interest in a Utah small business
             1814      corporation;]
             1815          [(m) for the taxable year beginning on or after January 1, 2005, but beginning on or
             1816      before December 31, 2005, the first $2,200 of income a qualifying military servicemember
             1817      receives:]
             1818          [(i) for service:]
             1819          [(A) as a qualifying military servicemember; or]
             1820          [(B) under an order into active service in accordance with Section 39-1-5 ; and]
             1821          [(ii) to the extent that income is included in adjusted gross income on that resident or
             1822      nonresident individual's federal individual income tax return for that taxable year;]
             1823          [(n)] (c) an amount received by a resident or nonresident individual or distribution


             1824      received by a resident or nonresident beneficiary of a resident trust:
             1825          (i) if that amount or distribution constitutes a refund of taxes imposed by:
             1826          (A) a state; or
             1827          (B) the District of Columbia; and
             1828          (ii) to the extent that amount or distribution is included in adjusted gross income for
             1829      that taxable year on the federal individual income tax return of the resident or nonresident
             1830      individual or resident or nonresident beneficiary of a resident trust;
             1831          [(o)] (d) the amount of a railroad retirement benefit:
             1832          (i) paid:
             1833          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
             1834      seq.;
             1835          (B) to a resident or nonresident individual; and
             1836          (C) for the taxable year; and
             1837          (ii) to the extent that railroad retirement benefit is included in adjusted gross income on
             1838      that resident or nonresident individual's federal individual income tax return for that taxable
             1839      year; and
             1840          [(p)] (e) an amount:
             1841          (i) received by an enrolled member of an American Indian tribe; and
             1842          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
             1843      part on that amount in accordance with:
             1844          (A) federal law;
             1845          (B) a treaty; or
             1846          (C) a final decision issued by a court of competent jurisdiction.
             1847          [(3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted
             1848      for taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
             1849      $4,800, except that:]
             1850          [(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             1851      earned over $32,000, the amount of the retirement income exemption that may be subtracted
             1852      shall be reduced by 50 cents;]
             1853          [(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             1854      earned over $16,000, the amount of the retirement income exemption that may be subtracted


             1855      shall be reduced by 50 cents; and]
             1856          [(iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             1857      $25,000, the amount of the retirement income exemption that may be subtracted shall be
             1858      reduced by 50 cents.]
             1859          [(b) For purposes of Subsection (2)(e), the amount of the personal retirement
             1860      exemption shall be further reduced according to the following schedule:]
             1861          [(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             1862      earned over $32,000, the amount of the personal retirement exemption shall be reduced by 50
             1863      cents;]
             1864          [(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             1865      earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
             1866      cents; and]
             1867          [(iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             1868      $25,000, the amount of the personal retirement exemption shall be reduced by 50 cents.]
             1869          [(c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be
             1870      calculated by adding to adjusted gross income any interest income not otherwise included in
             1871      adjusted gross income.]
             1872          [(d) For purposes of determining ownership of items of retirement income common
             1873      law doctrine will be applied in all cases even though some items may have originated from
             1874      service or investments in a community property state. Amounts received by the spouse of a
             1875      living retiree because of the retiree's having been employed in a community property state are
             1876      not deductible as retirement income of such spouse.]
             1877          [(e) For purposes of Subsection (2)(g), a subtraction for an amount paid for health care
             1878      insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:]
             1879          [(i) for an amount that is reimbursed or funded in whole or in part by the federal
             1880      government, the state, or an agency or instrumentality of the federal government or the state;
             1881      and]
             1882          [(ii) for a taxpayer who is eligible to participate in a health plan maintained and funded
             1883      in whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.]
             1884          [(4)] (3) (a) A subtraction for an amount described in Subsection (2)[(k)](b) is allowed
             1885      only if:


             1886          (i) the taxpayer is a Ute tribal member; and
             1887          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             1888      requirements of this Subsection [(4)] (3).
             1889          (b) The agreement described in Subsection [(4)] (3)(a):
             1890          (i) may not:
             1891          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             1892          (B) provide a subtraction under this section greater than or different from the
             1893      subtraction described in Subsection (2)[(k)](b); or
             1894          (C) affect the power of the state to establish rates of taxation; and
             1895          (ii) shall:
             1896          (A) provide for the implementation of the subtraction described in Subsection
             1897      (2)[(k)](b);
             1898          (B) be in writing;
             1899          (C) be signed by:
             1900          (I) the governor; and
             1901          (II) the chair of the Business Committee of the Ute tribe;
             1902          (D) be conditioned on obtaining any approval required by federal law; and
             1903          (E) state the effective date of the agreement.
             1904          (c) (i) The governor shall report to the commission by no later than February 1 of each
             1905      year regarding whether or not an agreement meeting the requirements of this Subsection [(4)]
             1906      (3) is in effect.
             1907          (ii) If an agreement meeting the requirements of this Subsection [(4)] (3) is terminated,
             1908      the subtraction permitted under Subsection (2)[(k)](b) is not allowed for taxable years
             1909      beginning on or after the January 1 following the termination of the agreement.
             1910          (d) For purposes of Subsection (2)[(k)](b) and in accordance with Title 63, Chapter
             1911      46a, Utah Administrative Rulemaking Act, the commission may make rules:
             1912          (i) for determining whether income is derived from a source within the Uintah and
             1913      Ouray Reservation; and
             1914          (ii) that are substantially similar to how adjusted gross income derived from Utah
             1915      sources is determined under Section 59-10-117 .
             1916          [(5)] (4) (a) For purposes of this Subsection [(5)] (4), "Form 8814" means:


             1917          (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
             1918      Interest and Dividends; or
             1919          (ii) (A) [for taxable years beginning on or after January 1, 2002,] a form designated by
             1920      the commission in accordance with Subsection [(5)] (4)(a)(ii)(B) as being substantially similar
             1921      to 2000 Form 8814 if for purposes of federal individual income taxes the information
             1922      contained on 2000 Form 8814 is reported on a form other than Form 8814; and
             1923          (B) for purposes of Subsection [(5)] (4)(a)(ii)(A) and in accordance with Title 63,
             1924      Chapter 46a, Utah Administrative Rulemaking Act, the commission may make rules
             1925      designating a form as being substantially similar to 2000 Form 8814 if for purposes of federal
             1926      individual income taxes the information contained on 2000 Form 8814 is reported on a form
             1927      other than Form 8814.
             1928          (b) The amount of a child's income added to adjusted gross income under Subsection
             1929      (1)[(c)](b) is equal to the difference between:
             1930          (i) the lesser of:
             1931          (A) the base amount specified on Form 8814; and
             1932          (B) the sum of the following reported on Form 8814:
             1933          (I) the child's taxable interest;
             1934          (II) the child's ordinary dividends; and
             1935          (III) the child's capital gain distributions; and
             1936          (ii) the amount not taxed that is specified on Form 8814.
             1937          [(6)] (5) Notwithstanding Subsection (1)[(g)](e), interest from bonds, notes, and other
             1938      evidences of indebtedness issued by an entity described in Subsections (1)[(g)](e)(i) through
             1939      (iv) may not be added to [federal taxable] adjusted gross income of a resident or nonresident
             1940      individual if, as annually determined by the commission:
             1941          (a) for an entity described in Subsection (1)[(g)](e)(i) or (ii), the entity and all of the
             1942      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             1943      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
             1944          (b) for an entity described in Subsection (1)[(g)](e)(iii) or (iv), the following do not
             1945      impose a tax based on income on any part of the bonds, notes, and other evidences of
             1946      indebtedness of this state:
             1947          (i) the entity; or


             1948          (ii) (A) the state in which the entity is located; or
             1949          (B) the District of Columbia, if the entity is located within the District of Columbia.
             1950          Section 28. Section 59-10-115 is amended to read:
             1951           59-10-115. Adjustments to adjusted gross income.
             1952          (1) The commission shall allow an adjustment to [federal taxable] adjusted gross
             1953      income of a [taxpayer] resident or nonresident individual if the [taxpayer] resident or
             1954      nonresident individual would otherwise:
             1955          (a) receive a double tax benefit under this part; or
             1956          (b) suffer a double tax detriment under this part.
             1957          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1958      commission may make rules to allow for the adjustment to [federal taxable] adjusted gross
             1959      income required by Subsection (1).
             1960          Section 29. Section 59-10-116 is amended to read:
             1961           59-10-116. Tax on nonresident individual -- Calculation -- Exemption.
             1962          [(1) For purposes of this section:]
             1963          [(a) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.]
             1964          [(b) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.]
             1965          [(c) "State income tax percentage" means a percentage equal to a nonresident
             1966      individual's adjusted gross income for the taxable year received from Utah sources, as
             1967      determined under Section 59-10-117 , divided by the difference between:]
             1968          [(i) the nonresident individual's total adjusted gross income for that taxable year; and]
             1969          [(ii) if the nonresident individual described in Subsection (1)(c)(i) is a servicemember,
             1970      the compensation the servicemember receives for military service if the servicemember is
             1971      serving in compliance with military orders.]
             1972          [(d) "State taxable income" means a nonresident individual's federal taxable income
             1973      after making the:]
             1974          [(i) additions and subtractions required by Section 59-10-114 ; and]
             1975          [(ii) adjustments required by Section 59-10-115 .]
             1976          [(e) "Unapportioned state tax" means the product of the:]
             1977          [(i) difference between:]
             1978          [(A) a nonresident individual's state taxable income; and]


             1979          [(B) if the nonresident individual described in Subsection (1)(e)(i)(A) is a
             1980      servicemember, compensation the servicemember receives for military service if the
             1981      servicemember is serving in compliance with military orders; and]
             1982          [(ii) tax rate imposed under Section 59-10-104 .]
             1983          [(2)] (1) Except as provided in Subsection [(3)] (2) [or Part 12, Single Rate Individual
             1984      Income Tax Act], a tax is imposed on a nonresident individual in an amount equal to the
             1985      product of the [nonresident individual's]:
             1986          [(a) unapportioned state tax; and]
             1987          [(b) state income tax percentage.]
             1988          (a) nonresident individual's state taxable income; and
             1989          (b) percentage listed in Subsection 59-10-104 (2).
             1990          [(3)] (2) This section does not apply to a nonresident individual exempt from taxation
             1991      under Section 59-10-104.1 .
             1992          [(4) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1993      for purposes of Subsection (1), the commission may by rule define what constitutes
             1994      compensation.]
             1995          Section 30. Section 59-10-117 is amended to read:
             1996           59-10-117. State taxable income derived from Utah sources.
             1997          (1) For purposes of Section 59-10-116 , [adjusted gross] state taxable income [derived
             1998      from Utah sources] includes those items includable in [adjusted gross] state taxable income
             1999      attributable to or resulting from:
             2000          (a) the ownership in this state of any interest in real or tangible personal property,
             2001      including real property or property rights from which ["]gross income from mining[,"] as
             2002      defined by Section 613(c), Internal Revenue Code, is derived; or
             2003          (b) the carrying on of a business, trade, profession, or occupation in this state.
             2004          (2) For the purposes of Subsection (1):
             2005          (a) income from intangible personal property, including annuities, dividends, interest,
             2006      and gains from the disposition of intangible personal property shall constitute income derived
             2007      from Utah sources only to the extent that [such] the income is from property employed in a
             2008      trade, business, profession, or occupation carried on in this state;
             2009          (b) [deductions] a deduction with respect to a capital [losses] loss, net long-term capital


             2010      [gains] gain, [and] or net operating [losses] loss shall be based solely on income, gain, loss, and
             2011      deduction connected with Utah sources, under rules prescribed by the commission in
             2012      accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, but otherwise
             2013      shall be determined in the same manner as the corresponding federal deductions;
             2014          (c) [salaries, wages, commissions, and] a salary, wage, commission, or compensation
             2015      for personal services rendered outside this state [shall] may not be considered to be derived
             2016      from Utah sources;
             2017          (d) a nonresident shareholder's distributive share of ordinary income, gain, loss, and
             2018      deduction derived from or connected with Utah sources shall be determined under Section
             2019      59-10-118 ;
             2020          (e) a nonresident, other than a dealer holding property primarily for sale to customers
             2021      in the ordinary course of the dealer's trade or business, may not be considered to carry on a
             2022      trade, business, profession, or occupation in this state solely by reason of the purchase or sale
             2023      of property for the nonresident's own account;
             2024          (f) if a trade, business, profession, or occupation is carried on partly within and partly
             2025      without this state, [items] an item of income, gain, loss, [and deductions] or a deduction
             2026      derived from or connected with Utah sources shall be determined in accordance with [the
             2027      provisions of] Section 59-10-118 ;
             2028          (g) a nonresident partner's distributive share of partnership income, gain, loss, and
             2029      deduction derived from or connected with Utah sources shall be determined under Section
             2030      [ 59-10-303 ] 59-10-1405 ;
             2031          (h) the share of a nonresident estate or trust [and nonresident beneficiaries] or a
             2032      nonresident beneficiary of any estate or trust in income, gain, loss, [and] or deduction derived
             2033      from or connected with Utah sources shall be determined under Section 59-10-207 ; and
             2034          (i) any dividend, interest, or distributive share of income, gain, or loss from a real
             2035      estate investment trust, as defined in Section [ 59-7-116.5 ] 59-7-101 , distributed or allocated to
             2036      a nonresident investor in the trust, including any shareholder, beneficiary, or owner of a
             2037      beneficial interest in the trust, shall be income from intangible personal property under
             2038      Subsection (2)(a), and shall constitute income derived from Utah sources only to the extent the
             2039      nonresident investor is employing its beneficial interest in the trust in a trade, business,
             2040      profession, or occupation carried on by the investor in this state.


             2041          Section 31. Section 59-10-118 is amended to read:
             2042           59-10-118. Division of income for tax purposes.
             2043          (1) As used in this section [unless the context otherwise requires]:
             2044          (a) "Business income" means income arising from transactions and activity in the
             2045      regular course of [the] a taxpayer's trade or business and includes income from tangible and
             2046      intangible property if the acquisition, management, and disposition of the property constitutes
             2047      integral parts of the taxpayer's regular trade or business operations.
             2048          (b) "Commercial domicile" means the principal place from which the trade or business
             2049      of [the] a taxpayer is directed or managed.
             2050          [(c) "Compensation" means wages, salaries, commissions, and any other form of
             2051      remuneration paid to employee for personal services.]
             2052          [(d)] (c) "Nonbusiness income" means all income other than business income.
             2053          [(e)] (d) "Sales" means all gross receipts of [the] a taxpayer not allocated under
             2054      Subsections (3) through (7).
             2055          [(f)] (e) "State" means any state of the United States, the District of Columbia, the
             2056      commonwealth of Puerto Rico, [and] or any possession of the United States.
             2057          (2) [Any] A taxpayer having business income [which] that is taxable both within and
             2058      without this state, shall allocate and apportion [his] the taxpayer's net income as provided in
             2059      this section.
             2060          (3) Rents and royalties from real or tangible personal property, capital gains, interest,
             2061      dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness
             2062      income, shall be allocated as provided in Subsections (4) through (7).
             2063          (4) (a) Net rents and royalties from real property located in this state are allocable to
             2064      this state.
             2065          (b) Net rents and royalties from tangible personal property are allocable to this state:
             2066          (i) if and to the extent that the property is utilized in this state; or
             2067          (ii) in their entirety if the taxpayer's commercial domicile is in this state and the
             2068      taxpayer is not organized under the laws of or taxable in the state in which the property is
             2069      utilized.
             2070          (c) The extent of utilization of tangible personal property in a state is determined by
             2071      multiplying the rents and royalties by a fraction, the numerator of which is the number of days


             2072      of physical location of the property in the state during the rental or royalty period in the taxable
             2073      year and the denominator of which is the number of days of physical location of the property
             2074      everywhere during all rental or royalty periods in the taxable year. If the physical location of
             2075      the property during the rental or royalty period is unknown or unascertainable by the taxpayer,
             2076      tangible personal property is utilized in the state in which the property was located at the time
             2077      the rental or royalty payer obtained possession.
             2078          (5) (a) Capital gains and losses from sales of real property located in this state are
             2079      allocable to this state.
             2080          (b) Capital gains and losses from sales of tangible personal property are allocable to
             2081      this state if:
             2082          (i) the property [had] has a situs in this state at the time of the sale; or
             2083          (ii) the taxpayer's commercial domicile is in this state and the taxpayer is not taxable in
             2084      the state in which the property had a situs.
             2085          (c) Capital gains and losses from sales of intangible personal property are allocable to
             2086      this state if the taxpayer's commercial domicile is in this state.
             2087          (6) Interest and dividends are allocable to this state if the taxpayer's commercial
             2088      domicile is in this state.
             2089          (7) (a) Patent and copyright royalties are allocable to this state:
             2090          (i) if and to the extent that the patent or copyright is utilized by the payer in this state;
             2091      or
             2092          (ii) if and to the extent that the patent or copyright is utilized by the payer in a state in
             2093      which the taxpayer is not taxable and the taxpayer's commercial domicile is in this state.
             2094          (b) A patent is utilized in a state to the extent that it is employed in production,
             2095      fabrication, manufacturing, or other processing in the state or to the extent that a patented
             2096      product is produced in the state. If the basis of receipts from patent royalties does not permit
             2097      allocation to states or if the accounting procedures do not reflect states of utilization, the patent
             2098      is utilized in the state in which the taxpayer's commercial domicile is located.
             2099          (8) All business income shall be apportioned to this state [by multiplying the income
             2100      by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales
             2101      factor, and the denominator of which is three] using the same methods, procedures, and
             2102      requirements of Sections 59-7-311 through 59-7-320 .


             2103          [(9) The property factor is a fraction, the numerator of which is the average value of the
             2104      taxpayer's real and tangible personal property owned or rented and used in this state during the
             2105      tax period and the denominator of which is the average value of all the taxpayer's real and
             2106      tangible personal property owned or rented and used during the tax period.]
             2107          [(10) Property owned by the taxpayer is valued at its original cost. Property rented by
             2108      the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the
             2109      annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from
             2110      subrentals.]
             2111          [(11) The average value of property shall be determined by averaging the values at the
             2112      beginning and ending of the tax period but the commission may require the averaging of
             2113      monthly values during the tax period, if reasonably required to reflect properly the average
             2114      value of the taxpayer's property.]
             2115          [(12) The payroll factor is a fraction, the numerator of which is the total amount paid in
             2116      this state during the tax period by the taxpayer for compensation, and the denominator of which
             2117      is the total compensation paid everywhere during the tax period.]
             2118          [(13) Compensation is paid in this state if:]
             2119          [(a) the individual's service is performed entirely within the state; or]
             2120          [(b) the individual's service is performed both within and without the state, but the
             2121      service performed without the state is incidental to the individual's service within the state; or]
             2122          [(c) some of the service is performed in the state and:]
             2123          [(i) the base of operations or, if there is no base of operations, the place from which the
             2124      service is directed or controlled is in the state; or]
             2125          [(ii) the base of operations or the place from which the service is directed or controlled
             2126      is not in any state in which some part of the service is performed, but the individual's residence
             2127      is in this state.]
             2128          [(14) The sales factor is a fraction, the numerator of which is the total sales of the
             2129      taxpayer in this state during the tax period, and the denominator of which is the total sales of
             2130      the taxpayer everywhere during the tax period.]
             2131          [(15) Sales of tangible personal property are in this state if the property is delivered or
             2132      shipped to a purchaser within this state regardless of the f.o.b. point or other conditions of the
             2133      sale.]


             2134          [(16) Sales, other than sales of tangible personal property, are in this state if:]
             2135          [(a) the income-producing activity is performed in this state; or]
             2136          [(b) the income-producing activity is performed both in and outside this state and a
             2137      greater proportion of the income-producing activity is performed in this state than in any other
             2138      state, based on costs of performance.]
             2139          [(17) If the allocation and apportionment provisions of this chapter do not fairly
             2140      represent the extent of the taxpayer's business activity in this state, the taxpayer may petition
             2141      for or the commission may require, in respect of all or any part of the taxpayer's business
             2142      activity, if reasonable:]
             2143          [(a) separate accounting;]
             2144          [(b) the exclusion of any one or more of the factors;]
             2145          [(c) the inclusion of one or more additional factors which will fairly represent the
             2146      taxpayer's business activity in this state; or]
             2147          [(d) the employment of any other method to effectuate an equitable allocation and
             2148      apportionment of the taxpayer's income.]
             2149          Section 32. Section 59-10-119 is amended to read:
             2150           59-10-119. Returns by husband and wife, either or both of whom is a
             2151      nonresident.
             2152          (1) If the [federal taxable] adjusted gross income of a husband and wife [(] who are
             2153      both nonresidents of this state[)] is reported or determined on separate federal individual
             2154      income tax returns, [their] the husband's and wife's state taxable incomes in this state shall be
             2155      separately determined.
             2156          (2) If the [federal taxable] adjusted gross income of a husband and wife [(] who are
             2157      both nonresidents[)] of this state is reported or determined on a joint federal individual income
             2158      tax return [their], the husband's and wife's tax shall be reported or determined in this state on a
             2159      joint return.
             2160          (3) (a) If [either husband or wife] one spouse is a nonresident of this state and the other
             2161      spouse is a resident of this state, separate taxes shall be determined on [their] each spouse's
             2162      separate state taxable incomes on [such forms as the commission shall prescribe, unless both
             2163      elect to determine their state taxable income as if both were residents] forms prescribed by the
             2164      commission.


             2165          (b) Notwithstanding Subsection (3)(a), a husband and wife may elect to be considered
             2166      to be residents of this state for purposes of determining state taxable income for a taxable year.
             2167          (c) If [a husband and wife (one being a resident, the other a nonresident)] one spouse
             2168      who is a nonresident of this state and the other spouse who is a resident of this state file a joint
             2169      federal income tax return, but determine [their] state taxable income separately, [they] the
             2170      spouses shall compute their taxable incomes in this state as if their [federal taxable] adjusted
             2171      gross incomes had been determined separately.
             2172          Section 33. Section 59-10-120 is amended to read:
             2173           59-10-120. Change of status as resident or nonresident.
             2174          (1) If an individual changes [his] the individual's status during [his] the taxable year
             2175      from resident to nonresident or from nonresident to resident, the commission may by rule,
             2176      made in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, require
             2177      [him] the individual to file one return for the portion of the taxable year during which [he] the
             2178      individual is a resident and another return for the portion of the taxable year during which [he]
             2179      the individual is a nonresident.
             2180          (2) [Except as provided in Subsection (3) the] The taxable income of the individual
             2181      described in Subsection (1) shall be determined as provided in this chapter for residents and for
             2182      nonresidents as if the individual's taxable year for federal income tax purposes were limited to
             2183      the period of [his] the individual's resident and nonresident status respectively.
             2184          [(3) There shall be included in determining taxable income from sources within or
             2185      without this state, as the case may be, income, gain, loss, or deduction accrued prior to the
             2186      change of status, even though not otherwise includable or allowable in respect of the period
             2187      prior to such change, but the taxation or deduction of items received or accrued prior to the
             2188      change of status shall not be affected by the change.]
             2189          Section 34. Section 59-10-121 is amended to read:
             2190           59-10-121. Proration when two returns required.
             2191          [Where two returns are required to be filed as provided in] If an individual is required
             2192      to file two returns for a taxable year under Section 59-10-120 :
             2193          (1) personal exemptions and the standard deduction as used on the federal individual
             2194      income tax return shall be prorated between the two returns, under rules prescribed by the
             2195      commission in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, to


             2196      reflect the proportions of the taxable year during which the individual was a resident and a
             2197      nonresident; and
             2198          (2) the total amount of the taxes due [thereon shall] on the two returns may not be less
             2199      than the total amount of the taxes that would be due if the total of the taxable incomes reported
             2200      on the two returns [were includable] had been included in one return.
             2201          Section 35. Section 59-10-122 is amended to read:
             2202           59-10-122. Taxable year.
             2203          (1) For purposes of [the] a tax imposed by this chapter, [a taxpayer's] the taxable year
             2204      of a resident or nonresident individual or resident or nonresident estate or trust shall be the
             2205      same as [his] the taxable year of the resident or nonresident individual or resident or
             2206      nonresident estate or trust for federal income tax purposes.
             2207          (2) (a) If [a taxpayer's] the taxable year of a resident or nonresident individual or
             2208      resident or nonresident estate or trust is changed for federal income tax purposes, [his] that
             2209      taxable year for purposes of [the] a tax imposed by this chapter shall be [similarly] changed in
             2210      the same manner as the change for federal income tax purposes.
             2211          (b) If a change in a taxable year results in a taxable period of less than 12 months for
             2212      federal income tax purposes, [the] that same taxable period shall be used in computing [the] a
             2213      tax imposed by this chapter.
             2214          Section 36. Section 59-10-123 is amended to read:
             2215           59-10-123. Accounting method.
             2216          (1) For purposes of [the] a tax imposed by this chapter, a [taxpayer's] resident or
             2217      nonresident individual's or resident or nonresident estate's or trust's method of accounting shall
             2218      be the same as the method [employed] of accounting the resident or nonresident individual or
             2219      resident or nonresident estate or trust uses for federal income tax purposes.
             2220          (2) If a [taxpayer's] resident or nonresident individual's or resident or nonresident
             2221      estate's or trust's method of accounting is changed for federal income tax purposes, [his] the
             2222      resident or nonresident individual's or resident or nonresident estate's or trust's method of
             2223      accounting shall be [similarly] changed [and reflected in each return filed for Utah individual
             2224      income tax purposes] in the same manner:
             2225          (a) for purposes of a tax imposed by this chapter; and
             2226          (b) for any taxable year for which [such] the change in the method of accounting is


             2227      [reflected in his return] made for federal income tax purposes.
             2228          Section 37. Section 59-10-124 is amended to read:
             2229           59-10-124. Adjustments between taxable years after change in accounting
             2230      method.
             2231          (1) In computing [a taxpayer's] a resident or nonresident individual's or resident or
             2232      nonresident estate's or trust's state taxable income for [any] a taxable year under a method of
             2233      accounting different from the method under which the [taxpayer's] resident or nonresident
             2234      individual's or resident or nonresident estate's or trust's state taxable income [for the previous
             2235      year] was computed[, there shall be taken into account those adjustments which are
             2236      determined, under rules prescribed by the commission, to be necessary solely by reason of the
             2237      change, to prevent double inclusion or exclusion of an item of gross income, or double
             2238      allowance or disallowance of an item of deduction or credit.] for the previous taxable year,
             2239      state taxable income shall be increased or decreased:
             2240          (a) to prevent double inclusion or exclusion of an item of gross income as a result of
             2241      the change in the method of accounting; or
             2242          (b) to prevent double allowance or disallowance of a subtraction from or addition to
             2243      gross income as a result of the change in the method of accounting.
             2244          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             2245      commission may make rules for making an increase or decrease required by Subsection (1).
             2246          Section 38. Section 59-10-125 is amended to read:
             2247           59-10-125. Adjustment after change of accounting method.
             2248          (1) If a taxpayer's method of accounting is changed, other than from an accrual to an
             2249      installment method, any additional tax that results from adjustments determined to be necessary
             2250      solely by reason of the change [shall] may not be greater than if [such] those adjustments were
             2251      ratably allocated and included for the taxable year of the change and the preceding taxable
             2252      years, not in excess of two, during which the taxpayer used the method of accounting from
             2253      which the change is made.
             2254          (2) If a taxpayer's method of accounting is changed from an accrual to an installment
             2255      method, any additional tax for the taxable year of [such] the change [of] in the method of
             2256      accounting and for any subsequent taxable year that is attributable to the receipt of installment
             2257      payments properly accrued in a prior taxable year, shall be reduced by the portion of tax for any


             2258      prior taxable year attributable to the accrual of such installment payments, under rules
             2259      prescribed by the commission in accordance with Title 63, Chapter 46a, Utah Administrative
             2260      Rulemaking Act.
             2261          Section 39. Section 59-10-126 is amended to read:
             2262           59-10-126. Business entities not subject to tax -- Exceptions.
             2263          (1) [An association, trust, or other unincorporated organization] A business entity that
             2264      is taxable as a corporation for federal income tax purposes [shall]:
             2265          (a) may not be subject to the tax imposed by this chapter[, but shall be]; and
             2266          (b) is subject to [the provisions of Title 59,] Chapter 7, Corporate Franchise and
             2267      Income Taxes.
             2268          [(2) To the extent an association, trust, or other unincorporated organization which by
             2269      reason of its purposes or activities is exempt from federal income tax, it shall be exempt from
             2270      the tax imposed by this chapter, but to the extent that such an otherwise exempt organization
             2271      has, or is treated as having, income subject to tax for federal tax purposes, it shall be subject to
             2272      the provisions of Title 59, Chapter 7.]
             2273          (2) A business entity that is exempt from federal income taxation is exempt from the
             2274      tax imposed by this chapter.
             2275          (3) Notwithstanding Subsection (2), if a business entity that is exempt from federal
             2276      income taxation has income that is subject to federal income taxation, that income is subject to
             2277      taxation under Chapter 7, Corporate Franchise and Income Taxes.
             2278          Section 40. Section 59-10-201 is amended to read:
             2279           59-10-201. Taxation of resident trusts and estates.
             2280          (1) [A] Except as provided in Subsection (2), a tax determined in accordance with the
             2281      [rates] rate prescribed by [Section 59-10-104 for individuals filing separately] Subsection
             2282      59-10-104 (2)(b) is imposed for each taxable year on the state taxable income of each resident
             2283      estate or trust[, except for trusts].
             2284          (2) The following are not subject to a tax imposed by this part:
             2285          (a) a resident estate or trust that is not required to file a federal income tax return for
             2286      estates and trusts for the taxable year; or
             2287          (b) a resident trust taxed as [corporations] a corporation.
             2288          [(2)] (3) A resident estate or trust shall be allowed the credit provided in Section


             2289      59-10-1003 , relating to an income tax imposed by another state, except that the limitation shall
             2290      be computed by reference to the taxable income of the estate or trust.
             2291          [(3)] (4) The property of the Utah Educational Savings Plan trust established in Title
             2292      53B, Chapter 8a, Higher Education Savings Incentive Program, and its income from operations
             2293      and investments are exempt from all taxation by the state under this chapter.
             2294          Section 41. Section 59-10-201.1 is amended to read:
             2295           59-10-201.1. State taxable income of a resident estate or trust defined.
             2296          [The] For a taxable year, the state taxable income of a resident estate or trust means [its
             2297      federal taxable] the unadjusted income [as calculated in Section 641 (a) and (b), Internal
             2298      Revenue Code] of the resident estate or trust for that taxable year, as adjusted by Sections
             2299      59-10-202 , 59-10-209.1 , and 59-10-210 .
             2300          Section 42. Section 59-10-202 is amended to read:
             2301           59-10-202. Additions to and subtractions from unadjusted income of a resident or
             2302      nonresident estate or trust.
             2303          (1) There shall be added to[ federal taxable] unadjusted income of a resident or
             2304      nonresident estate or trust:
             2305          [(a) the amount of any income tax imposed by this or any predecessor Utah individual
             2306      income tax law and the amount of any income tax imposed by the laws of another state, the
             2307      District of Columbia, or a possession of the United States, to the extent deducted from federal
             2308      adjusted total income as defined in Section 62, Internal Revenue Code, in determining federal
             2309      taxable income;]
             2310          [(b)] (a) a lump sum distribution allowable as a deduction under Section 402(d)(3) [of
             2311      the], Internal Revenue Code, to the extent deductible under Section 62(a)(8) [of the], Internal
             2312      Revenue Code, in determining adjusted gross income;
             2313          [(c)] (b) except as provided in Subsection (3), [for taxable years beginning on or after
             2314      January 1, 2003,] for bonds, notes, and other evidences of indebtedness acquired on or after
             2315      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             2316      one or more of the following entities:
             2317          (i) a state other than this state;
             2318          (ii) the District of Columbia;
             2319          (iii) a political subdivision of a state other than this state; or


             2320          (iv) an agency or instrumentality of an entity described in Subsections (1)[(c)](b)(i)
             2321      through (iii);
             2322          [(d)] (c) any portion of federal taxable income for a taxable year if that federal taxable
             2323      income is derived from stock:
             2324          (i) in an S corporation; and
             2325          (ii) that is held by an electing small business trust;
             2326          [(e) (i)] (d) the amount withdrawn under Title 53B, Chapter 8a, Higher Education
             2327      Savings Incentive Program, from the account of a resident or nonresident estate or trust that is
             2328      an account owner as defined in Section 53B-8a-102 , for the taxable year for which the amount
             2329      is withdrawn, if that amount withdrawn from the account of the resident or nonresident estate
             2330      or trust that is the account owner:
             2331          [(A)] (i) is not expended for higher education costs as defined in Section 53B-8a-102 ;
             2332      and
             2333          [(B)] (ii) is:
             2334          (A) subtracted by the resident or nonresident estate or trust:
             2335          (I) that is the account owner; and
             2336          [(II) in accordance with Subsection (2)(j)(i); and]
             2337          [(ii) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             2338      Incentive Program, from the account of a resident or nonresident estate or trust that is an
             2339      account owner as defined in Section 53B-8a-102 , for the taxable year beginning on or after
             2340      January 1, 2007, but beginning on or before December 31, 2007, if that amount withdrawn
             2341      from the account of the resident or nonresident estate or trust that is the account owner:]
             2342          [(A) is not expended for higher education costs as defined in Section 53B-8a-102 ; and]
             2343          [(B) is subtracted by the resident or nonresident estate or trust:]
             2344          [(I) that is the account owner; and]
             2345          [(II) in accordance with Subsection (2)(j)(ii); and]
             2346          (II) on the resident or nonresident estate's or trust's return filed under this chapter for a
             2347      taxable year beginning on or before December 31, 2007; or
             2348          (B) used as the basis for the resident or nonresident estate or trust that is the account
             2349      owner to claim a tax credit under Section 59-10-1017 ; and
             2350          [(f)] (e) any fiduciary adjustments required by Section 59-10-210 .


             2351          (2) There shall be subtracted from [federal taxable] unadjusted income of a resident or
             2352      nonresident estate or trust:
             2353          (a) the interest or a dividend on obligations or securities of the United States and its
             2354      possessions or of any authority, commission, or instrumentality of the United States, to the
             2355      extent that interest or dividend is included in gross income for federal income tax purposes for
             2356      the taxable year but exempt from state income taxes under the laws of the United States, but
             2357      the amount subtracted under this Subsection (2) shall be reduced by any interest on
             2358      indebtedness incurred or continued to purchase or carry the obligations or securities described
             2359      in this Subsection (2), and by any expenses incurred in the production of interest or dividend
             2360      income described in this Subsection (2) to the extent that such expenses, including amortizable
             2361      bond premiums, are deductible in determining federal taxable income;
             2362          [(b) 1/2 of the net amount of any income tax paid or payable to the United States after
             2363      all allowable credits, as per the United States fiduciary income tax return of the taxpayer for the
             2364      same taxable year;]
             2365          [(c)] (b) income of an irrevocable resident trust if:
             2366          (i) the income would not be treated as state taxable income derived from Utah sources
             2367      under Section 59-10-204 if received by a nonresident trust;
             2368          (ii) the trust first became a resident trust on or after January 1, 2004;
             2369          (iii) no assets of the trust were held, at any time after January 1, 2003, in another
             2370      resident irrevocable trust created by the same settlor or the spouse of the same settlor;
             2371          (iv) the trustee of the trust is a trust company as defined in Subsection 7-5-1 (1)(d);
             2372          (v) the amount subtracted under this Subsection (2)(b) is reduced to the extent the
             2373      settlor or any other person is treated as an owner of any portion of the trust under Subtitle A,
             2374      Subchapter J, Subpart E of the Internal Revenue Code; and
             2375          (vi) the amount subtracted under this Subsection (2)(b) is reduced by any interest on
             2376      indebtedness incurred or continued to purchase or carry the assets generating the income
             2377      described in this Subsection (2)(b), and by any expenses incurred in the production of income
             2378      described in this Subsection (2)(b), to the extent that those expenses, including amortizable
             2379      bond premiums, are deductible in determining federal taxable income;
             2380          [(d)] (c) if the conditions of Subsection (4)(a) are met, the amount of income of a
             2381      resident or nonresident estate or trust derived from a deceased Ute tribal member:


             2382          (i) during a time period that the Ute tribal member resided on homesteaded land
             2383      diminished from the Uintah and Ouray Reservation; and
             2384          (ii) from a source within the Uintah and Ouray Reservation;
             2385          [(e) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
             2386      resident or nonresident estate's or trust's short-term capital gain or long-term capital gain on a
             2387      capital gain transaction:]
             2388          [(A) that occurs on or after January 1, 2003;]
             2389          [(B) if 70% or more of the gross proceeds of the capital gain transaction are expended:]
             2390          [(I) to purchase qualifying stock in a Utah small business corporation; and]
             2391          [(II) within a 12-month period after the day on which the capital gain transaction
             2392      occurs; and]
             2393          [(C) if, prior to the purchase of the qualifying stock described in Subsection
             2394      (2)(e)(i)(B)(I), the resident or nonresident estate or trust did not have an ownership interest in
             2395      the Utah small business corporation that issued the qualifying stock; and]
             2396          [(ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             2397      the commission may make rules:]
             2398          [(A) defining the term "gross proceeds"; and]
             2399          [(B) for purposes of Subsection (2)(e)(i)(C), prescribing the circumstances under which
             2400      a resident or nonresident estate or trust has an ownership interest in a Utah small business
             2401      corporation;]
             2402          [(f) for the taxable year beginning on or after January 1, 2005, but beginning on or
             2403      before December 31, 2005, the first $2,200 of income of a resident or nonresident estate or
             2404      trust that is derived from a deceased qualifying military servicemember:]
             2405          [(i) for service:]
             2406          [(A) as a qualifying military servicemember; or]
             2407          [(B) under an order into active service in accordance with Section 39-1-5 ; and]
             2408          [(ii) to the extent that income is included in total income on that resident or nonresident
             2409      estate's or trust's federal income tax return for estates and trusts for that taxable year;]
             2410          [(g)] (d) any amount:
             2411          (i) received by a resident or nonresident estate or trust;
             2412          (ii) that constitutes a refund of taxes imposed by:


             2413          (A) a state; or
             2414          (B) the District of Columbia; and
             2415          (iii) to the extent that amount is included in total income on that resident or nonresident
             2416      estate's or trust's federal tax return for estates and trusts for that taxable year;
             2417          [(h)] (e) the amount of a railroad retirement benefit:
             2418          (i) paid:
             2419          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
             2420      seq.;
             2421          (B) to a resident or nonresident estate or trust derived from a deceased resident or
             2422      nonresident individual; and
             2423          (C) for the taxable year; and
             2424          (ii) to the extent that railroad retirement benefit is included in total income on that
             2425      resident or nonresident estate's or trust's federal tax return for estates and trusts;
             2426          [(i)] (f) an amount:
             2427          (i) received by a resident or nonresident estate or trust if that amount is derived from a
             2428      deceased enrolled member of an American Indian tribe; and
             2429          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
             2430      part on that amount in accordance with:
             2431          (A) federal law;
             2432          (B) a treaty; or
             2433          (C) a final decision issued by a court of competent jurisdiction;
             2434          [(j) (i) subject to Subsection (1)(e)(i), for taxable years beginning on or after January 1,
             2435      2007, the amount of a qualified investment as defined in Section 53B-8a-102 that:]
             2436          [(A) a resident or nonresident estate or trust that is an account owner as defined in
             2437      Section 53B-8a-102 makes during the taxable year;]
             2438          [(B) the resident or nonresident estate or trust described in Subsection (2)(j)(i)(A) does
             2439      not deduct on a federal tax return for estates and trusts; and]
             2440          [(C) does not exceed the maximum amount of the qualified investment that may be
             2441      subtracted from federal taxable income for a taxable year in accordance with Subsections
             2442      53B-8a-106 (1)(e) and (f); and]
             2443          [(ii) subject to Subsection (1)(e)(ii), for the taxable year beginning on or after January


             2444      1, 2007, but beginning on or before December 31, 2007 only, and in addition to any subtraction
             2445      a resident or nonresident estate or trust that is an account owner as defined in Section
             2446      53B-8a-102 makes in accordance with Subsection (2)(j)(i), the amount of a qualified
             2447      investment as defined in Section 53B-8a-102 that:]
             2448          [(A) a resident or nonresident estate or trust that is an account owner as defined in
             2449      Section 53B-8a-102 could have subtracted under Subsection (2)(j)(i) for the taxable year
             2450      beginning on or after January 1, 2006, but beginning on or before December 31, 2006, had the
             2451      subtraction under Subsection (2)(j)(i) been in effect for the taxable year beginning on or after
             2452      January 1, 2006, but beginning on or before December 31, 2006;]
             2453          [(B) the resident or nonresident estate or trust described in Subsection (2)(j)(ii)(A)
             2454      makes during the taxable year beginning on or after January 1, 2006, but beginning on or
             2455      before December 31, 2006;]
             2456          [(C) the resident or nonresident estate or trust described in Subsection (2)(j)(ii)(A) does
             2457      not deduct on a federal tax return for estates and trusts; and]
             2458          [(D) does not exceed the maximum amount of the qualified investment that may be
             2459      subtracted from federal taxable income:]
             2460          [(I) for the taxable year beginning on or after January 1, 2006, but beginning on or
             2461      before December 31, 2006; and]
             2462          [(II) in accordance with Subsections 53B-8a-106 (1)(e) and (f); and]
             2463          (g) the amount that a qualified nongrantor charitable lead trust deducts under Section
             2464      642(c), Internal Revenue Code, as a charitable contribution deduction, as allowed on the
             2465      qualified nongrantor charitable lead trust's federal income tax return for estates and trusts for
             2466      the taxable year; and
             2467          [(k)] (h) any fiduciary adjustments required by Section 59-10-210 .
             2468          (3) Notwithstanding Subsection (1)[(c)](b), interest from bonds, notes, and other
             2469      evidences of indebtedness issued by an entity described in Subsections (1)[(c)](b)(i) through
             2470      (iv) may not be added to [federal taxable] unadjusted income of a resident or nonresident estate
             2471      or trust if, as annually determined by the commission:
             2472          (a) for an entity described in Subsection (1)[(c)](b)(i) or (ii), the entity and all of the
             2473      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             2474      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or


             2475          (b) for an entity described in Subsection (1)[(c)](b)(iii) or (iv), the following do not
             2476      impose a tax based on income on any part of the bonds, notes, and other evidences of
             2477      indebtedness of this state:
             2478          (i) the entity; or
             2479          (ii) (A) the state in which the entity is located; or
             2480          (B) the District of Columbia, if the entity is located within the District of Columbia.
             2481          (4) (a) A subtraction for an amount described in Subsection (2)[(d)](c) is allowed only
             2482      if:
             2483          (i) the income is derived from a deceased Ute tribal member; and
             2484          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             2485      requirements of this Subsection (4).
             2486          (b) The agreement described in Subsection (4)(a):
             2487          (i) may not:
             2488          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             2489          (B) provide a subtraction under this section greater than or different from the
             2490      subtraction described in Subsection (2)[(d)](c); or
             2491          (C) affect the power of the state to establish rates of taxation; and
             2492          (ii) shall:
             2493          (A) provide for the implementation of the subtraction described in Subsection
             2494      (2)[(d)](c);
             2495          (B) be in writing;
             2496          (C) be signed by:
             2497          (I) the governor; and
             2498          (II) the chair of the Business Committee of the Ute tribe;
             2499          (D) be conditioned on obtaining any approval required by federal law; and
             2500          (E) state the effective date of the agreement.
             2501          (c) (i) The governor shall report to the commission by no later than February 1 of each
             2502      year regarding whether or not an agreement meeting the requirements of this Subsection (4) is
             2503      in effect.
             2504          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
             2505      subtraction permitted under Subsection (2)[(d)](c) is not allowed for taxable years beginning


             2506      on or after the January 1 following the termination of the agreement.
             2507          (d) For purposes of Subsection (2)[(d)](c) and in accordance with Title 63, Chapter
             2508      46a, Utah Administrative Rulemaking Act, the commission may make rules:
             2509          (i) for determining whether income is derived from a source within the Uintah and
             2510      Ouray Reservation; and
             2511          (ii) that are substantially similar to how adjusted gross income derived from Utah
             2512      sources is determined under Section 59-10-117 .
             2513          Section 43. Section 59-10-204 is amended to read:
             2514           59-10-204. State taxable income of a nonresident estate or trust.
             2515          [The] For a taxable year, the state taxable income of a nonresident estate or trust [shall
             2516      be its state taxable] is an amount calculated by:
             2517          (1) determining the unadjusted income [as calculated in Section 59-10-201.1 ,] of the
             2518      nonresident estate or trust for that taxable year after making the adjustments required by:
             2519          (a) Section 59-10-202 ;
             2520          (b) Section 59-10-207 ;
             2521          (c) Section 59-10-209.1 ; or
             2522          (d) Section 59-10-210 ; and
             2523          (2) calculating the portion of the amount determined under Subsection (1) that is
             2524      derived from Utah sources determined in accordance with the principles of Section 59-10-117 [,
             2525      and adjusted as provided in Section 59-10-207 ].
             2526          Section 44. Section 59-10-205 is amended to read:
             2527           59-10-205. Tax on income derived from Utah sources.
             2528          [A tax] (1) Except as provided in Subsection (2), a tax is imposed on a nonresidential
             2529      estate or trust in an amount equal to the product of:
             2530          (a) the nonresident estate's or trust's state taxable income[, as calculated in Section
             2531      59-10-204 , of every nonresident estate or trust in accordance with the rates prescribed in
             2532      Section 59-10-104 for individuals filing separately. The tax shall only be applied to income
             2533      derived from Utah sources as adjusted by Section 59-10-207 , including such items from
             2534      another estate or trust of which the first estate or trust is a beneficiary.] as determined under
             2535      Section 59-10-204 ; and
             2536          (b) the percentage listed in Subsection 59-10-104 (2).


             2537          (2) The following are not subject to a tax imposed by this part:
             2538          (a) a nonresident estate or trust that is not required to file a federal income tax return
             2539      for estates and trusts for the taxable year; or
             2540          (b) a nonresident trust taxed as a corporation.
             2541          Section 45. Section 59-10-207 is amended to read:
             2542           59-10-207. Share of a nonresident estate or trust and beneficiaries in state taxable
             2543      income.
             2544          (1) The following shall be determined as provided in this section:
             2545          [(1) The](a) the share of a nonresident estate or trust [and its beneficiaries in items] or
             2546      a nonresident beneficiary of a nonresident estate or trust in an item of income, gain, loss, [and]
             2547      or deduction [entering into the definition of] that constitutes distributable net income; and [the
             2548      share]
             2549          (b) for purposes of Section 59-10-116 , the share of a nonresident beneficiary of any
             2550      estate or trust in estate or trust income, gain, loss, [and] or deduction [shall be determined as
             2551      follows:].
             2552          (2) (a) [To] The modifications described in Sections 59-10-202 and 59-10-210 shall be
             2553      added to or subtracted from the amount of [items] an item of income, gain, loss, [and] or
             2554      deduction that [enter into the definition of] constitutes distributable net income [there shall be
             2555      added or subtracted, as the case may be, the modifications described in Sections 59-10-202 and
             2556      59-10-210 ] to the extent [they relate to items] the item relates to an item of income, gain, loss,
             2557      [and] or deduction that also [enter into the definition of] constitutes distributable net income.
             2558      [No]
             2559          (b) A modification [shall] may not be made under this section [that has the effect of
             2560      duplicating] if the modification duplicates an item already reflected in [the definition of]
             2561      distributable net income.
             2562          [(b)] (3) (a) The amount determined under Subsection [(1)] (2)(a) shall be allocated
             2563      among the estate or trust and [its] the beneficiaries [(including solely for the purpose of this
             2564      allocation, resident beneficiaries)] of the estate or trust, including a resident beneficiary, in
             2565      proportion to [their respective shares of federal] the estate's, trust's, or beneficiary's share of
             2566      distributable net income. [The amounts so allocated shall have]
             2567          (b) An amount allocated in accordance with Subsection (3)(a) has the same character


             2568      as for federal income tax purposes.
             2569          [(c)] (4) (a) If [the] an estate or trust [has no federal] does not have distributable net
             2570      income for the taxable year, the share of each beneficiary in the [net] amount determined under
             2571      Subsection [(1)] (2)(a) shall be in proportion to [his] the beneficiary's share of the estate or trust
             2572      income for [such] that taxable year, under state law or the terms of the governing instrument,
             2573      that is required to be distributed currently and any other amounts of [such] that income
             2574      distributed in [such] that taxable year. [Any]
             2575          (b) For purposes of this Subsection (4), any balance of [such] net income shall be
             2576      allocated to the estate or trust.
             2577          [(2) The] (5) (a) In accordance with Title 63, Chapter 46a, Utah Administrative
             2578      Rulemaking Act, the commission may by rule establish [such] one or more other [method or]
             2579      methods of determining the [respective] shares of [the beneficiaries] a beneficiary and of [the]
             2580      an estate or trust in [its]:
             2581          (i) income derived from sources in this state[,]; and [in the]
             2582          (ii) modifications related [thereto, as may be appropriate and equitable. The] to
             2583      income, gain, loss, or deduction.
             2584          (b) A fiduciary may elect to use [any other methods prescribed in] a method allowed by
             2585      this Subsection (5) only [when] if the allocation of [such respective shares] a share under [this
             2586      section would result] Subsection (3) or (4):
             2587          (i) results in an inequity in the allocation [which]; and
             2588          (ii) the inequity described in Subsection (5)(b)(i) is substantial [both]:
             2589          (A) in amount; and
             2590          (B) in relation to the total amount of the modifications [referred to] described in
             2591      Subsection [(1)] (2)(a).
             2592          Section 46. Section 59-10-209.1 is amended to read:
             2593           59-10-209.1. Adjustments to unadjusted income.
             2594          (1) The commission shall allow an adjustment to [state taxable] unadjusted income of a
             2595      resident or nonresident estate or trust if the resident or nonresident estate or trust would
             2596      otherwise:
             2597          (a) receive a double tax benefit under this chapter; or
             2598          (b) suffer a double tax detriment under this chapter.


             2599          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             2600      commission may make rules to allow for the adjustment to [state taxable] unadjusted income
             2601      required by Subsection (1).
             2602          Section 47. Section 59-10-210 is amended to read:
             2603           59-10-210. Fiduciary adjustments.
             2604          (1) A share of the fiduciary adjustments described in Subsection (2) shall be added to
             2605      or subtracted from [federal taxable] unadjusted income:
             2606          (a) of:
             2607          (i) a resident or nonresident estate or trust; or
             2608          (ii) a resident or nonresident beneficiary of a resident or nonresident estate or trust; and
             2609          (b) as provided in this section.
             2610          (2) For purposes of Subsection (1), the fiduciary adjustments are the following
             2611      amounts:
             2612          (a) the additions to and subtractions from [federal taxable] unadjusted income of a
             2613      resident or nonresident estate or trust required by Section 59-10-202 [, except for Subsection
             2614      59-10-202 (2)(b)]; and
             2615          (b) a tax credit claimed by a resident or nonresident estate or trust as allowed by:
             2616          (i) Section 59-6-102 ;
             2617          (ii) Part 10, Nonrefundable Tax Credit Act;
             2618          (iii) Part 11, Refundable Tax Credit Act;
             2619          (iv) Section 59-13-202 ;
             2620          (v) Section 63-38f-413 ; or
             2621          (vi) Section 63-38f-503 .
             2622          (3) (a) The respective shares of an estate or trust and its beneficiaries, including for the
             2623      purpose of this allocation a nonresident beneficiary, in the state fiduciary adjustments, shall be
             2624      allocated in proportion to their respective shares of federal distributable net income of the
             2625      estate or trust.
             2626          (b) If the estate or trust described in Subsection (3)(a) has no federal distributable net
             2627      income for the taxable year, the share of each beneficiary in the fiduciary adjustments shall be
             2628      allocated in proportion to that beneficiary's share of the estate or trust income for the taxable
             2629      year that is, under state law or the governing instrument, required to be distributed currently


             2630      plus any other amounts of that income distributed in that taxable year.
             2631          (c) After making the allocations required by Subsections (3)(a) and (b), any balance of
             2632      the fiduciary adjustments shall be allocated to the estate or trust.
             2633          (4) (a) The commission shall allow a fiduciary to use a method for determining the
             2634      allocation of the fiduciary adjustments described in Subsection (2) other than the method
             2635      described in Subsection (3) if using the method described in Subsection (3) results in an
             2636      inequity:
             2637          (i) in allocating the fiduciary adjustments described in Subsection (2); and
             2638          (ii) if the inequity is substantial:
             2639          (A) in amount; and
             2640          (B) in relation to the total amount of the fiduciary adjustments described in Subsection
             2641      (2).
             2642          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             2643      commission may make rules authorizing a fiduciary to use a method for determining the
             2644      allocation of the fiduciary adjustments described in Subsection (2) other than the method
             2645      described in Subsection (3) if using the method described in Subsection (3) results in an
             2646      inequity:
             2647          (i) in allocating the fiduciary adjustments described in Subsection (2); and
             2648          (ii) if the inequity is substantial:
             2649          (A) in amount; and
             2650          (B) in relation to the total amount of the fiduciary adjustments described in Subsection
             2651      (2).
             2652          Section 48. Section 59-10-507 is amended to read:
             2653           59-10-507. Return by a pass-through entity.
             2654          (1) [For purposes of] As used in this section[, "taxable]:
             2655          (a) "Pass-through entity" is as defined in Section 59-10-1402 .
             2656          (b) "Taxable year" means a year or other time period that would be a taxable year of a
             2657      [partnership if the partnership] pass-through entity if the pass-through entity were subject to
             2658      taxation under this chapter.
             2659          (2) A [partnership] pass-through entity having any income derived from sources in this
             2660      state shall make a return for the taxable year as prescribed by the commission.


             2661          (3) For purposes of Subsection (2), a [partnership's] pass-through entity's income
             2662      derived from sources in this state shall be determined in accordance with [Section 59-10-303]
             2663      the principles of Section 59-10-1405 .
             2664          Section 49. Section 59-10-1002.1 , which is renumbered from Section 59-10-1016 is
             2665      renumbered and amended to read:
             2666           [59-10-1016].     59-10-1002.1. Removal of tax credit from tax return and
             2667      prohibition on claiming or carrying forward a tax credit -- Conditions for removal and
             2668      prohibition on claiming or carrying forward a tax credit -- Commission reporting
             2669      requirements.
             2670          (1) As used in this section, "tax return" means a tax return filed in accordance with this
             2671      chapter.
             2672          (2) Beginning two taxable years after the requirements of Subsection (3) are met:
             2673          (a) the commission shall remove a tax credit allowed under this part from each tax
             2674      return on which the tax credit appears; and
             2675          (b) a claimant, estate, or trust filing a tax return may not claim or carry forward the tax
             2676      credit.
             2677          (3) The commission shall remove a tax credit allowed under this part from a tax return
             2678      and a claimant, estate, or trust filing a tax return may not claim or carry forward [a] the tax
             2679      credit as provided in Subsection (2) if:
             2680          (a) the total amount of the tax credit claimed or carried forward by all claimants,
             2681      estates, or trusts filing tax returns is less than $10,000 per year for three consecutive taxable
             2682      years beginning on or after January 1, 2002; and
             2683          (b) less than ten claimants, estates, and trusts per year for the three consecutive taxable
             2684      years described in Subsection (3)(a), file a tax return claiming or carrying forward the tax
             2685      credit.
             2686          (4) The commission shall, on or before the November interim meeting of the year after
             2687      the taxable year in which the requirements of Subsection (3) are met:
             2688          (a) report to the Revenue and Taxation Interim Committee that in accordance with this
             2689      section:
             2690          (i) the commission is required to remove a tax credit from each tax return on which the
             2691      tax credit appears; and


             2692          (ii) a claimant, estate, or trust filing a tax return may not claim or carry forward the tax
             2693      credit; and
             2694          (b) notify each state agency required by statute to assist in the administration of the tax
             2695      credit that in accordance with this section:
             2696          (i) the commission is required to remove a tax credit from each tax return on which the
             2697      tax credit appears; and
             2698          (ii) a claimant, estate, or trust filing a tax return may not claim or carry forward the tax
             2699      credit.
             2700          Section 50. Section 59-10-1002.2 , which is renumbered from Section 59-10-1206.9 is
             2701      renumbered and amended to read:
             2702           [59-10-1206.9].     59-10-1002.2. Apportionment of tax credits.
             2703          (1) A nonresident individual or a part-year resident individual that claims a tax credit
             2704      in accordance with Section [ 59-10-1206.1 , 59-10-1206.2 , or 59-10-1206.3 ] 59-10-1017 ,
             2705      59-10-1018 , 59-10-1019 , 59-10-1021 , 59-10-1022 , 59-10-1023 , or 59-10-1024 , may only claim
             2706      an apportioned amount of the tax credit equal to:
             2707          [(1)] (a) for a nonresident individual, the product of:
             2708          [(a)] (i) the state income tax percentage for the nonresident individual; and
             2709          [(b)] (ii) the amount of the tax credit that the nonresident individual would have been
             2710      allowed to claim but for the apportionment requirements of this section; or
             2711          [(2)] (b) for a part-year resident individual, the product of:
             2712          [(a)] (i) the state income tax percentage for the part-year resident individual; and
             2713          [(b)] (ii) the amount of the tax credit that the part-year resident individual would have
             2714      been allowed to claim but for the apportionment requirements of this section.
             2715          (2) A nonresident estate or trust that claims a tax credit in accordance with Section
             2716      59-10-1017 , 59-10-1020 , 59-10-1022 , or 59-10-1024 , may only claim an apportioned amount
             2717      of the tax credit equal to the product of:
             2718          (a) the state income tax percentage for the nonresident estate or trust; and
             2719          (b) the amount of the tax credit that the nonresident estate or trust would have been
             2720      allowed to claim but for the apportionment requirements of this section.
             2721          Section 51. Section 59-10-1014 is amended to read:
             2722           59-10-1014. Renewable energy systems tax credit -- Definitions -- Limitations --


             2723      State tax credit in addition to allowable federal credits -- Certification -- Rulemaking
             2724      authority.
             2725          (1) As used in this part:
             2726          (a) "Active solar system":
             2727          (i) means a system of equipment capable of collecting and converting incident solar
             2728      radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
             2729      by a separate apparatus to storage or to the point of use; and
             2730          (ii) includes water heating, space heating or cooling, and electrical or mechanical
             2731      energy generation.
             2732          (b) "Biomass system" means any system of apparatus and equipment for use in
             2733      converting material into biomass energy, as defined in Section 59-12-102 , and transporting that
             2734      energy by separate apparatus to the point of use or storage.
             2735          (c) "Business entity" means any entity under which business is conducted or transacted.
             2736          (d) "Direct-use geothermal system" means a system of apparatus and equipment
             2737      enabling the direct use of thermal energy, generally between 100 and 300 degrees Fahrenheit,
             2738      that is contained in the earth to meet energy needs, including heating a building, an industrial
             2739      process, and aquaculture.
             2740          (e) "Geothermal electricity" means energy contained in heat that continuously flows
             2741      outward from the earth that is used as a sole source of energy to produce electricity.
             2742          (f) "Geothermal heat-pump system" means a system of apparatus and equipment
             2743      enabling the use of thermal properties contained in the earth at temperatures well below 100
             2744      degrees Fahrenheit to help meet heating and cooling needs of a structure.
             2745          (g) "Hydroenergy system" means a system of apparatus and equipment capable of
             2746      intercepting and converting kinetic water energy into electrical or mechanical energy and
             2747      transferring this form of energy by separate apparatus to the point of use or storage.
             2748          (h) "Passive solar system":
             2749          (i) means a direct thermal system that utilizes the structure of a building and its
             2750      operable components to provide for collection, storage, and distribution of heating or cooling
             2751      during the appropriate times of the year by utilizing the climate resources available at the site;
             2752      and
             2753          (ii) includes those portions and components of a building that are expressly designed


             2754      and required for the collection, storage, and distribution of solar energy.
             2755          (i) "Residential energy system" means any active solar, passive solar, biomass,
             2756      direct-use geothermal, geothermal heat-pump system, wind, or hydroenergy system used to
             2757      supply energy to or for any residential unit.
             2758          (j) "Residential unit" means any house, condominium, apartment, or similar dwelling
             2759      unit that serves as a dwelling for a person, group of persons, or a family but does not include
             2760      property subject to a fee under:
             2761          (i) Section 59-2-404 ;
             2762          (ii) Section 59-2-405 ;
             2763          (iii) Section 59-2-405.1 ;
             2764          (iv) Section 59-2-405.2 ; or
             2765          (v) Section 59-2-405.3 .
             2766          (k) "Utah Geological Survey" means the Utah Geological Survey established in Section
             2767      63-73-5 .
             2768          (l) "Wind system" means a system of apparatus and equipment capable of intercepting
             2769      and converting wind energy into mechanical or electrical energy and transferring these forms of
             2770      energy by a separate apparatus to the point of use or storage.
             2771          (2) For taxable years beginning on or after January 1, 2007, a claimant, estate, or trust
             2772      may claim a nonrefundable tax credit as provided in this section if:
             2773          (a) a claimant, estate, or trust that is not a business entity purchases and completes or
             2774      participates in the financing of a residential energy system to supply all or part of the energy for
             2775      the claimant's, estate's, or trust's residential unit in the state; or
             2776          (b) (i) a claimant, estate, or trust that is a business entity sells a residential unit to
             2777      another claimant, estate, or trust that is not a business entity before making a claim for a tax
             2778      credit under Subsection (6) or Section 59-7-614 ; and
             2779          (ii) the claimant, estate, or trust that is a business entity assigns its right to the tax credit
             2780      to the claimant, estate, or trust that is not a business entity as provided in Subsection (6)(c) or
             2781      Subsection 59-7-614 (2)(a)(iii).
             2782          (3) (a) The tax credit described in Subsection (2) is equal to 25% of the reasonable
             2783      costs of each residential energy system, including installation costs, against any income tax
             2784      liability of the claimant, estate, or trust under this chapter for the taxable year in which the


             2785      residential energy system is completed and placed in service.
             2786          (b) The total amount of each tax credit under this section may not exceed $2,000 per
             2787      residential unit.
             2788          (c) The tax credit under this section is allowed for any residential energy system
             2789      completed and placed in service on or after January 1, 2007.
             2790          (4) (a) The tax credit provided for in this section shall be claimed in the return for the
             2791      taxable year in which the residential energy system is completed and placed in service.
             2792          (b) Additional residential energy systems or parts of residential energy systems may be
             2793      similarly claimed in returns for subsequent taxable years as long as the total amount claimed
             2794      does not exceed $2,000 per residential unit.
             2795          (c) If the amount of the tax credit under this section exceeds the income tax liability of
             2796      the claimant, estate, or trust claiming the tax credit under this section for that taxable year, then
             2797      the amount not used may be carried over for a period that does not exceed the next four taxable
             2798      years.
             2799          (5) (a) A claimant, estate, or trust that is not a business entity that leases a residential
             2800      energy system installed on a residential unit is eligible for the residential energy tax credit if
             2801      that claimant, estate, or trust confirms that the lessor irrevocably elects not to claim the tax
             2802      credit.
             2803          (b) Only the principal recovery portion of the lease payments, which is the cost
             2804      incurred by the claimant, estate, or trust in acquiring the residential energy system excluding
             2805      interest charges and maintenance expenses, is eligible for the tax credits.
             2806          (c) A claimant, estate, or trust described in this Subsection (5) may use the tax credits
             2807      for a period that does not exceed seven years from the initiation of the lease.
             2808          (6) (a) A claimant, estate, or trust that is a business entity that purchases and completes
             2809      or participates in the financing of a residential energy system to supply all or part of the energy
             2810      required for a residential unit owned or used by the claimant, estate, or trust that is a business
             2811      entity and situated in Utah is entitled to a nonrefundable tax credit as provided in this
             2812      Subsection (6).
             2813          (b) (i) For taxable years beginning on or after January 1, 2007, a claimant, estate, or
             2814      trust that is a business entity is entitled to a nonrefundable tax credit equal to 25% of the
             2815      reasonable costs of a residential energy system installed with respect to each residential unit it


             2816      owns or uses, including installation costs, against any tax due under this chapter for the taxable
             2817      year in which the energy system is completed and placed in service.
             2818          (ii) The total amount of the tax credit under this Subsection (6) may not exceed $2,000
             2819      per residential unit.
             2820          (iii) The tax credit under this Subsection (6) is allowed for any residential energy
             2821      system completed and placed in service on or after January 1, 2007.
             2822          (c) If a claimant, estate, or trust that is a business entity sells a residential unit to a
             2823      claimant, estate, or trust that is not a business entity before making a claim for the tax credit
             2824      under this Subsection (6), the claimant, estate, or trust that is a business entity may:
             2825          (i) assign its right to this tax credit to the claimant, estate, or trust that is not a business
             2826      entity; and
             2827          (ii) if the claimant, estate, or trust that is a business entity assigns its right to the tax
             2828      credit to a claimant, estate, or trust that is not a business entity under Subsection (6)(c)(i), the
             2829      claimant, estate, or trust that is not a business entity may claim the tax credit as if that claimant,
             2830      estate, or trust that is not a business entity had completed or participated in the costs of the
             2831      residential energy system under this section.
             2832          (7) (a) A tax credit under this section may be claimed for the taxable year in which the
             2833      residential energy system is completed and placed in service.
             2834          (b) Additional residential energy systems or parts of residential energy systems may be
             2835      claimed for subsequent years.
             2836          (c) If the amount of a tax credit under this section exceeds the tax liability of the
             2837      claimant, estate, or trust claiming the tax credit under this section for a taxable year, the amount
             2838      of the tax credit exceeding the tax liability may be carried over for a period which does not
             2839      exceed the next four taxable years.
             2840          (8) (a) [The] Except as provided in Subsection (8)(b), tax credits provided for under
             2841      this section are in addition to any tax credits provided under the laws or rules and regulations of
             2842      the United States.
             2843          (b) A purchaser of one or more solar units that claims a tax credit under Section
             2844      59-10-1024 for the purchase of the one or more solar units may not claim a tax credit under this
             2845      section for that purchase.
             2846          (9) (a) The Utah Geological Survey may set standards for residential energy systems


             2847      that cover the safety, reliability, efficiency, leasing, and technical feasibility of the systems to
             2848      ensure that the systems eligible for the tax credit use the state's renewable and nonrenewable
             2849      energy resources in an appropriate and economic manner.
             2850          (b) The Utah Geological Survey may set standards for residential and commercial
             2851      energy systems that establish the reasonable costs of an energy system, as used in Subsections
             2852      (3)(a) and (6)(b)(i), as an amount per unit of energy production.
             2853          (c) A tax credit may not be taken under this section until the Utah Geological Survey
             2854      has certified that the energy system has been completely installed and is a viable system for
             2855      saving or production of energy from renewable resources.
             2856          (10) The Utah Geological Survey and the commission may make rules in accordance
             2857      with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, that are necessary to
             2858      implement this section.
             2859          (11) (a) On or before October 1, 2012, and every five years thereafter, the Utah Tax
             2860      Review Commission shall review each tax credit provided by this section and make
             2861      recommendations to the Revenue and Taxation Interim Committee concerning whether the
             2862      credit should be continued, modified, or repealed.
             2863          (b) The Utah Tax Review Commission's report under Subsection (11)(a) shall include
             2864      information concerning the cost of the credit, the purpose and effectiveness of the credit, and
             2865      the state's benefit from the credit.
             2866          Section 52. Section 59-10-1017 , which is renumbered from Section 59-10-1206.1 is
             2867      renumbered and amended to read:
             2868           [59-10-1206.1].     59-10-1017. Utah Educational Savings Plan tax credit.
             2869          (1) As used in this section:
             2870          (a) "Account owner" is as defined in Section 53B-8a-102 .
             2871          [(b) "Claimant" means a resident or nonresident individual that has state taxable
             2872      income under this part.]
             2873          [(c)] (b) "Higher education costs" is as defined in Section 53B-8a-102 .
             2874          [(d)] (c) "Maximum amount of a qualified investment for the taxable year" means, for
             2875      a taxable year:
             2876          (i) for a claimant, estate, or trust that is an account owner, if that claimant, estate, or
             2877      trust is [a person] other than husband and wife account owners who file a single return jointly,


             2878      the maximum amount of a qualified investment:
             2879          (A) listed in Subsection 53B-8a-106 (1)(e)(ii); and
             2880          (B) increased or decreased for that taxable year in accordance with Subsection
             2881      53B-8a-106 (1)(f); or
             2882          (ii) for claimants who are husband and wife account owners who file a single return
             2883      jointly, the maximum amount of a qualified investment:
             2884          (A) listed in Subsection 53B-8a-106 (1)(e)(iii); and
             2885          (B) increased or decreased for that taxable year in accordance with Subsection
             2886      53B-8a-106 (1)(f).
             2887          [(e)] (d) "Qualified investment" is as defined in Section 53B-8a-102 .
             2888          (2) [For taxable years beginning on or after January 1, 2007, a] Except as provided in
             2889      Section 59-10-1002.2 , a claimant, estate, or trust that is an account owner may claim a
             2890      nonrefundable tax credit equal to the product of:
             2891          (a) the lesser of:
             2892          (i) the amount of a qualified investment the claimant, estate, or trust:
             2893          (A) makes during the taxable year; and
             2894          (B) does not deduct:
             2895          (I) for a claimant, on the claimant's federal individual income tax return; or
             2896          (II) for an estate or trust, on the estate's or trust's federal income tax return; or
             2897          (ii) the maximum amount of a qualified investment for the taxable year if the amount
             2898      described in Subsection (2)(a)(i) is greater than the maximum amount of a qualified investment