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S.B. 31

             1     

INCOME TAX AMENDMENTS

             2     
2008 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Wayne L. Niederhauser

             5     
House Sponsor: John Dougall

             6     
             7      LONG TITLE
             8      Committee Note:
             9          The Revenue and Taxation Interim Committee recommended this bill.
             10          The Utah Tax Review Commission recommended this bill.
             11              Membership:    6 legislators    10 non-legislators
             12              Legislative Vote:    5 voting for    0 voting against    1 absent
             13      General Description:
             14          This bill amends the Individual Income Tax Act and related provisions to address the
             15      income taxation of individuals, estates, and trusts.
             16      Highlighted Provisions:
             17          This bill:
             18          .    repeals provisions imposing an individual income tax on the basis of graduated
             19      brackets and rates;
             20          .    provides that an individual income tax is imposed on the basis of a single tax rate,
             21      including:
             22              .    modifying and repealing definitions;
             23              .    modifying additions to and subtractions from adjusted gross income;
             24              .    addressing the taxation of a nonresident individual or part-year resident
             25      individual; and
             26              .    addressing provisions relating to the determination and reporting of income tax
             27      liability and information;


             28          .    modifies the income taxation of estates and trusts, including:
             29              .    providing definitions;
             30              .    providing that the tax is calculated on the basis of unadjusted income;        
             31              .    modifying additions to and subtractions from unadjusted income; and
             32              .    addressing provisions relating to the determination and reporting of income tax
             33      liability and information;
             34          .    addresses the taxation of pass-through entities, including:
             35              .    providing definitions;    and
             36              .    renumbering and amending provisions relating to pass-through entities;
             37          .    renumbers and amends provisions relating to tax credits, including tax credits for:
             38              .    a taxpayer;
             39              .    an investment in the Utah Educational Savings Plan Trust; or
             40              .    retirement income;
             41          .    provides nonrefundable tax credits for:
             42              .    a trust or estate; or
             43              .    a contribution to a medical care savings account;
             44          .    modifies the refundable renewable energy tax credit to clarify that an estate or trust
             45      may claim the tax credit;    
             46          .    addresses the apportionment of tax credits;    
             47          .    addresses the following relating to a medical care savings account:
             48              .    taxation;
             49              .    penalties; and
             50              .    interest;
             51          .    amends provisions relating to the taxation of an investment in the Utah Educational
             52      Savings Plan Trust;
             53          .    renumbers and amends the individual income tax contribution provisions;
             54          .    addresses the administration of income tax contributions; and
             55          .    makes technical changes.
             56      Monies Appropriated in this Bill:
             57          None
             58      Other Special Clauses:


             59          This bill has retrospective operation for taxable years beginning on or after January 1,
             60      2008.
             61      Utah Code Sections Affected:
             62      AMENDS:
             63          9-4-802, as last amended by Laws of Utah 2003, Chapter 132
             64          9-4-803, as last amended by Laws of Utah 2003, Chapter 132
             65          23-14-13, as last amended by Laws of Utah 1995, Chapter 211
             66          23-14-14.1, as enacted by Laws of Utah 2003, Chapter 162
             67          26-18a-3, as last amended by Laws of Utah 1997, Chapter 1
             68          26-18a-4, as last amended by Laws of Utah 1997, Chapter 1
             69          26-48-102, as enacted by Laws of Utah 2006, Chapter 280
             70          31A-32a-101, as enacted by Laws of Utah 1999, Chapter 131
             71          31A-32a-103, as enacted by Laws of Utah 1999, Chapter 131
             72          31A-32a-104, as enacted by Laws of Utah 1999, Chapter 131
             73          31A-32a-105, as enacted by Laws of Utah 1999, Chapter 131
             74          31A-32a-106, as last amended by Laws of Utah 2001, Chapter 53
             75          31A-32a-107, as enacted by Laws of Utah 1999, Chapter 131
             76          48-2c-117, as enacted by Laws of Utah 2001, Chapter 260
             77          53B-8a-106, as last amended by Laws of Utah 2007, Chapter 100
             78          59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             79          59-10-104, as last amended by Laws of Utah 2007, Chapter 288
             80          59-10-104.1, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             81          59-10-110, as renumbered and amended by Laws of Utah 1987, Chapter 2
             82          59-10-114, as last amended by Laws of Utah 2007, Chapter 100
             83          59-10-115, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             84          59-10-116, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             85          59-10-117, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
             86          59-10-118, as last amended by Laws of Utah 1995, Chapter 311
             87          59-10-119, as renumbered and amended by Laws of Utah 1987, Chapter 2
             88          59-10-120, as renumbered and amended by Laws of Utah 1987, Chapter 2
             89          59-10-121, as renumbered and amended by Laws of Utah 1987, Chapter 2


             90          59-10-122, as renumbered and amended by Laws of Utah 1987, Chapter 2
             91          59-10-123, as renumbered and amended by Laws of Utah 1987, Chapter 2
             92          59-10-124, as renumbered and amended by Laws of Utah 1987, Chapter 2
             93          59-10-125, as renumbered and amended by Laws of Utah 1987, Chapter 2
             94          59-10-126, as last amended by Laws of Utah 1995, Chapter 311
             95          59-10-201, as last amended by Laws of Utah 2007, Chapter 100
             96          59-10-201.1, as last amended by Laws of Utah 2006, Chapter 223
             97          59-10-202, as last amended by Laws of Utah 2007, Chapter 100
             98          59-10-204, as last amended by Laws of Utah 2006, Chapter 223
             99          59-10-205, as last amended by Laws of Utah 2006, Chapter 223
             100          59-10-207, as last amended by Laws of Utah 2006, Chapter 223
             101          59-10-209.1, as enacted by Laws of Utah 2006, Chapter 223
             102          59-10-210, as last amended by Laws of Utah 2006, Chapter 223
             103          59-10-507, as last amended by Laws of Utah 2003, Chapter 198
             104          59-10-1106, as enacted by Laws of Utah 2007, Chapter 288
             105      ENACTS:
             106          59-10-1020, Utah Code Annotated 1953
             107          59-10-1021, Utah Code Annotated 1953
             108          59-10-1301, Utah Code Annotated 1953
             109          59-10-1302, Utah Code Annotated 1953
             110          59-10-1303, Utah Code Annotated 1953
             111          59-10-1401, Utah Code Annotated 1953
             112          59-10-1402, Utah Code Annotated 1953
             113      RENUMBERS AND AMENDS:
             114          59-10-1002.1, (Renumbered from 59-10-1016, as renumbered and amended by Laws of
             115      Utah 2006, Chapter 223)
             116          59-10-1002.2, (Renumbered from 59-10-1206.9, as enacted by Laws of Utah 2007,
             117      Chapter 288)
             118          59-10-1017, (Renumbered from 59-10-1206.1, as enacted by Laws of Utah 2007,
             119      Chapter 100)
             120          59-10-1018, (Renumbered from 59-10-1206.2, as enacted by Laws of Utah 2007,


             121      Chapter 288)
             122          59-10-1019, (Renumbered from 59-10-1206.3, as enacted by Laws of Utah 2007,
             123      Chapter 288)
             124          59-10-1304, (Renumbered from 59-10-551, as last amended by Laws of Utah 2006,
             125      Chapter 280)
             126          59-10-1305, (Renumbered from 59-10-530, as last amended by Laws of Utah 1997,
             127      Chapter 12)
             128          59-10-1306, (Renumbered from 59-10-530.5, as last amended by Laws of Utah 2003,
             129      Chapter 132)
             130          59-10-1307, (Renumbered from 59-10-549, as last amended by Laws of Utah 2005,
             131      Chapter 208)
             132          59-10-1308, (Renumbered from 59-10-550, as last amended by Laws of Utah 1997,
             133      Chapters 1, and 12)
             134          59-10-1309, (Renumbered from 59-10-550.1, as enacted by Laws of Utah 2003,
             135      Chapter 162)
             136          59-10-1310, (Renumbered from 59-10-550.2, as enacted by Laws of Utah 2006,
             137      Chapter 280)
             138          59-10-1311, (Renumbered from 59-10-547, as last amended by Laws of Utah 1998,
             139      Chapter 269)
             140          59-10-1312, (Renumbered from 59-10-548, as last amended by Laws of Utah 2002,
             141      Chapters 107, and 256)
             142          59-10-1403, (Renumbered from 59-10-301, as renumbered and amended by Laws of
             143      Utah 1987, Chapter 2)
             144          59-10-1404, (Renumbered from 59-10-302, as renumbered and amended by Laws of
             145      Utah 1987, Chapter 2)
             146          59-10-1405, (Renumbered from 59-10-303, as last amended by Laws of Utah 2006,
             147      Fourth Special Session, Chapter 2)
             148      REPEALS:
             149          59-10-206, as last amended by Laws of Utah 1995, Chapter 345
             150          59-10-801, as last amended by Laws of Utah 1997, Chapter 159
             151          59-10-1201, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2


             152          59-10-1202, as last amended by Laws of Utah 2007, Chapters 100, and 288
             153          59-10-1203, as last amended by Laws of Utah 2007, Chapters 100, and 288
             154          59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             155          59-10-1205, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             156          59-10-1206, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             157          59-10-1207, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
             158     
             159      Be it enacted by the Legislature of the state of Utah:
             160          Section 1. Section 9-4-802 is amended to read:
             161           9-4-802. Purposes of Homeless Coordinating Committee -- Uses of Pamela
             162      Atkinson Homeless Trust Account.
             163          (1) (a) The Homeless Coordinating Committee shall work to ensure that services
             164      provided to the homeless by state agencies, local governments, and private organizations are
             165      provided in a cost-effective manner.
             166          (b) Programs funded by the committee shall emphasize emergency housing and
             167      self-sufficiency, including placement in meaningful employment or occupational training
             168      activities and, where needed, special services to meet the unique needs of the homeless who
             169      have families with children, or who are mentally ill, disabled, or suffer from other serious
             170      challenges to employment and self-sufficiency.
             171          (c) The committee may also fund treatment programs to ameliorate the effects of
             172      substance abuse or a disability.
             173          (2) The committee members designated in Subsection 9-4-801 (2) shall:
             174          (a) award contracts funded by the Pamela Atkinson Homeless Trust Account with the
             175      advice and input of those designated in Subsection 9-4-801 (3);
             176          (b) consider need, diversity of geographic location, coordination with or enhancement
             177      of existing services, and the extensive use of volunteers; and
             178          (c) give priority for funding to programs that serve the homeless who are mentally ill
             179      and who are in families with children.
             180          (3) (a) In any fiscal year, no more than 80% of the funds in the Pamela Atkinson
             181      Homeless Trust Account may be allocated to organizations that provide services only in Salt
             182      Lake, Davis, Weber, and Utah Counties.


             183          (b) The committee may:
             184          (i) expend up to 3% of its annual appropriation for administrative costs associated with
             185      the allocation of funds from the Pamela Atkinson Homeless Trust Account, and up to 2% of its
             186      annual appropriation for marketing the account and soliciting donations to the account; and
             187          (ii) pay for the initial costs of the State Tax Commission in implementing Section
             188      [ 59-10-530.5 ] 59-10-1306 from the account.
             189          (4) (a) The committee may not expend, except as provided in Subsection (4)(b), an
             190      amount equal to the greater of $50,000 or 20% of the amount donated to the Pamela Atkinson
             191      Homeless Trust Account during fiscal year 1988-89.
             192          (b) If there are decreases in contributions to the account, the committee may expend
             193      funds held in reserve to provide program stability, but the committee shall reimburse the
             194      amounts of those expenditures to the reserve fund.
             195          (5) The committee shall make an annual report to the Economic Development and
             196      Human Resources Appropriations Subcommittee regarding the programs and services funded
             197      by contributions to the Pamela Atkinson Homeless Trust Account.
             198          (6) The moneys in the Pamela Atkinson Homeless Trust Account shall be invested by
             199      the state treasurer according to the procedures and requirements of Title 51, Chapter 7, State
             200      Money Management Act, except that all interest or other earnings derived from the fund
             201      moneys shall be deposited in the fund.
             202          Section 2. Section 9-4-803 is amended to read:
             203           9-4-803. Creation of Pamela Atkinson Homeless Trust Account.
             204          (1) There is created a restricted account within the General Fund to be known as the
             205      Pamela Atkinson Homeless Trust Account.
             206          (2) Private contributions received under this section and Section [ 59-10-530.5 ]
             207      59-10-1306 shall be deposited into the account to be used only for programs described in
             208      Section 9-4-802 .
             209          (3) Money shall be appropriated from the account to the State Homeless Coordinating
             210      Committee in accordance with the Utah Budgetary Procedures Act.
             211          (4) The State Homeless Coordinating Committee may accept transfers, grants, gifts,
             212      bequests, or any money made available from any source to implement this part.
             213          Section 3. Section 23-14-13 is amended to read:


             214           23-14-13. Wildlife Resources Account.
             215          (1) The Wildlife Resources Account [within the General Fund] is established within
             216      the General Fund.
             217          (2) The following monies shall be deposited into the Wildlife Resources Account:
             218          (a) revenue from the sale of licenses, permits, tags, and certificates of registration
             219      issued under this title or a rule or proclamation of the Wildlife Board, except as otherwise
             220      provided by this title;
             221          (b) revenue from the sale, lease, rental, or other granting of rights of real or personal
             222      property acquired with revenue specified in Subsection (a);
             223          (c) revenue from fines and forfeitures for violations of this title or any rule,
             224      proclamation, or order of the Wildlife Board, minus court costs not to exceed the schedule
             225      adopted by the Judicial Council;
             226          (d) funds appropriated from the General Fund by the Legislature pursuant to Section
             227      23-19-39 ;
             228          (e) other monies received by the division under any provision of this title, except as
             229      otherwise provided by this title; [and]
             230          (f) contributions made in accordance with Section 59-10-1305 ; and
             231          [(f)] (g) interest, dividends, or other income earned on account monies.
             232          (3) Monies in the Wildlife Resources Account shall be used for the administration of
             233      this title.
             234          Section 4. Section 23-14-14.1 is amended to read:
             235           23-14-14.1. Wolf Depredation and Management Restricted Account -- Interest --
             236      Use of contributions and interest.
             237          (1) There is created within the General Fund the Wolf Depredation and Management
             238      Restricted Account.
             239          (2) The account shall be funded by contributions deposited into the Wolf Depredation
             240      and Management Restricted Account in accordance with Section [ 59-10-550.1 ] 59-10-1309 .
             241          (3) (a) The Wolf Depredation and Management Restricted Account shall earn interest.
             242          (b) Interest earned on the Wolf Depredation and Management Restricted Account shall
             243      be deposited into the Wolf Depredation and Management Restricted Account.
             244          (4) (a) Subject to Subsection (4)(b), contributions and interest deposited into the Wolf


             245      Depredation and Management Restricted Account shall be used by the Division of Wildlife
             246      Resources for:
             247          (i) payments for livestock depredation by wolves; or
             248          (ii) wolf management.
             249          (b) Contributions and interest deposited into the Wolf Depredation and Management
             250      Restricted Account may be used for the purposes described in Subsection (4)(a) only to the
             251      extent permitted by federal law.
             252          Section 5. Section 26-18a-3 is amended to read:
             253           26-18a-3. Purpose of committee.
             254          (1) The committee shall work to:
             255          (a) provide financial assistance for initial medical expenses of children who need organ
             256      transplants;
             257          (b) obtain the assistance of volunteer and public service organizations; and
             258          (c) fund activities as the committee designates for the purpose of educating the public
             259      about the need for organ donors.
             260          (2) (a) The committee is responsible for awarding financial assistance funded by the
             261      trust account.
             262          (b) The financial assistance awarded by the committee under Subsection (1)(a) shall be
             263      in the form of interest free loans. The committee may establish terms for repayment of the
             264      loans, including a waiver of the requirement to repay any awards if, in the committee's
             265      judgment, repayment of the loan would impose an undue financial burden on the recipient.
             266          (c) In making financial awards under Subsection (1)(a), the committee shall consider:
             267          (i) need;
             268          (ii) coordination with or enhancement of existing services or financial assistance,
             269      including availability of insurance or other state aid;
             270          (iii) the success rate of the particular organ transplant procedure needed by the child;
             271      and
             272          (iv) the extent of the threat to the child's life without the organ transplant.
             273          (3) The committee may only provide the assistance described in this section to children
             274      who have resided in Utah, or whose legal guardians have resided in Utah for at least six months
             275      prior to the date of assistance under this section.


             276          (4) (a) The committee may expend up to 5% of its annual appropriation for
             277      administrative costs associated with the allocation of funds from the trust account.
             278          (b) The administrative costs shall be used for the costs associated with staffing the
             279      committee and for State Tax Commission costs in implementing Section [ 59-10-550 ]
             280      59-10-1308 .
             281          (5) The committee shall make an annual report to the Health and Human Services
             282      Appropriations Subcommittee regarding the programs and services funded by contributions to
             283      the trust account.
             284          Section 6. Section 26-18a-4 is amended to read:
             285           26-18a-4. Creation of Kurt Oscarson Children's Organ Transplant Trust
             286      Account.
             287          (1) There is created a restricted account within the General Fund pursuant to Section
             288      51-5-4 known as the Kurt Oscarson Children's Organ Transplant Trust Account. Private
             289      contributions received under this section and Section [ 59-10-550 ] 59-10-1308 shall be
             290      deposited into the trust account to be used only for the programs and purposes described in
             291      Section 26-18a-3 .
             292          (2) Money shall be appropriated from the trust account to the committee in accordance
             293      with Title 63, Chapter 38, Budgetary Procedures Act.
             294          (3) In addition to funds received under Section [ 59-10-550 ] 59-10-1308 , the committee
             295      may accept transfers, grants, gifts, bequests, or any money made available from any source to
             296      implement this chapter.
             297          Section 7. Section 26-48-102 is amended to read:
             298           26-48-102. Cat and Dog Community Spay and Neuter Program Restricted
             299      Account -- Interest -- Use of contributions and interest.
             300          (1) There is created within the General Fund the Cat and Dog Community Spay and
             301      Neuter Program Restricted Account.
             302          (2) The account shall be funded by contributions deposited into the Cat and Dog
             303      Community Spay and Neuter Program Restricted Account in accordance with Section
             304      [ 59-10-550.2 ] 59-10-1310 .
             305          (3) (a) The Cat and Dog Community Spay and Neuter Program Restricted Account
             306      shall earn interest.


             307          (b) Interest earned on the Cat and Dog Community Spay and Neuter Program
             308      Restricted Account shall be deposited into the Cat and Dog Community Spay and Neuter
             309      Program Restricted Account.
             310          (4) The department shall distribute contributions and interest deposited into the Cat and
             311      Dog Community Spay and Neuter Program Restricted Account to one or more organizations
             312      that:
             313          (a) are exempt from federal income taxation under Section 501(c)(3), Internal Revenue
             314      Code;
             315          (b) operate a mobile spay and neuter clinic for cats and dogs;
             316          (c) provide annual spay and neuter services at the mobile spay and neuter clinic
             317      described in Subsection (4)(b):
             318          (i) to one or more communities in at least 20 counties in the state; and
             319          (ii) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
             320      and
             321          (d) (i) spay and neuter cats and dogs owned by persons having low incomes; and
             322          (ii) have established written guidelines for determining what constitutes a person
             323      having a low income in accordance with any rules made by the department as authorized by
             324      Subsection (5)(c).
             325          (5) (a) An organization described in Subsection (4) may apply to the department to
             326      receive a distribution in accordance with Subsection (4).
             327          (b) An organization that receives a distribution from the department in accordance with
             328      Subsection (4):
             329          (i) shall expend the distribution only to spay or neuter dogs and cats:
             330          (A) owned by persons having low incomes;
             331          (B) by veterinarians who are licensed by Title 58, Chapter 28, Veterinary Practice Act;
             332          (C) through a statewide voucher program; and
             333          (D) at a location that:
             334          (I) is not a mobile spay and neuter clinic; and
             335          (II) does not receive any funding from a governmental entity; and
             336          (ii) may not expend the distribution for any administrative cost relating to an
             337      expenditure authorized by Subsection (5)(b)(i).


             338          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             339      department may make rules:
             340          (i) providing procedures and requirements for an organization to apply to the
             341      department to receive a distribution in accordance with Subsection (4); and
             342          (ii) to define what constitutes a person having a low income.
             343          Section 8. Section 31A-32a-101 is amended to read:
             344           31A-32a-101. Title and scope.
             345          (1) This chapter is known as the "Medical Care Savings Account Act."
             346          (2) (a) This chapter applies only to a medical care savings [accounts] account
             347      established for the purpose of seeking a tax [deduction] credit under Section [ 59-10-114 ]
             348      59-10-1021 .
             349          (b) This chapter does not apply to a medical care savings [accounts that will not be
             350      subject to tax deductions under Section 59-10-114 ] account with respect to which a tax credit is
             351      not claimed under Section 59-10-1021 .
             352          Section 9. Section 31A-32a-103 is amended to read:
             353           31A-32a-103. Establishing medical care savings accounts.
             354          [(1) For tax years beginning 1995, both of the following apply:]
             355          (1) For a taxable year beginning on or after January 1, 1995:
             356          (a) an employer, except as otherwise provided by contract or a collective bargaining
             357      agreement, may offer a medical care savings account program to the employer's employees;
             358      [and] or
             359          (b) a resident individual may establish a medical care savings account program for the
             360      individual or for the individual's dependents.
             361          (2) (a) A contribution into an account made by an employer on behalf of an employee,
             362      or made by an individual account holder may not exceed the greater of:
             363          [(a)] (i) $2,000 in any [tax] taxable year; or
             364          (ii) an amount of money equal to the sum of all eligible medical expenses paid by the
             365      employee or account holder [in] for that [tax] taxable year on behalf of the employee, account
             366      holder, or the employee's or account holder's spouse or dependents.
             367          (b) For purposes of Subsection (2)(a)(ii), eligible medical expenses [as defined in
             368      Subsection 31A-32a-102 (5),] are limited to expenses in [that tax year which] the taxable year


             369      that an insurance carrier has applied to the employee's or account holder's deductible.
             370          (3) An employer that offers a medical care savings account program shall, before
             371      making any contributions:
             372          (a) inform all employees in writing of the fact that these contributions may not be
             373      deductible under the federal tax laws; and
             374          (b) obtain from the employee a written election to participate in the medical care
             375      savings account program.
             376          (4) Except as provided in Sections 31A-32a-105 and 59-10-114 , principal contributed
             377      to and interest earned on a medical care savings account and money reimbursed to an employee
             378      or account holder for eligible medical expenses are exempt from taxation.
             379          (5) (a) An employer may select a single account administrator for all of the employer's
             380      employee's medical care savings accounts.
             381          (b) If a single account administrator is not selected, an employer may contribute
             382      directly to the account holder's individual medical care savings account.
             383          Section 10. Section 31A-32a-104 is amended to read:
             384           31A-32a-104. Administration of medical care savings account.
             385          (1) An account administrator shall administer the medical care savings account from
             386      which the payment of claims is made and has a fiduciary duty to the person for whose benefit
             387      the account administrator administers an account.
             388          (2) (a) Except as provided in Subsection 31A-32a-105 (1), the account administrator
             389      shall use the funds held in a medical care savings account solely for the purpose of paying or
             390      reimbursing the employee or account holder for eligible medical expenses of the employee or
             391      account holder or of the employee's or account holder's dependents.
             392          (b) The commissioner shall adopt rules concerning the coordination of benefits
             393      between a medical care savings account and medical expenses payable from automobile
             394      insurance policies, workers' compensation insurance policies, or other health care insurance
             395      policies or contracts.
             396          (3) The employee or account holder may submit documentation of eligible medical
             397      expenses paid by the employee or account holder in the [tax] taxable year to the account
             398      administrator, and the account administrator shall reimburse the employee or account holder
             399      from the employee's or account holder's account for eligible medical expenses.


             400          (4) If an employer makes contributions to a medical care savings account program on a
             401      periodic installment basis, the employer may advance to an employee an amount necessary to
             402      cover eligible medical expenses incurred that exceed the amount in the employee's medical
             403      care savings account at the time the expense is incurred if the employee agrees to repay the
             404      advance.
             405          Section 11. Section 31A-32a-105 is amended to read:
             406           31A-32a-105. Withdrawals -- Termination -- Transfers.
             407          (1) Subject to Subsection (3), if the employee or account holder withdraws money for
             408      any purpose other than a medical expense at any time in which the balance in the account is
             409      below $4,000 [all of the following apply]:
             410          (a) the amount of the withdrawal [is income for the purposes of Title 59, Chapter 10,
             411      Individual Income Tax Act] shall be added to adjusted gross income in accordance with
             412      Section 59-10-114 ; and
             413          (b) the administrator shall withhold from the amount of the withdrawal, and on behalf
             414      of the employee or account holder shall pay a penalty to the State Tax Commission equal to
             415      10% of the amount of the withdrawal.
             416          (2) If an employee or account holder withdraws money from the employee's or account
             417      holder's medical care savings account for any purpose other than a medical expense, but the
             418      withdrawal occurs when the balance in the medical care savings account is over $4,000, and
             419      the withdrawal will not result in the account balance dropping below $4,000, the amount of the
             420      withdrawal:
             421          (a) is not subject to the penalties described in Subsection (1)(b); and
             422          [(b) is subject to taxation as provided in Subsection (1)(a).]
             423          (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .
             424          (3) The amount of a disbursement of any assets of a medical care savings account
             425      pursuant to a filing for protection under [Title 11 of the United States Code,] 11 U.S.C. Sec.
             426      101 to 1330, by an employee, account holder, or person for whose benefit the account was
             427      established:
             428          (a) is not considered a withdrawal for purposes of this section; and
             429          [(b) is subject to taxation under Title 59, Chapter 10, Individual Income Tax Act.]
             430          (b) shall be added to adjusted gross income in accordance with Section 59-10-114 .


             431          (4) (a) Upon the death of the employee or account holder, the account administrator
             432      shall distribute the principal and accumulated interest of the medical care savings account to
             433      the estate of the employee or account holder.
             434          (b) A distribution under this Subsection (4) is not subject to the penalties described in
             435      Subsection (1)(b).
             436          (5) (a) If an employee is no longer employed by an employer that participates in a
             437      medical care savings account program, and if the employee's account is administered by the
             438      employer's account administrator, the money in the medical care savings account may be used
             439      for the benefit of the employee or the employee's dependents in accordance with this chapter,
             440      and [remains exempt from taxation] may not be added to adjusted gross income under Section
             441      59-10-114 if the employee, not more than 60 days after the employee's final day of
             442      employment:
             443          (i) transfers the account to a new account administrator; or
             444          (ii) (A) requests in writing to the former employer's account administrator that the
             445      account remain with that administrator; and
             446          (B) the account administrator agrees to retain the account.
             447          (b) Not more than 30 days after the expiration of the 60 days described in Subsection
             448      (5)(a), if an account administrator has not accepted the former employee's account, the
             449      employer shall mail a check to the former employee at the employee's last-known address equal
             450      to the amount in the account on that day.
             451          (c) The amount mailed to the employee [is subject to taxation pursuant to Subsection
             452      (1)(a)] under Subsection (5)(b) shall be added to adjusted gross income in accordance with
             453      Section 59-10-114 , but is not subject to the penalties under Subsection (1)(b).
             454          (d) If an employee becomes employed with a different employer that participates in a
             455      medical care savings account program, the employee may transfer the employee's medical care
             456      savings account to that new employer's account administrator.
             457          (e) If an account holder becomes an employee of an employer that participates in a
             458      medical care savings account program, the account holder may transfer the account holder's
             459      account to the employer's account administrator.
             460          Section 12. Section 31A-32a-106 is amended to read:
             461           31A-32a-106. Regulation of account administrators -- Administration of addition


             462      to adjusted gross income and tax credit -- Rulemaking authority.
             463          (1) The department shall regulate account administrators and may adopt rules
             464      necessary to administer this chapter.
             465          (2) The State Tax Commission may adopt rules necessary to monitor and implement
             466      the [tax deductions established by this chapter and Section 59-10-114 .]:
             467          (a) amounts required to be added to adjusted gross income in accordance with Sections
             468      31A-32a-105 and 59-10-114 ; or
             469          (b) amount claimed as a tax credit in accordance with Section 59-10-1021 .
             470          Section 13. Section 31A-32a-107 is amended to read:
             471           31A-32a-107. Penalties for noncompliance with tax provisions.
             472          (1) An account administrator who fails to comply with [the statutes and rules
             473      governing the tax deduction established by this chapter and Section 59-10-114 ] a provision
             474      described in Subsection (2) is subject to:
             475          [(1)] (a) the civil penalties provided in Section 59-1-401 ; and
             476          [(2)] (b) interest at the rate and in the manner provided in Section 59-1-402 .
             477          (2) The following provisions apply to Subsection (1):
             478          (a) a provision of this chapter relating to:
             479          (i) an addition to income made in accordance with Section 59-10-114 ; or
             480          (ii) a tax credit allowed by Section 59-10-1021 ; or
             481          (b) a provision of Title 59, Chapter 10, Individual Income Tax Act, relating to:
             482          (i) an addition to income made in accordance with Section 59-10-114 ; or
             483          (ii) a tax credit allowed by Section 59-10-1021 .
             484          Section 14. Section 48-2c-117 is amended to read:
             485           48-2c-117. Taxation of limited liability companies.
             486          A company established under this chapter or a foreign company transacting business in
             487      this state shall be taxed as provided in [Section 59-10-801 ] Subsection 59-10-1403 (4).
             488          Section 15. Section 53B-8a-106 is amended to read:
             489           53B-8a-106. Account agreements.
             490          The Utah Educational Savings Plan Trust may enter into account agreements with
             491      account owners on behalf of beneficiaries under the following terms and agreements:
             492          (1) (a) An account agreement may require an account owner to agree to invest a


             493      specific amount of money in the Utah Educational Savings Plan Trust for a specific period of
             494      time for the benefit of a specific beneficiary, not to exceed an amount determined by the
             495      program administrator.
             496          (b) Account agreements may be amended to provide for adjusted levels of payments
             497      based upon changed circumstances or changes in educational plans.
             498          (c) An account owner may make additional optional payments as long as the total
             499      payments for a specific beneficiary do not exceed the total estimated higher education costs as
             500      determined by the program administrator.
             501          (d) Subject to Subsection (1)(f), the maximum amount of a qualified investment that a
             502      corporation that is an account owner may subtract from unadjusted income for a taxable year in
             503      accordance with Title 59, Chapter 7, Corporate Franchise and Income Taxes, is [$1,560]
             504      $1,650 for each individual beneficiary for the taxable year beginning on or after January 1,
             505      [2006] 2008, but beginning on or before December 31, [2006] 2008.
             506          (e) Subject to Subsection (1)(f), the maximum amount of a qualified investment that
             507      may be [subtracted from federal taxable income of a resident or nonresident individual for a
             508      taxable year in accordance with Section 59-10-114 , a resident or nonresident estate or trust for
             509      a taxable year in accordance with Section 59-10-202 , or] used as the basis for claiming a tax
             510      credit [for a taxable year by a resident or nonresident individual] in accordance with Section
             511      [ 59-10-1206.1 ] 59-10-1017 , is:
             512          (i) for a resident or nonresident estate or trust that is an account owner, [$1,560] $1,650
             513      for each individual beneficiary for the taxable year beginning on or after January 1, [2006]
             514      2008, but beginning on or before December 31, [2006] 2008;
             515          (ii) for a resident or nonresident individual that is an account owner, other than a
             516      husband and wife who are account owners and file a single return jointly, [$1,560] $1,650 for
             517      each individual beneficiary for the taxable year beginning on or after January 1, [2006] 2008,
             518      but beginning on or before December 31, [2006] 2008; or
             519          (iii) for a husband and wife who are account owners and file a single return jointly,
             520      [$3,120] $3,300 for each individual beneficiary:
             521          (A) for the taxable year beginning on or after January 1, [2006] 2008, but beginning on
             522      or before December 31, [2006] 2008; and
             523          (B) regardless of whether the Utah Educational Savings Plan Trust has entered into:


             524          (I) a separate account agreement with each spouse; or
             525          (II) a single account agreement with both spouses jointly.
             526          (f) (i) For taxable years beginning on or after January 1, [2007] 2009, the program
             527      administrator shall increase or decrease the maximum amount of a qualified investment
             528      described in Subsections (1)(d) and (1)(e)(i) and (ii), by a percentage equal to the percentage
             529      difference between the consumer price index for the preceding calendar year and the consumer
             530      price index for the calendar year [2005] 2007.
             531          (ii) After making an increase or decrease required by Subsection (1)(f)(i), the program
             532      administrator shall:
             533          (A) round the maximum amount of the qualified investments described in Subsections
             534      (1)(d) and (1)(e)(i) and (ii) increased or decreased under Subsection (1)(f)(i) to the nearest ten
             535      dollar increment; and
             536          (B) increase or decrease the maximum amount of the qualified investment described in
             537      Subsection (1)(e)(iii) so that the maximum amount of the qualified investment described in
             538      Subsection (1)(e)(iii) is equal to the product of:
             539          (I) the maximum amount of the qualified investment described in Subsection (1)(e)(ii)
             540      as rounded under Subsection (1)(f)(ii)(A); and
             541          (II) two.
             542          (iii) For purposes of Subsections (1)(f)(i) and (ii), the program administrator shall
             543      calculate the consumer price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue
             544      Code.
             545          (2) (a) (i) Beneficiaries designated in account agreements must be designated after
             546      birth and before age 19 for an account owner to:
             547          (A) subtract a qualified investment from income under[:(I)] Title 59, Chapter 7,
             548      Corporate Franchise and Income Taxes; or
             549          [(II) Section 59-10-114 ; or]
             550          [(III) Section 59-10-202 ; or]
             551          (B) use a qualified investment as the basis for claiming a tax credit in accordance with
             552      Section [ 59-10-1206.1 ] 59-10-1017 .
             553          (ii) If the beneficiary is designated after birth and before age 19, the payment of
             554      benefits provided under the account agreement must begin not later than the beneficiary's 27th


             555      birthday.
             556          (b) (i) Account owners may designate [beneficiaries] a beneficiary age 19 or older, but
             557      investments for [those beneficiaries] that beneficiary are not eligible [for subtraction from
             558      federal taxable income.] to be:
             559          (A) subtracted from income under Title 59, Chapter 7, Corporate Franchise and Income
             560      Taxes; or
             561          (B) used as the basis for claiming a tax credit in accordance with Section 59-10-1017 .
             562          (ii) If a beneficiary age 19 or older is designated, the payment of benefits provided
             563      under the account agreement must begin not later than ten years from the account agreement
             564      date.
             565          (3) Each account agreement shall state clearly that there are no guarantees regarding
             566      moneys in the Utah Educational Savings Plan Trust as to the return of principal and that losses
             567      could occur.
             568          (4) Each account agreement shall provide that:
             569          (a) [no] a contributor to, or designated beneficiary under, an account agreement may
             570      not direct the investment of any contributions or earnings on contributions;
             571          (b) [no] any part of the money in any account may not be used as security for a loan;
             572      and
             573          (c) [no] an account owner may not borrow from the Utah Educational Savings Plan
             574      Trust.
             575          (5) The execution of an account agreement by the trust may not guarantee in any way
             576      that higher education costs will be equal to projections and estimates provided by the Utah
             577      Educational Savings Plan Trust or that the beneficiary named in any participation agreement
             578      will:
             579          (a) be admitted to an institution of higher education;
             580          (b) if admitted, be determined a resident for tuition purposes by the institution of
             581      higher education, unless the account agreement is vested;
             582          (c) be allowed to continue attendance at the institution of higher education following
             583      admission; or
             584          (d) graduate from the institution of higher education.
             585          (6) [Beneficiaries] A beneficiary may be changed as permitted by the rules and


             586      regulations of the board upon written request of the account owner prior to the date of
             587      admission of any beneficiary under an account agreement by an institution of higher education
             588      so long as the substitute beneficiary is eligible for participation.
             589          (7) [Account agreements] An account agreement may be freely amended throughout
             590      [their terms] the term of the account agreement in order to enable [account owners] an account
             591      owner to increase or decrease the level of participation, change the designation of beneficiaries,
             592      and carry out similar matters as authorized by rule.
             593          (8) Each account agreement shall provide that:
             594          (a) the account agreement may be canceled upon the terms and conditions, and upon
             595      payment of the fees and costs set forth and contained in the board's rules and regulations; and
             596          (b) the program administrator may amend the agreement unilaterally and retroactively,
             597      if necessary, to maintain the Utah Educational Savings Plan Trust as a qualified tuition
             598      program under Section 529, Internal Revenue Code.
             599          Section 16. Section 59-10-103 is amended to read:
             600           59-10-103. Definitions.
             601          (1) As used in this chapter:
             602          (a) "Adjusted gross income":
             603          (i) for a resident or nonresident individual, is as defined in Section 62, Internal
             604      Revenue Code; or
             605          (ii) for a resident or nonresident estate or trust, is as calculated in Section 67(e),
             606      Internal Revenue Code.
             607          [(b) "Adoption expenses" means:]
             608          [(i) any actual medical and hospital expenses of the mother of the adopted child which
             609      are incident to the child's birth;]
             610          [(ii) any welfare agency fees or costs;]
             611          [(iii) any child placement service fees or costs;]
             612          [(iv) any legal fees or costs; or]
             613          [(v) any other fees or costs relating to an adoption.]
             614          [(c) "Adult with a disability" means an individual who:]
             615          [(i) is 18 years of age or older;]
             616          [(ii) is eligible for services under Title 62A, Chapter 5, Services for People with


             617      Disabilities; and]
             618          [(iii) is not enrolled in:]
             619          [(A) an education program for students with disabilities that is authorized under
             620      Section 53A-15-301 ; or]
             621          [(B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.]
             622          [(d) (i) For purposes of Subsection 59-10-114 (2)(l), "capital gain transaction" means a
             623      transaction that results in a:]
             624          [(A) short-term capital gain; or]
             625          [(B) long-term capital gain.]
             626          [(ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             627      the commission may by rule define the term "transaction."]
             628          [(e) "Commercial domicile" means the principal place from which the trade or business
             629      of a Utah small business corporation is directed or managed.]
             630          [(f)] (b) "Corporation" includes:
             631          (i) [associations] an association;
             632          (ii) a joint stock [companies] company; and
             633          (iii) an insurance [companies] company.
             634          [(g) "Dependent child with a disability" means an individual 21 years of age or younger
             635      who:]
             636          [(i) (A) is diagnosed by a school district representative under rules adopted by the State
             637      Board of Education as having a disability classified as:]
             638          [(I) autism;]
             639          [(II) deafness;]
             640          [(III) preschool developmental delay;]
             641          [(IV) dual sensory impairment;]
             642          [(V) hearing impairment;]
             643          [(VI) intellectual disability;]
             644          [(VII) multidisability;]
             645          [(VIII) orthopedic impairment;]
             646          [(IX) other health impairment;]
             647          [(X) traumatic brain injury; or]


             648          [(XI) visual impairment;]
             649          [(B) is not receiving residential services from:]
             650          [(I) the Division of Services for People with Disabilities created under Section
             651      62A-5-102 ; or]
             652          [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             653      and]
             654          [(C) is enrolled in:]
             655          [(I) an education program for students with disabilities that is authorized under Section
             656      53A-15-301 ; or]
             657          [(II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             658      or]
             659          [(ii) is identified under guidelines of the Department of Health as qualified for:]
             660          [(A) Early Intervention; or]
             661          [(B) Infant Development Services.]
             662          [(h)] (c) "Distributable net income" is as defined in Section 643, Internal Revenue
             663      Code.
             664          [(i)] (d) "Employee" is as defined in Section 59-10-401 .
             665          [(j)] (e) "Employer" is as defined in Section 59-10-401 .
             666          [(k)] (f) "Federal taxable income":
             667          (i) for a resident or nonresident individual, means taxable income as defined by Section
             668      63, Internal Revenue Code; or
             669          (ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
             670      (b), Internal Revenue Code.
             671          [(l)] (g) "Fiduciary" means:
             672          (i) a guardian;
             673          (ii) a trustee;
             674          (iii) an executor;
             675          (iv) an administrator;
             676          (v) a receiver;
             677          (vi) a conservator; or
             678          (vii) any person acting in any fiduciary capacity for any individual.


             679          (h) "Guaranteed annuity interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
             680          [(m)] (i) "Homesteaded land diminished from the Uintah and Ouray Reservation"
             681      means the homesteaded land that was held to have been diminished from the Uintah and Ouray
             682      Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
             683          [(n)] (j) "Individual" means a natural person and includes aliens and minors.
             684          [(o)] (k) "Irrevocable trust" means a trust in which the settlor may not revoke or
             685      terminate all or part of the trust without the consent of a person who has a substantial beneficial
             686      interest in the trust and the interest would be adversely affected by the exercise of the settlor's
             687      power to revoke or terminate all or part of the trust.
             688          [(p) For purposes of Subsection 59-10-114 (2)(l), "long-term capital gain" is as defined
             689      in Section 1222, Internal Revenue Code.]
             690          (l) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.
             691          [(q)] (m) "Nonresident individual" means an individual who is not a resident of this
             692      state.
             693          [(r)] (n) "Nonresident trust" or "nonresident estate" means a trust or estate which is not
             694      a resident estate or trust.
             695          [(s)] (o) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
             696      unincorporated organization:
             697          (A) through or by means of which any business, financial operation, or venture is
             698      carried on; and
             699          (B) which is not, within the meaning of this chapter:
             700          (I) a trust;
             701          (II) an estate; or
             702          (III) a corporation.
             703          (ii) "Partnership" does not include any organization not included under the definition of
             704      "partnership" in Section 761, Internal Revenue Code.
             705          (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
             706      organization described in Subsection (1)[(s)](o)(i).
             707          [(t) "Qualifying military servicemember" means a member of:]
             708          [(i) The Utah Army National Guard;]
             709          [(ii) The Utah Air National Guard; or]


             710          [(iii) the following if the member is assigned to a unit that is located in the state:]
             711          [(A) The Army Reserve;]
             712          [(B) The Naval Reserve;]
             713          [(C) The Air Force Reserve;]
             714          [(D) The Marine Corps Reserve; or]
             715          [(E) The Coast Guard Reserve.]
             716          [(u) "Qualifying stock" means stock that is:]
             717          [(i) (A) common; or]
             718          [(B) preferred;]
             719          [(ii) as defined by the commission by rule, originally issued to:]
             720          [(A) a resident or nonresident individual; or]
             721          [(B) a partnership if the resident or nonresident individual making a subtraction from
             722      federal taxable income in accordance with Subsection 59-10-114 (2)(l):]
             723          [(I) was a partner when the stock was issued; and]
             724          [(II) remains a partner until the last day of the taxable year for which the resident or
             725      nonresident individual makes the subtraction from federal taxable income in accordance with
             726      Subsection 59-10-114 (2)(l); and]
             727          [(iii) issued:]
             728          [(A) by a Utah small business corporation;]
             729          [(B) on or after January 1, 2003; and]
             730          [(C) for:]
             731          [(I) money; or]
             732          [(II) other property, except for stock or securities.]
             733          (p) "Qualified nongrantor charitable lead trust" means a trust:
             734          (i) that is irrevocable;
             735          (ii) that has a trust term measured by:
             736          (A) a fixed term of years; or
             737          (B) the life of a person living on the day on which the trust is created;
             738          (iii) under which:
             739          (A) a portion of the value of the trust assets is distributed during the trust term:
             740          (I) to an organization described in Section 170(c), Internal Revenue Code; and


             741          (II) as a:
             742          (Aa) guaranteed annuity interest; or
             743          (Bb) unitrust interest; and
             744          (B) assets remaining in the trust at the termination of the trust term are distributed to a
             745      beneficiary:
             746          (I) designated in the trust; and
             747          (II) that is not an organization described in Section 170(c), Internal Revenue Code;
             748          (iv) for which the trust is allowed a deduction under Section 642(c), Internal Revenue
             749      Code; and
             750          (v) under which the grantor of the trust is not treated as the owner of any portion of the
             751      trust for federal income tax purposes.
             752          [(v)] (q) (i) "Resident individual" means:
             753          (A) an individual who is domiciled in this state for any period of time during the
             754      taxable year, but only for the duration of the period during which the individual is domiciled in
             755      this state; or
             756          (B) an individual who is not domiciled in this state but:
             757          (I) maintains a permanent place of abode in this state; and
             758          (II) spends in the aggregate 183 or more days of the taxable year in this state.
             759          (ii) For purposes of Subsection (1)[(v)] (q)(i)(B), a fraction of a calendar day shall be
             760      counted as a whole day.
             761          [(w)] (r) "Resident estate" or "resident trust" is as defined in Section 75-7-103 .
             762          [(x) For purposes of Subsection 59-10-114 (2)(l), "short-term capital gain" is as defined
             763      in Section 1222, Internal Revenue Code.]
             764          (s) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.
             765          (t) "State income tax percentage for a nonresident estate or trust" means a percentage
             766      equal to a nonresident estate's or trust's state taxable income for the taxable year divided by the
             767      nonresident estate's or trust's total adjusted gross income for that taxable year after making the
             768      adjustments required by:
             769          (i) Section 59-10-202 ;
             770          (ii) Section 59-10-207 ;
             771          (iii) Section 59-10-209.1 ; or


             772          (iv) Section 59-10-210 ;
             773          (u) "State income tax percentage for a nonresident individual" means a percentage
             774      equal to a nonresident individual's state taxable income for the taxable year divided by the
             775      difference between:
             776          (i) the nonresident individual's total adjusted gross income for that taxable year, after
             777      making the:
             778          (A) additions and subtractions required by Section 59-10-114 ; and
             779          (B) adjustments required by Section 59-10-115 ; and
             780          (ii) if the nonresident individual described in Subsection (1)(u)(i) is a servicemember,
             781      the compensation the servicemember receives for military service if the servicemember is
             782      serving in compliance with military orders.
             783          (v) "State income tax percentage for a part-year resident individual" means, for a
             784      taxable year, a fraction:
             785          (i) the numerator of which is the sum of:
             786          (A) subject to Subsections 59-10-1404 (3) and (4), for the time period during the
             787      taxable year that the part-year resident individual is a resident, the part-year resident
             788      individual's total adjusted gross income for that time period, after making the:
             789          (I) additions and subtractions required by Section 59-10-114 ; and
             790          (II) adjustments required by Section 59-10-115 ; and
             791          (B) for the time period during the taxable year that the part-year resident individual is a
             792      nonresident, an amount calculated by:
             793          (I) determining the part-year resident individual's adjusted gross income for that time
             794      period, after making the:
             795          (Aa) additions and subtractions required by Section 59-10-114 ; and
             796          (Bb) adjustments required by Section 59-10-115 ; and
             797          (II) calculating the portion of the amount determined under Subsection (1)(v)(i)(B)(I)
             798      that is derived from Utah sources in accordance with Section 59-10-117 ; and
             799          (ii) the denominator of which is the difference between:
             800          (A) the part-year resident individual's total adjusted gross income for that taxable year,
             801      after making the:
             802          (I) additions and subtractions required by Section 59-10-114 ; and


             803          (II) adjustments required by Section 59-10-115 ; and
             804          (B) if the part-year resident individual is a servicemember, any compensation the
             805      servicemember receives for military service during the portion of the taxable year that the
             806      servicemember is a nonresident if the servicemember is serving in compliance with military
             807      orders.
             808          [(y)] (w) "Taxable income" or "state taxable income":
             809          (i) subject to Subsection [ 59-10-302 (2)] 59-10-1404 (3), for a resident individual [other
             810      than a resident individual described in Subsection (1)(y)(iii)], means the resident individual's
             811      [federal taxable] adjusted gross income after making the:
             812          (A) additions and subtractions required by Section 59-10-114 ; and
             813          (B) adjustments required by Section 59-10-115 ;
             814          (ii) for a nonresident individual [other than a nonresident individual described in
             815      Subsection (1)(y)(iii), is as defined in Section 59-10-116 ;], is an amount calculated by:
             816          (A) determining the nonresident individual's adjusted gross income for the taxable
             817      year, after making the:
             818          (I) additions and subtractions required by Section 59-10-114 ; and
             819          (II) adjustments required by Section 59-10-115 ; and
             820          (B) calculating the portion of the amount determined under Subsection (1)(w)(ii)(A)
             821      that is derived from Utah sources in accordance with Section 59-10-117 ;
             822          [(iii) for a resident or nonresident individual that collects and pays a tax described in
             823      Part 12, Single Rate Individual Income Tax Act, is as defined in Section 59-10-1202 ;]
             824          [(iv)] (iii) for a resident estate or trust, is as calculated under Section 59-10-201.1 ; and
             825          [(v)] (iv) for a nonresident estate or trust, is as calculated under Section 59-10-204 .
             826          [(z)] (x) "Taxpayer" means any individual, estate, [or] trust, or beneficiary of an estate
             827      or trust, [whose income is] that has income subject in whole or part to the tax imposed by this
             828      chapter.
             829          (y) "Trust term" means a time period:
             830          (i) beginning on the day on which a qualified nongrantor charitable lead trust is
             831      created; and
             832          (ii) ending on the day on which the qualified nongrantor charitable lead trust described
             833      in Subsection (1)(y)(i) terminates.


             834          [(aa)] (z) "Uintah and Ouray Reservation" means the lands recognized as being
             835      included within the Uintah and Ouray Reservation in:
             836          (i) Hagen v. Utah, 510 U.S. 399 (1994); and
             837          (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
             838          [(bb) (i) "Utah small business corporation" means a corporation that:]
             839          [(A) is a small business corporation as defined in Section 1244(c)(3), Internal Revenue
             840      Code;]
             841          [(B) except as provided in Subsection (1)(bb)(ii), meets the requirements of Section
             842      1244(c)(1)(C), Internal Revenue Code; and]
             843          [(C) has its commercial domicile in this state.]
             844          [(ii) Notwithstanding Subsection (1)(bb)(i)(B), the time period described in Section
             845      1244(c)(1)(C) and Section 1244(c)(2), Internal Revenue Code, for determining the source of a
             846      corporation's aggregate gross receipts shall end on the last day of the taxable year for which the
             847      resident or nonresident individual makes a subtraction from federal taxable income in
             848      accordance with Subsection 59-10-114 (2)(l).]
             849          (aa) "Unadjusted income" means an amount equal to the difference between:
             850          (i) the total income required to be reported by a resident or nonresident estate or trust
             851      on the resident or nonresident estate's or trust's federal income tax return for estates and trusts
             852      for the taxable year; and
             853          (ii) the sum of the following:
             854          (A) fees paid or incurred to the fiduciary of a resident or nonresident estate or trust:
             855          (I) for administering the resident or nonresident estate or trust; and
             856          (II) that the resident or nonresident estate or trust deducts as allowed on the resident or
             857      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             858      year;
             859          (B) the income distribution deduction that a resident or nonresident estate or trust
             860      deducts under Section 651 or 661, Internal Revenue Code, as allowed on the resident or
             861      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             862      year;
             863          (C) the amount that a resident or nonresident estate or trust deducts as a deduction for
             864      estate tax or generation skipping transfer tax under Section 691(c), Internal Revenue Code, as


             865      allowed on the resident or nonresident estate's or trust's federal income tax return for estates
             866      and trusts for the taxable year; and
             867          (D) the amount that a resident or nonresident estate or trust deducts as a personal
             868      exemption under Section 642(b), Internal Revenue Code, as allowed on the resident or
             869      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             870      year.
             871          (bb) "Unitrust interest" is as defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
             872          (cc) "Ute tribal member" means a person who is enrolled as a member of the Ute
             873      Indian Tribe of the Uintah and Ouray Reservation.
             874          (dd) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
             875          (ee) "Wages" is as defined in Section 59-10-401 .
             876          (2) (a) Any term used in this chapter has the same meaning as when used in
             877      comparable context in the laws of the United States relating to federal income taxes unless a
             878      different meaning is clearly required.
             879          (b) Any reference to the Internal Revenue Code or to the laws of the United States shall
             880      mean the Internal Revenue Code or other provisions of the laws of the United States relating to
             881      federal income taxes that are in effect for the taxable year.
             882          (c) Any reference to a specific section of the Internal Revenue Code or other provision
             883      of the laws of the United States relating to federal income taxes shall include any
             884      corresponding or comparable provisions of the Internal Revenue Code as [hereafter] amended,
             885      redesignated, or reenacted.
             886          Section 17. Section 59-10-104 is amended to read:
             887           59-10-104. Tax basis -- Tax rate -- Exemption.
             888          (1) [Except as provided in Subsection (5) or Part 12, Single Rate Individual Income
             889      Tax Act, for] For taxable years beginning on or after January 1, [2006] 2008, [but beginning on
             890      or before December 31, 2007,] a tax is imposed on the state taxable income of [every] a
             891      resident individual as provided in this section.
             892          [(2) For an individual, other than a husband and wife or head of household required to
             893      use the tax table under Subsection (3), the tax under this section is imposed in accordance with
             894      the following income brackets:]
             895      [If the state taxable income is:                The tax is:]


             896      [Less than or equal to $1,000            2.3% of the state taxable income]
             897      [Greater than $1,000 but less than        $23, plus 3.3% of state taxable]
             898          [or equal to $2,000             income greater than $1,000]
             899      [Greater than $2,000 but less than        $56, plus 4.2% of state taxable]
             900          [or equal to $3,000             income greater than $2,000]
             901      [Greater than $3,000 but less than        $98, plus 5.2% of state taxable]
             902          [or equal to $4,000             income greater than $3,000]
             903      [Greater than $4,000 but less than        $150, plus 6% of state taxable]
             904          [or equal to $5,500             income greater than $4,000]
             905      [Greater than $5,500                $240, plus 6.98% of state taxable]
             906                               [income greater than $5,500]
             907          [(3) For a husband and wife filing a single return jointly, or a head of household as
             908      defined in Section 2(b), Internal Revenue Code, filing a single return, the tax under this section
             909      is imposed in accordance with the following income brackets:]
             910      [If the state taxable income is:                The tax is:]
             911      [Less than or equal to $2,000            2.3% of the state taxable income]
             912      [Greater than $2,000 but less than        $46, plus 3.3% of state taxable]
             913          [or equal to $4,000             income greater than $2,000]
             914      [Greater than $4,000 but less than        $112, plus 4.2% of state taxable]
             915          [or equal to $6,000             income greater than $4,000]
             916      [Greater than $6,000 but less than        $196, plus 5.2% of state taxable]
             917          [or equal to $8,000             income greater than $6,000]
             918      [Greater than $8,000 but less than        $300, plus 6% of state taxable]
             919          [or equal to $11,000             income greater than $8,000]
             920      [Greater than $11,000                $480, plus 6.98% of state taxable]
             921                               [income greater than $11,000]
             922          [(4) (a) For taxable years beginning on or after January 1, 2009, the commission shall:]
             923          [(i) make the following adjustments to the income brackets under Subsection (2):]
             924          [(A) increase or decrease the income brackets under Subsection (2) by a percentage
             925      equal to the percentage difference between the consumer price index for the preceding calendar
             926      year and the consumer price index for the calendar year 2007; and]


             927          [(B) after making an increase or decrease under Subsection (4)(a)(i)(A), round the
             928      income brackets under Subsection (2) to the nearest whole dollar;]
             929          [(ii) after making the adjustments described in Subsection (4)(a)(i) to the income
             930      brackets under Subsection (2), adjust the income brackets under Subsection (3) so that for each
             931      income bracket under Subsection (2) there is a corresponding income bracket under Subsection
             932      (3) that is equal to the product of:]
             933          [(A) each income bracket under Subsection (2); and]
             934          [(B) two; and]
             935          [(iii) to the extent necessary to reflect an adjustment under Subsection (4)(a)(i) or (ii):]
             936          [(A) increase or decrease the amount of tax under Subsection (2) or (3) prior to adding
             937      in the portion of the tax calculated as a percentage of state taxable income; and]
             938          [(B) after making an increase or decrease under Subsection (4)(a)(iii)(A), round the
             939      amount of tax under Subsection (2) or (3) to the nearest whole dollar.]
             940          [(b) The commission may not increase or decrease the tax rate percentages provided in
             941      Subsection (2) or (3).]
             942          [(c) For purposes of Subsection (4)(a)(i), the commission shall calculate the consumer
             943      price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.]
             944          (2) For purposes of Subsection (1), for a taxable year, the tax is an amount equal to the
             945      product of:
             946          (a) the resident individual's state taxable income for that taxable year; and
             947          (b) 5%.
             948          [(5)] (3) This section does not apply to a resident individual exempt from taxation
             949      under Section 59-10-104.1 .
             950          Section 18. Section 59-10-104.1 is amended to read:
             951           59-10-104.1. Exemption from taxation.
             952          (1) For purposes of this section:
             953          (a) "Personal exemptions" means the total exemption amount an individual is allowed
             954      to claim for the taxable year under Section 151, Internal Revenue Code, for:
             955          (i) the individual;
             956          (ii) the individual's spouse; and
             957          (iii) the individual's dependents.


             958          (b) "Standard deduction":
             959          (i) [except as provided in Subsection (1)(b)(ii),] means the standard deduction an
             960      individual is allowed to claim for the taxable year under Section 63, Internal Revenue Code;
             961      and
             962          (ii) notwithstanding Subsection (1)(b)(i), does not include an additional amount
             963      allowed under Section 63(f), Internal Revenue Code, for an individual or an individual's spouse
             964      who is:
             965          (A) blind; or
             966          (B) 65 years of age or older.
             967          (2) For taxable years beginning on or after January 1, 2002, an individual is exempt
             968      from a tax imposed by Section 59-10-104 or 59-10-116 [or described in Section 59-10-1203 ]
             969      if the individual's adjusted gross income on the individual's federal individual income tax
             970      return for the taxable year is less than or equal to the sum of the individual's:
             971          (a) personal exemptions for that taxable year; and
             972          (b) standard deduction for that taxable year.
             973          Section 19. Section 59-10-110 is amended to read:
             974           59-10-110. Disallowance of federal tax credits.
             975          [No] A credit applied directly to the income tax calculated for federal income tax
             976      purposes [pursuant to] in accordance with the Internal Revenue Code [shall] may not be
             977      applied in calculating the tax due under this chapter.
             978          Section 20. Section 59-10-114 is amended to read:
             979           59-10-114. Additions to and subtractions from adjusted gross income of an
             980      individual.
             981          (1) There shall be added to [federal taxable] adjusted gross income of a resident or
             982      nonresident individual:
             983          [(a) the amount of any income tax imposed by this or any predecessor Utah individual
             984      income tax law and the amount of any income tax imposed by the laws of another state, the
             985      District of Columbia, or a possession of the United States, to the extent deducted from adjusted
             986      gross income in determining federal taxable income;]
             987          [(b)] (a) a lump sum distribution that the taxpayer does not include in adjusted gross
             988      income on the taxpayer's federal individual income tax return for the taxable year;


             989          [(c)] (b) [for taxable years beginning on or after January 1, 2002,] the amount of a
             990      child's income calculated under Subsection [(5)] (4) that:
             991          (i) a parent elects to report on the parent's federal individual income tax return for the
             992      taxable year; and
             993          (ii) the parent does not include in adjusted gross income on the parent's federal
             994      individual income tax return for the taxable year;
             995          [(d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
             996      Code;]
             997          [(e)] (c) (i) a withdrawal from a medical care savings account and any penalty imposed
             998      [in] for the taxable year if:
             999          [(i)] (A) the resident or nonresident individual [did] does not deduct [or include] the
             1000      amounts on the resident or nonresident individual's federal individual income tax return
             1001      [pursuant to] under Section 220, Internal Revenue Code;
             1002          [(ii)] (I) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2); and
             1003          [(iii)] (II) the withdrawal is [deducted by]:
             1004           (Aa) subtracted on a return the resident or nonresident individual [under Subsection
             1005      (2)(h);] files under this chapter for a taxable year beginning on or before December 31, 2007;
             1006      or
             1007          (Bb) used as the basis for a resident or nonresident individual to claim a tax credit
             1008      under Section 59-10-1021 ;
             1009          (ii) a disbursement required to be added to adjusted gross income in accordance with
             1010      Subsection 31A-32a-105 (3); or
             1011          (iii) an amount required to be added to adjusted gross income in accordance with
             1012      Subsection 31A-32a-105 (5)(c);
             1013          [(f)] (d) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             1014      Incentive Program, from the account of a resident or nonresident individual who is an account
             1015      owner as defined in Section 53B-8a-102 , for the taxable year for which the amount is
             1016      withdrawn, if that amount withdrawn from the account of the resident or nonresident individual
             1017      who is the account owner:
             1018          (i) is not expended for higher education costs as defined in Section 53B-8a-102 ; and
             1019          (ii) is:


             1020          (A) subtracted by the resident or nonresident individual:
             1021          (I) who is the account owner; and
             1022          [(II) in accordance with Subsection (2)(i); or]
             1023          (II) on the resident or nonresident individual's return filed under this chapter for a
             1024      taxable year beginning on or before December 31, 2007; or
             1025          (B) used as the basis for the resident or nonresident individual who is the account
             1026      owner to claim a tax credit under Section [ 59-10-1206.1 ] 59-10-1017 ;
             1027          [(g)] (e) except as provided in Subsection (6), [for taxable years beginning on or after
             1028      January 1, 2003,] for bonds, notes, and other evidences of indebtedness acquired on or after
             1029      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             1030      one or more of the following entities:
             1031          (i) a state other than this state;
             1032          (ii) the District of Columbia;
             1033          (iii) a political subdivision of a state other than this state; or
             1034          (iv) an agency or instrumentality of an entity described in Subsections (1)[(g)](e)(i)
             1035      through (iii);
             1036          [(h)] (f) subject to Subsection (2)[(n)](c), any distribution received by a resident
             1037      beneficiary of a resident trust of income that was taxed at the trust level for federal tax
             1038      purposes, but was subtracted from state taxable income of the trust pursuant to Subsection
             1039      59-10-202 (2)[(c)](b);
             1040          [(i)] (g) any distribution received by a resident beneficiary of a nonresident trust of
             1041      undistributed distributable net income realized by the trust on or after January 1, 2004, if that
             1042      undistributed distributable net income was taxed at the trust level for federal tax purposes, but
             1043      was not taxed at the trust level by any state, with undistributed distributable net income
             1044      considered to be distributed from the most recently accumulated undistributed distributable net
             1045      income; and
             1046          [(j)] (h) any adoption expense:
             1047          (i) for which a resident or nonresident individual receives reimbursement from another
             1048      person; and
             1049          (ii) to the extent to which the resident or nonresident individual [deducts] subtracts that
             1050      adoption expense:


             1051          [(A) under Subsection (2)(c); or]
             1052          (A) on a return filed under this chapter for a taxable year beginning on or before
             1053      December 31, 2007; or
             1054          (B) from federal taxable income on a federal individual income tax return.
             1055          (2) There shall be subtracted from [federal taxable] adjusted gross income of a resident
             1056      or nonresident individual:
             1057          (a) the difference between:
             1058          [(a)] (i) the interest or a dividend on [obligations or securities] an obligation or security
             1059      of the United States [and its possessions or of any] or an authority, commission, [or]
             1060      instrumentality, or possession of the United States, to the extent that interest or dividend is:
             1061          (A) included in adjusted gross income for federal income tax purposes for the taxable
             1062      year [but]; and
             1063          (B) exempt from state income taxes under the laws of the United States[, but the
             1064      amount subtracted under this Subsection (2)(a) shall be reduced by]; and
             1065          (ii) any interest on indebtedness incurred or continued to purchase or carry the
             1066      [obligations or securities] obligation or security described in [this] Subsection (2)(a)(i)[, and by
             1067      any expenses incurred in the production of interest or dividend income described in this
             1068      Subsection (2)(a) to the extent that such expenses, including amortizable bond premiums, are
             1069      deductible in determining federal taxable income];
             1070          [(b) 1/2 of the net amount of any income tax paid or payable to the United States after
             1071      all allowable credits, as reported on the United States individual income tax return of the
             1072      taxpayer for the same taxable year;]
             1073          [(c) the amount of adoption expenses for one of the following taxable years as elected
             1074      by the resident or nonresident individual:]
             1075          [(i) regardless of whether a court issues an order granting the adoption, the taxable year
             1076      in which the adoption expenses are:]
             1077          [(A) paid; or]
             1078          [(B) incurred;]
             1079          [(ii) the taxable year in which a court issues an order granting the adoption; or]
             1080          [(iii) any year in which the resident or nonresident individual may claim the federal
             1081      adoption expenses credit under Section 23, Internal Revenue Code;]


             1082          [(d) amounts received by taxpayers under age 65 as retirement income which, for
             1083      purposes of this section, means pensions and annuities, paid from an annuity contract
             1084      purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
             1085      Internal Revenue Code, or purchased by an employee under a plan which meets the
             1086      requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
             1087      political subdivision thereof, or the District of Columbia, to the employee involved or the
             1088      surviving spouse;]
             1089          [(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
             1090      personal retirement exemption;]
             1091          [(f) 75% of the amount of the personal exemption, as defined and calculated in the
             1092      Internal Revenue Code, for each dependent child with a disability and adult with a disability
             1093      who is claimed as a dependent on a taxpayer's return;]
             1094          [(g) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
             1095      taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:]
             1096          [(i) for:]
             1097          [(A) the taxpayer;]
             1098          [(B) the taxpayer's spouse; and]
             1099          [(C) the taxpayer's dependents; and]
             1100          [(ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
             1101      213, Internal Revenue Code, in determining federal taxable income for the taxable year;]
             1102          [(h) (i) except as provided in this Subsection (2)(h), the amount of a contribution made
             1103      during the taxable year on behalf of the taxpayer to a medical care savings account and interest
             1104      earned on a contribution to a medical care savings account established pursuant to Title 31A,
             1105      Chapter 32a, Medical Care Savings Account Act, to the extent the contribution is accepted by
             1106      the account administrator as provided in the Medical Care Savings Account Act, and if the
             1107      taxpayer did not deduct or include amounts on the taxpayer's federal individual income tax
             1108      return pursuant to Section 220, Internal Revenue Code; and]
             1109          [(ii) a contribution deductible under this Subsection (2)(h) may not exceed either of the
             1110      following:]
             1111          [(A) the maximum contribution allowed under the Medical Care Savings Account Act
             1112      for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is


             1113      covered by health care insurance as defined in Section 31A-1-301 or self-funded plan that
             1114      covers the other spouse, and each spouse has a medical care savings account; or]
             1115          [(B) the maximum contribution allowed under the Medical Care Savings Account Act
             1116      for the tax year for taxpayers:]
             1117          [(I) who do not file a joint return; or]
             1118          [(II) who file a joint return, but do not qualify under Subsection (2)(h)(ii)(A);]
             1119          [(i) subject to Subsection (1)(f), the amount of a qualified investment as defined in
             1120      Section 53B-8a-102 that:]
             1121          [(i) a resident or nonresident individual who is an account owner as defined in Section
             1122      53B-8a-102 makes during the taxable year;]
             1123          [(ii) the resident or nonresident individual described in Subsection (2)(i)(i) does not
             1124      deduct on a federal individual income tax return; and]
             1125          [(iii) does not exceed the maximum amount of the qualified investment that may be
             1126      subtracted from federal taxable income for a taxable year in accordance with Subsections
             1127      53B-8a-106 (1)(e) and (f);]
             1128          [(j) for taxable years beginning on or after January 1, 2000, any amounts paid for
             1129      premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
             1130      amounts paid for long-term care insurance were not deducted under Section 213, Internal
             1131      Revenue Code, in determining federal taxable income;]
             1132          [(k)] (b) for taxable years beginning on or after January 1, 2000, if the conditions of
             1133      Subsection [(4)] (3)(a) are met, the amount of income derived by a Ute tribal member:
             1134          (i) during a time period that the Ute tribal member resides on homesteaded land
             1135      diminished from the Uintah and Ouray Reservation; and
             1136          (ii) from a source within the Uintah and Ouray Reservation;
             1137          [(l) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
             1138      resident or nonresident individual's short-term capital gain or long-term capital gain on a
             1139      capital gain transaction:]
             1140          [(A) that occurs on or after January 1, 2003;]
             1141          [(B) if 70% or more of the gross proceeds of the capital gain transaction are expended:]
             1142          [(I) to purchase qualifying stock in a Utah small business corporation; and]
             1143          [(II) within a 12-month period after the day on which the capital gain transaction


             1144      occurs; and]
             1145          [(C) if, prior to the purchase of the qualifying stock described in Subsection
             1146      (2)(l)(i)(B)(I), the resident or nonresident individual did not have an ownership interest in the
             1147      Utah small business corporation that issued the qualifying stock; and]
             1148          [(ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1149      the commission may make rules:]
             1150          [(A) defining the term "gross proceeds"; and]
             1151          [(B) for purposes of Subsection (2)(l)(i)(C), prescribing the circumstances under which
             1152      a resident or nonresident individual has an ownership interest in a Utah small business
             1153      corporation;]
             1154          [(m) for the taxable year beginning on or after January 1, 2005, but beginning on or
             1155      before December 31, 2005, the first $2,200 of income a qualifying military servicemember
             1156      receives:]
             1157          [(i) for service:]
             1158          [(A) as a qualifying military servicemember; or]
             1159          [(B) under an order into active service in accordance with Section 39-1-5 ; and]
             1160          [(ii) to the extent that income is included in adjusted gross income on that resident or
             1161      nonresident individual's federal individual income tax return for that taxable year;]
             1162          [(n)] (c) an amount received by a resident or nonresident individual or distribution
             1163      received by a resident or nonresident beneficiary of a resident trust:
             1164          (i) if that amount or distribution constitutes a refund of taxes imposed by:
             1165          (A) a state; or
             1166          (B) the District of Columbia; and
             1167          (ii) to the extent that amount or distribution is included in adjusted gross income for
             1168      that taxable year on the federal individual income tax return of the resident or nonresident
             1169      individual or resident or nonresident beneficiary of a resident trust;
             1170          [(o)] (d) the amount of a railroad retirement benefit:
             1171          (i) paid:
             1172          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
             1173      seq.;
             1174          (B) to a resident or nonresident individual; and


             1175          (C) for the taxable year; and
             1176          (ii) to the extent that railroad retirement benefit is included in adjusted gross income on
             1177      that resident or nonresident individual's federal individual income tax return for that taxable
             1178      year; and
             1179          [(p)] (e) an amount:
             1180          (i) received by an enrolled member of an American Indian tribe; and
             1181          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
             1182      part on that amount in accordance with:
             1183          (A) federal law;
             1184          (B) a treaty; or
             1185          (C) a final decision issued by a court of competent jurisdiction.
             1186          [(3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted
             1187      for taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
             1188      $4,800, except that:]
             1189          [(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             1190      earned over $32,000, the amount of the retirement income exemption that may be subtracted
             1191      shall be reduced by 50 cents;]
             1192          [(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             1193      earned over $16,000, the amount of the retirement income exemption that may be subtracted
             1194      shall be reduced by 50 cents; and]
             1195          [(iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             1196      $25,000, the amount of the retirement income exemption that may be subtracted shall be
             1197      reduced by 50 cents.]
             1198          [(b) For purposes of Subsection (2)(e), the amount of the personal retirement
             1199      exemption shall be further reduced according to the following schedule:]
             1200          [(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             1201      earned over $32,000, the amount of the personal retirement exemption shall be reduced by 50
             1202      cents;]
             1203          [(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             1204      earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
             1205      cents; and]


             1206          [(iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             1207      $25,000, the amount of the personal retirement exemption shall be reduced by 50 cents.]
             1208          [(c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be
             1209      calculated by adding to adjusted gross income any interest income not otherwise included in
             1210      adjusted gross income.]
             1211          [(d) For purposes of determining ownership of items of retirement income common
             1212      law doctrine will be applied in all cases even though some items may have originated from
             1213      service or investments in a community property state. Amounts received by the spouse of a
             1214      living retiree because of the retiree's having been employed in a community property state are
             1215      not deductible as retirement income of such spouse.]
             1216          [(e) For purposes of Subsection (2)(g), a subtraction for an amount paid for health care
             1217      insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:]
             1218          [(i) for an amount that is reimbursed or funded in whole or in part by the federal
             1219      government, the state, or an agency or instrumentality of the federal government or the state;
             1220      and]
             1221          [(ii) for a taxpayer who is eligible to participate in a health plan maintained and funded
             1222      in whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.]
             1223          [(4)] (3) (a) A subtraction for an amount described in Subsection (2)[(k)](b) is allowed
             1224      only if:
             1225          (i) the taxpayer is a Ute tribal member; and
             1226          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             1227      requirements of this Subsection [(4)] (3).
             1228          (b) The agreement described in Subsection [(4)] (3)(a):
             1229          (i) may not:
             1230          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             1231          (B) provide a subtraction under this section greater than or different from the
             1232      subtraction described in Subsection (2)[(k)](b); or
             1233          (C) affect the power of the state to establish rates of taxation; and
             1234          (ii) shall:
             1235          (A) provide for the implementation of the subtraction described in Subsection
             1236      (2)[(k)](b);


             1237          (B) be in writing;
             1238          (C) be signed by:
             1239          (I) the governor; and
             1240          (II) the chair of the Business Committee of the Ute tribe;
             1241          (D) be conditioned on obtaining any approval required by federal law; and
             1242          (E) state the effective date of the agreement.
             1243          (c) (i) The governor shall report to the commission by no later than February 1 of each
             1244      year regarding whether or not an agreement meeting the requirements of this Subsection [(4)]
             1245      (3) is in effect.
             1246          (ii) If an agreement meeting the requirements of this Subsection [(4)] (3) is terminated,
             1247      the subtraction permitted under Subsection (2)[(k)](b) is not allowed for taxable years
             1248      beginning on or after the January 1 following the termination of the agreement.
             1249          (d) For purposes of Subsection (2)[(k)](b) and in accordance with Title 63, Chapter
             1250      46a, Utah Administrative Rulemaking Act, the commission may make rules:
             1251          (i) for determining whether income is derived from a source within the Uintah and
             1252      Ouray Reservation; and
             1253          (ii) that are substantially similar to how adjusted gross income derived from Utah
             1254      sources is determined under Section 59-10-117 .
             1255          [(5)] (4) (a) For purposes of this Subsection [(5)] (4), "Form 8814" means:
             1256          (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
             1257      Interest and Dividends; or
             1258          (ii) (A) [for taxable years beginning on or after January 1, 2002,] a form designated by
             1259      the commission in accordance with Subsection [(5)] (4)(a)(ii)(B) as being substantially similar
             1260      to 2000 Form 8814 if for purposes of federal individual income taxes the information
             1261      contained on 2000 Form 8814 is reported on a form other than Form 8814; and
             1262          (B) for purposes of Subsection [(5)] (4)(a)(ii)(A) and in accordance with Title 63,
             1263      Chapter 46a, Utah Administrative Rulemaking Act, the commission may make rules
             1264      designating a form as being substantially similar to 2000 Form 8814 if for purposes of federal
             1265      individual income taxes the information contained on 2000 Form 8814 is reported on a form
             1266      other than Form 8814.
             1267          (b) The amount of a child's income added to adjusted gross income under Subsection


             1268      (1)[(c)](b) is equal to the difference between:
             1269          (i) the lesser of:
             1270          (A) the base amount specified on Form 8814; and
             1271          (B) the sum of the following reported on Form 8814:
             1272          (I) the child's taxable interest;
             1273          (II) the child's ordinary dividends; and
             1274          (III) the child's capital gain distributions; and
             1275          (ii) the amount not taxed that is specified on Form 8814.
             1276          [(6)] (5) Notwithstanding Subsection (1)[(g)](e), interest from bonds, notes, and other
             1277      evidences of indebtedness issued by an entity described in Subsections (1)[(g)](e)(i) through
             1278      (iv) may not be added to [federal taxable] adjusted gross income of a resident or nonresident
             1279      individual if, as annually determined by the commission:
             1280          (a) for an entity described in Subsection (1)[(g)](e)(i) or (ii), the entity and all of the
             1281      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             1282      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
             1283          (b) for an entity described in Subsection (1)[(g)](e)(iii) or (iv), the following do not
             1284      impose a tax based on income on any part of the bonds, notes, and other evidences of
             1285      indebtedness of this state:
             1286          (i) the entity; or
             1287          (ii) (A) the state in which the entity is located; or
             1288          (B) the District of Columbia, if the entity is located within the District of Columbia.
             1289          Section 21. Section 59-10-115 is amended to read:
             1290           59-10-115. Adjustments to adjusted gross income.
             1291          (1) The commission shall allow an adjustment to [federal taxable] adjusted gross
             1292      income of a [taxpayer] resident or nonresident individual if the [taxpayer] resident or
             1293      nonresident individual would otherwise:
             1294          (a) receive a double tax benefit under this part; or
             1295          (b) suffer a double tax detriment under this part.
             1296          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1297      commission may make rules to allow for the adjustment to [federal taxable] adjusted gross
             1298      income required by Subsection (1).


             1299          Section 22. Section 59-10-116 is amended to read:
             1300           59-10-116. Tax on nonresident individual -- Calculation -- Exemption.
             1301          [(1) For purposes of this section:]
             1302          [(a) "Military service" is as defined in Pub. L. No. 108-189, Sec. 101.]
             1303          [(b) "Servicemember" is as defined in Pub. L. No. 108-189, Sec. 101.]
             1304          [(c) "State income tax percentage" means a percentage equal to a nonresident
             1305      individual's adjusted gross income for the taxable year received from Utah sources, as
             1306      determined under Section 59-10-117 , divided by the difference between:]
             1307          [(i) the nonresident individual's total adjusted gross income for that taxable year; and]
             1308          [(ii) if the nonresident individual described in Subsection (1)(c)(i) is a servicemember,
             1309      the compensation the servicemember receives for military service if the servicemember is
             1310      serving in compliance with military orders.]
             1311          [(d) "State taxable income" means a nonresident individual's federal taxable income
             1312      after making the:]
             1313          [(i) additions and subtractions required by Section 59-10-114 ; and]
             1314          [(ii) adjustments required by Section 59-10-115 .]
             1315          [(e) "Unapportioned state tax" means the product of the:]
             1316          [(i) difference between:]
             1317          [(A) a nonresident individual's state taxable income; and]
             1318          [(B) if the nonresident individual described in Subsection (1)(e)(i)(A) is a
             1319      servicemember, compensation the servicemember receives for military service if the
             1320      servicemember is serving in compliance with military orders; and]
             1321          [(ii) tax rate imposed under Section 59-10-104 .]
             1322          [(2)] (1) Except as provided in Subsection [(3)] (2) [or Part 12, Single Rate Individual
             1323      Income Tax Act], a tax is imposed on a nonresident individual in an amount equal to the
             1324      product of the [nonresident individual's]:
             1325          [(a) unapportioned state tax; and]
             1326          [(b) state income tax percentage.]
             1327          (a) nonresident individual's state taxable income; and
             1328          (b) percentage listed in Subsection 59-10-104 (2).
             1329          [(3)] (2) This section does not apply to a nonresident individual exempt from taxation


             1330      under Section 59-10-104.1 .
             1331          [(4) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1332      for purposes of Subsection (1), the commission may by rule define what constitutes
             1333      compensation.]
             1334          Section 23. Section 59-10-117 is amended to read:
             1335           59-10-117. State taxable income derived from Utah sources.
             1336          (1) For purposes of Section 59-10-116 , [adjusted gross] state taxable income [derived
             1337      from Utah sources] includes those items includable in [adjusted gross] state taxable income
             1338      attributable to or resulting from:
             1339          (a) the ownership in this state of any interest in real or tangible personal property,
             1340      including real property or property rights from which ["]gross income from mining[,"] as
             1341      defined by Section 613(c), Internal Revenue Code, is derived; or
             1342          (b) the carrying on of a business, trade, profession, or occupation in this state.
             1343          (2) For the purposes of Subsection (1):
             1344          (a) income from intangible personal property, including annuities, dividends, interest,
             1345      and gains from the disposition of intangible personal property shall constitute income derived
             1346      from Utah sources only to the extent that [such] the income is from property employed in a
             1347      trade, business, profession, or occupation carried on in this state;
             1348          (b) [deductions] a deduction with respect to a capital [losses] loss, net long-term capital
             1349      [gains] gain, [and] or net operating [losses] loss shall be based solely on income, gain, loss, and
             1350      deduction connected with Utah sources, under rules prescribed by the commission in
             1351      accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, but otherwise
             1352      shall be determined in the same manner as the corresponding federal deductions;
             1353          (c) [salaries, wages, commissions, and] a salary, wage, commission, or compensation
             1354      for personal services rendered outside this state [shall] may not be considered to be derived
             1355      from Utah sources;
             1356          (d) a nonresident shareholder's distributive share of ordinary income, gain, loss, and
             1357      deduction derived from or connected with Utah sources shall be determined under Section
             1358      59-10-118 ;
             1359          (e) a nonresident, other than a dealer holding property primarily for sale to customers
             1360      in the ordinary course of the dealer's trade or business, may not be considered to carry on a


             1361      trade, business, profession, or occupation in this state solely by reason of the purchase or sale
             1362      of property for the nonresident's own account;
             1363          (f) if a trade, business, profession, or occupation is carried on partly within and partly
             1364      without this state, [items] an item of income, gain, loss, [and deductions] or a deduction
             1365      derived from or connected with Utah sources shall be determined in accordance with [the
             1366      provisions of] Section 59-10-118 ;
             1367          (g) a nonresident partner's distributive share of partnership income, gain, loss, and
             1368      deduction derived from or connected with Utah sources shall be determined under Section
             1369      [ 59-10-303 ] 59-10-1405 ;
             1370          (h) the share of a nonresident estate or trust [and nonresident beneficiaries] or a
             1371      nonresident beneficiary of any estate or trust in income, gain, loss, [and] or deduction derived
             1372      from or connected with Utah sources shall be determined under Section 59-10-207 ; and
             1373          (i) any dividend, interest, or distributive share of income, gain, or loss from a real
             1374      estate investment trust, as defined in Section 59-7-116.5 , distributed or allocated to a
             1375      nonresident investor in the trust, including any shareholder, beneficiary, or owner of a
             1376      beneficial interest in the trust, shall be income from intangible personal property under
             1377      Subsection (2)(a), and shall constitute income derived from Utah sources only to the extent the
             1378      nonresident investor is employing its beneficial interest in the trust in a trade, business,
             1379      profession, or occupation carried on by the investor in this state.
             1380          Section 24. Section 59-10-118 is amended to read:
             1381           59-10-118. Division of income for tax purposes.
             1382          (1) As used in this section [unless the context otherwise requires]:
             1383          (a) "Business income" means income arising from transactions and activity in the
             1384      regular course of [the] a taxpayer's trade or business and includes income from tangible and
             1385      intangible property if the acquisition, management, and disposition of the property constitutes
             1386      integral parts of the taxpayer's regular trade or business operations.
             1387          (b) "Commercial domicile" means the principal place from which the trade or business
             1388      of [the] a taxpayer is directed or managed.
             1389          [(c) "Compensation" means wages, salaries, commissions, and any other form of
             1390      remuneration paid to employee for personal services.]
             1391          [(d)] (c) "Nonbusiness income" means all income other than business income.


             1392          [(e)] (d) "Sales" means all gross receipts of [the] a taxpayer not allocated under
             1393      Subsections (3) through (7).
             1394          [(f)] (e) "State" means any state of the United States, the District of Columbia, the
             1395      commonwealth of Puerto Rico, [and] or any possession of the United States.
             1396          (2) [Any] A taxpayer having business income [which] that is taxable both within and
             1397      without this state, shall allocate and apportion [his] the taxpayer's net income as provided in
             1398      this section.
             1399          (3) Rents and royalties from real or tangible personal property, capital gains, interest,
             1400      dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness
             1401      income, shall be allocated as provided in Subsections (4) through (7).
             1402          (4) (a) Net rents and royalties from real property located in this state are allocable to
             1403      this state.
             1404          (b) Net rents and royalties from tangible personal property are allocable to this state:
             1405          (i) if and to the extent that the property is utilized in this state; or
             1406          (ii) in their entirety if the taxpayer's commercial domicile is in this state and the
             1407      taxpayer is not organized under the laws of or taxable in the state in which the property is
             1408      utilized.
             1409          (c) The extent of utilization of tangible personal property in a state is determined by
             1410      multiplying the rents and royalties by a fraction, the numerator of which is the number of days
             1411      of physical location of the property in the state during the rental or royalty period in the taxable
             1412      year and the denominator of which is the number of days of physical location of the property
             1413      everywhere during all rental or royalty periods in the taxable year. If the physical location of
             1414      the property during the rental or royalty period is unknown or unascertainable by the taxpayer,
             1415      tangible personal property is utilized in the state in which the property was located at the time
             1416      the rental or royalty payer obtained possession.
             1417          (5) (a) Capital gains and losses from sales of real property located in this state are
             1418      allocable to this state.
             1419          (b) Capital gains and losses from sales of tangible personal property are allocable to
             1420      this state if:
             1421          (i) the property [had] has a situs in this state at the time of the sale; or
             1422          (ii) the taxpayer's commercial domicile is in this state and the taxpayer is not taxable in


             1423      the state in which the property had a situs.
             1424          (c) Capital gains and losses from sales of intangible personal property are allocable to
             1425      this state if the taxpayer's commercial domicile is in this state.
             1426          (6) Interest and dividends are allocable to this state if the taxpayer's commercial
             1427      domicile is in this state.
             1428          (7) (a) Patent and copyright royalties are allocable to this state:
             1429          (i) if and to the extent that the patent or copyright is utilized by the payer in this state;
             1430      or
             1431          (ii) if and to the extent that the patent or copyright is utilized by the payer in a state in
             1432      which the taxpayer is not taxable and the taxpayer's commercial domicile is in this state.
             1433          (b) A patent is utilized in a state to the extent that it is employed in production,
             1434      fabrication, manufacturing, or other processing in the state or to the extent that a patented
             1435      product is produced in the state. If the basis of receipts from patent royalties does not permit
             1436      allocation to states or if the accounting procedures do not reflect states of utilization, the patent
             1437      is utilized in the state in which the taxpayer's commercial domicile is located.
             1438          (8) All business income shall be apportioned to this state [by multiplying the income
             1439      by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales
             1440      factor, and the denominator of which is three] using the same methods, procedures, and
             1441      requirements of Sections 59-7-311 through 59-7-320 .
             1442          [(9) The property factor is a fraction, the numerator of which is the average value of the
             1443      taxpayer's real and tangible personal property owned or rented and used in this state during the
             1444      tax period and the denominator of which is the average value of all the taxpayer's real and
             1445      tangible personal property owned or rented and used during the tax period.]
             1446          [(10) Property owned by the taxpayer is valued at its original cost. Property rented by
             1447      the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the
             1448      annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from
             1449      subrentals.]
             1450          [(11) The average value of property shall be determined by averaging the values at the
             1451      beginning and ending of the tax period but the commission may require the averaging of
             1452      monthly values during the tax period, if reasonably required to reflect properly the average
             1453      value of the taxpayer's property.]


             1454          [(12) The payroll factor is a fraction, the numerator of which is the total amount paid in
             1455      this state during the tax period by the taxpayer for compensation, and the denominator of which
             1456      is the total compensation paid everywhere during the tax period.]
             1457          [(13) Compensation is paid in this state if:]
             1458          [(a) the individual's service is performed entirely within the state; or]
             1459          [(b) the individual's service is performed both within and without the state, but the
             1460      service performed without the state is incidental to the individual's service within the state; or]
             1461          [(c) some of the service is performed in the state and:]
             1462          [(i) the base of operations or, if there is no base of operations, the place from which the
             1463      service is directed or controlled is in the state; or]
             1464          [(ii) the base of operations or the place from which the service is directed or controlled
             1465      is not in any state in which some part of the service is performed, but the individual's residence
             1466      is in this state.]
             1467          [(14) The sales factor is a fraction, the numerator of which is the total sales of the
             1468      taxpayer in this state during the tax period, and the denominator of which is the total sales of
             1469      the taxpayer everywhere during the tax period.]
             1470          [(15) Sales of tangible personal property are in this state if the property is delivered or
             1471      shipped to a purchaser within this state regardless of the f.o.b. point or other conditions of the
             1472      sale.]
             1473          [(16) Sales, other than sales of tangible personal property, are in this state if:]
             1474          [(a) the income-producing activity is performed in this state; or]
             1475          [(b) the income-producing activity is performed both in and outside this state and a
             1476      greater proportion of the income-producing activity is performed in this state than in any other
             1477      state, based on costs of performance.]
             1478          [(17) If the allocation and apportionment provisions of this chapter do not fairly
             1479      represent the extent of the taxpayer's business activity in this state, the taxpayer may petition
             1480      for or the commission may require, in respect of all or any part of the taxpayer's business
             1481      activity, if reasonable:]
             1482          [(a) separate accounting;]
             1483          [(b) the exclusion of any one or more of the factors;]
             1484          [(c) the inclusion of one or more additional factors which will fairly represent the


             1485      taxpayer's business activity in this state; or]
             1486          [(d) the employment of any other method to effectuate an equitable allocation and
             1487      apportionment of the taxpayer's income.]
             1488          Section 25. Section 59-10-119 is amended to read:
             1489           59-10-119. Returns by husband and wife, either or both of whom is a
             1490      nonresident.
             1491          (1) If the [federal taxable] adjusted gross income of a husband and wife [(] who are
             1492      both nonresidents of this state[)] is reported or determined on separate federal individual
             1493      income tax returns, [their] the husband's and wife's state taxable incomes in this state shall be
             1494      separately determined.
             1495          (2) If the [federal taxable] adjusted gross income of a husband and wife [(] who are
             1496      both nonresidents[)] of this state is reported or determined on a joint federal individual income
             1497      tax return [their], the husband's and wife's tax shall be reported or determined in this state on a
             1498      joint return.
             1499          (3) (a) If [either husband or wife] one spouse is a nonresident of this state and the other
             1500      spouse is a resident of this state, separate taxes shall be determined on [their] each spouse's
             1501      separate state taxable incomes on [such forms as the commission shall prescribe, unless both
             1502      elect to determine their state taxable income as if both were residents] forms prescribed by the
             1503      commission.
             1504          (b) Notwithstanding Subsection (3)(a), a husband and wife may elect to be considered
             1505      to be residents of this state for purposes of determining state taxable income for a taxable year.
             1506          (c) If [a husband and wife (one being a resident, the other a nonresident)] one spouse
             1507      who is a nonresident of this state and the other spouse who is a resident of this state file a joint
             1508      federal income tax return, but determine [their] state taxable income separately, [they] the
             1509      spouses shall compute their taxable incomes in this state as if their [federal taxable] adjusted
             1510      gross incomes had been determined separately.
             1511          Section 26. Section 59-10-120 is amended to read:
             1512           59-10-120. Change of status as resident or nonresident.
             1513          (1) If an individual changes [his] the individual's status during [his] the taxable year
             1514      from resident to nonresident or from nonresident to resident, the commission may by rule,
             1515      made in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, require


             1516      [him] the individual to file one return for the portion of the taxable year during which [he] the
             1517      individual is a resident and another return for the portion of the taxable year during which [he]
             1518      the individual is a nonresident.
             1519          (2) [Except as provided in Subsection (3) the] The taxable income of the individual
             1520      described in Subsection (1) shall be determined as provided in this chapter for residents and for
             1521      nonresidents as if the individual's taxable year for federal income tax purposes were limited to
             1522      the period of [his] the individual's resident and nonresident status respectively.
             1523          [(3) There shall be included in determining taxable income from sources within or
             1524      without this state, as the case may be, income, gain, loss, or deduction accrued prior to the
             1525      change of status, even though not otherwise includable or allowable in respect of the period
             1526      prior to such change, but the taxation or deduction of items received or accrued prior to the
             1527      change of status shall not be affected by the change.]
             1528          Section 27. Section 59-10-121 is amended to read:
             1529           59-10-121. Proration when two returns required.
             1530          [Where two returns are required to be filed as provided in Section 59-10-120 :]
             1531          [(1) personal exemptions and the standard deduction as used on the federal return shall
             1532      be prorated between the two returns, under rules prescribed by the commission, to reflect the
             1533      proportions of the taxable year during which the individual was a resident and a nonresident;
             1534      and]
             1535          [(2)] If, for purposes of Section 59-10-120 , an individual is required to file two returns
             1536      for a taxable year, the total amount of the taxes due [thereon shall] on the two returns may not
             1537      be less than the total amount of the taxes that would be due if the total of the taxable incomes
             1538      reported on the two returns [were includable] had been included in one return.
             1539          Section 28. Section 59-10-122 is amended to read:
             1540           59-10-122. Taxable year.
             1541          (1) For purposes of [the] a tax imposed by this chapter, [a taxpayer's] the taxable year
             1542      of a resident or nonresident individual or resident or nonresident estate or trust shall be the
             1543      same as [his] the taxable year of the resident or nonresident individual or resident or
             1544      nonresident estate or trust for federal income tax purposes.
             1545          (2) (a) If [a taxpayer's] the taxable year of a resident or nonresident individual or
             1546      resident or nonresident estate or trust is changed for federal income tax purposes, [his] that


             1547      taxable year for purposes of [the] a tax imposed by this chapter shall be [similarly] changed in
             1548      the same manner as the change for federal income tax purposes.
             1549          (b) If a change in a taxable year results in a taxable period of less than 12 months for
             1550      federal income tax purposes, [the] that same taxable period shall be used in computing [the] a
             1551      tax imposed by this chapter.
             1552          Section 29. Section 59-10-123 is amended to read:
             1553           59-10-123. Accounting method.
             1554          (1) For purposes of [the] a tax imposed by this chapter, a [taxpayer's] resident or
             1555      nonresident individual's or resident or nonresident estate's or trust's method of accounting shall
             1556      be the same as the method [employed] of accounting the resident or nonresident individual or
             1557      resident or nonresident estate or trust uses for federal income tax purposes.
             1558          (2) If a [taxpayer's] resident or nonresident individual's or resident or nonresident
             1559      estate's or trust's method of accounting is changed for federal income tax purposes, [his] the
             1560      resident or nonresident individual's or resident or nonresident estate's or trust's method of
             1561      accounting shall be [similarly] changed [and reflected in each return filed for Utah individual
             1562      income tax purposes] in the same manner:
             1563          (a) for purposes of a tax imposed by this chapter; and
             1564          (b) for any taxable year for which [such] the change in the method of accounting is
             1565      [reflected in his return] made for federal income tax purposes.
             1566          Section 30. Section 59-10-124 is amended to read:
             1567           59-10-124. Adjustments between taxable years after change in accounting
             1568      method.
             1569          (1) In computing [a taxpayer's] a resident or nonresident individual's or resident or
             1570      nonresident estate's or trust's state taxable income for [any] a taxable year under a method of
             1571      accounting different from the method under which the [taxpayer's] resident or nonresident
             1572      individual's or resident or nonresident estate's or trust's state taxable income [for the previous
             1573      year] was computed[, there shall be taken into account those adjustments which are
             1574      determined, under rules prescribed by the commission, to be necessary solely by reason of the
             1575      change, to prevent double inclusion or exclusion of an item of gross income, or double
             1576      allowance or disallowance of an item of deduction or credit.] for the previous taxable year,
             1577      state taxable income shall be increased or decreased:


             1578          (a) to prevent double inclusion or exclusion of an item of gross income as a result of
             1579      the change in the method of accounting; or
             1580          (b) to prevent double allowance or disallowance of a subtraction from or addition to
             1581      gross income as a result of the change in the method of accounting.
             1582          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1583      commission may make rules for making an increase or decrease required by Subsection (1).
             1584          Section 31. Section 59-10-125 is amended to read:
             1585           59-10-125. Adjustment after change of accounting method.
             1586          (1) If a taxpayer's method of accounting is changed, other than from an accrual to an
             1587      installment method, any additional tax that results from adjustments determined to be necessary
             1588      solely by reason of the change [shall] may not be greater than if [such] those adjustments were
             1589      ratably allocated and included for the taxable year of the change and the preceding taxable
             1590      years, not in excess of two, during which the taxpayer used the method of accounting from
             1591      which the change is made.
             1592          (2) If a taxpayer's method of accounting is changed from an accrual to an installment
             1593      method, any additional tax for the taxable year of [such] the change [of] in the method of
             1594      accounting and for any subsequent taxable year that is attributable to the receipt of installment
             1595      payments properly accrued in a prior taxable year, shall be reduced by the portion of tax for any
             1596      prior taxable year attributable to the accrual of such installment payments, under rules
             1597      prescribed by the commission in accordance with Title 63, Chapter 46a, Utah Administrative
             1598      Rulemaking Act.
             1599          Section 32. Section 59-10-126 is amended to read:
             1600           59-10-126. Business entities not subject to tax -- Exceptions.
             1601          (1) [An association, trust, or other unincorporated organization] A business entity that
             1602      is taxable as a corporation for federal income tax purposes [shall]:
             1603          (a) may not be subject to the tax imposed by this chapter[, but shall be]; and
             1604          (b) is subject to [the provisions of Title 59,] Chapter 7, Corporate Franchise and
             1605      Income Taxes.
             1606          [(2) To the extent an association, trust, or other unincorporated organization which by
             1607      reason of its purposes or activities is exempt from federal income tax, it shall be exempt from
             1608      the tax imposed by this chapter, but to the extent that such an otherwise exempt organization


             1609      has, or is treated as having, income subject to tax for federal tax purposes, it shall be subject to
             1610      the provisions of Title 59, Chapter 7.]
             1611          (2) A business entity that is exempt from federal income taxation is exempt from the
             1612      tax imposed by this chapter.
             1613          (3) Notwithstanding Subsection (2), if a business entity that is exempt from federal
             1614      income taxation has income that is subject to federal income taxation, that income is subject to
             1615      taxation under Chapter 7, Corporate Franchise and Income Taxes.
             1616          Section 33. Section 59-10-201 is amended to read:
             1617           59-10-201. Taxation of resident trusts and estates.
             1618          (1) [A] Except as provided in Subsection (2), a tax determined in accordance with the
             1619      [rates] rate prescribed by [Section 59-10-104 for individuals filing separately] Subsection
             1620      59-10-104 (2)(b) is imposed for each taxable year on the state taxable income of each resident
             1621      estate or trust[, except for trusts].
             1622          (2) The following are not subject to a tax imposed by this part:
             1623          (a) a resident estate or trust that is not required to file a federal income tax return for
             1624      estates and trusts for the taxable year; or
             1625          (b) a resident trust taxed as [corporations] a corporation.
             1626          [(2)] (3) A resident estate or trust shall be allowed the credit provided in Section
             1627      59-10-1003 , relating to an income tax imposed by another state, except that the limitation shall
             1628      be computed by reference to the taxable income of the estate or trust.
             1629          [(3)] (4) The property of the Utah Educational Savings Plan trust established in Title
             1630      53B, Chapter 8a, Higher Education Savings Incentive Program, and its income from operations
             1631      and investments are exempt from all taxation by the state under this chapter.
             1632          Section 34. Section 59-10-201.1 is amended to read:
             1633           59-10-201.1. State taxable income of a resident estate or trust defined.
             1634          [The] For a taxable year, the state taxable income of a resident estate or trust means [its
             1635      federal taxable] the unadjusted income [as calculated in Section 641 (a) and (b), Internal
             1636      Revenue Code] of the resident estate or trust for that taxable year, as adjusted by Sections
             1637      59-10-202 , 59-10-209.1 , and 59-10-210 .
             1638          Section 35. Section 59-10-202 is amended to read:
             1639           59-10-202. Additions to and subtractions from unadjusted income of a resident or


             1640      nonresident estate or trust.
             1641          (1) There shall be added to[ federal taxable] unadjusted income of a resident or
             1642      nonresident estate or trust:
             1643          [(a) the amount of any income tax imposed by this or any predecessor Utah individual
             1644      income tax law and the amount of any income tax imposed by the laws of another state, the
             1645      District of Columbia, or a possession of the United States, to the extent deducted from federal
             1646      adjusted total income as defined in Section 62, Internal Revenue Code, in determining federal
             1647      taxable income;]
             1648          [(b)] (a) a lump sum distribution allowable as a deduction under Section 402(d)(3) [of
             1649      the], Internal Revenue Code, to the extent deductible under Section 62(a)(8) [of the], Internal
             1650      Revenue Code, in determining adjusted gross income;
             1651          [(c)] (b) except as provided in Subsection (3), [for taxable years beginning on or after
             1652      January 1, 2003,] for bonds, notes, and other evidences of indebtedness acquired on or after
             1653      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             1654      one or more of the following entities:
             1655          (i) a state other than this state;
             1656          (ii) the District of Columbia;
             1657          (iii) a political subdivision of a state other than this state; or
             1658          (iv) an agency or instrumentality of an entity described in Subsections (1)[(c)](b)(i)
             1659      through (iii);
             1660          [(d)] (c) any portion of federal taxable income for a taxable year if that federal taxable
             1661      income is derived from stock:
             1662          (i) in an S corporation; and
             1663          (ii) that is held by an electing small business trust;
             1664          [(e) (i)] (d) the amount withdrawn under Title 53B, Chapter 8a, Higher Education
             1665      Savings Incentive Program, from the account of a resident or nonresident estate or trust that is
             1666      an account owner as defined in Section 53B-8a-102 , for the taxable year for which the amount
             1667      is withdrawn, if that amount withdrawn from the account of the resident or nonresident estate
             1668      or trust that is the account owner:
             1669          [(A)] (i) is not expended for higher education costs as defined in Section 53B-8a-102 ;
             1670      and


             1671          [(B)] (ii) is:
             1672          (A) subtracted by the resident or nonresident estate or trust:
             1673          (I) that is the account owner; and
             1674          [(II) in accordance with Subsection (2)(j)(i); and]
             1675          [(ii) the amount withdrawn under Title 53B, Chapter 8a, Higher Education Savings
             1676      Incentive Program, from the account of a resident or nonresident estate or trust that is an
             1677      account owner as defined in Section 53B-8a-102 , for the taxable year beginning on or after
             1678      January 1, 2007, but beginning on or before December 31, 2007, if that amount withdrawn
             1679      from the account of the resident or nonresident estate or trust that is the account owner:]
             1680          [(A) is not expended for higher education costs as defined in Section 53B-8a-102 ; and]
             1681          [(B) is subtracted by the resident or nonresident estate or trust:]
             1682          [(I) that is the account owner; and]
             1683          [(II) in accordance with Subsection (2)(j)(ii); and]
             1684          (II) on the resident or nonresident estate's or trust'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 estate or trust that is the account
             1687      owner to claim a tax credit under Section 59-10-1017 ; and
             1688          [(f)] (e) any fiduciary adjustments required by Section 59-10-210 .
             1689          (2) There shall be subtracted from [federal taxable] unadjusted income of a resident or
             1690      nonresident estate or trust:
             1691          (a) the interest or a dividend on obligations or securities of the United States and its
             1692      possessions or of any authority, commission, or instrumentality of the United States, to the
             1693      extent that interest or dividend is included in gross income for federal income tax purposes for
             1694      the taxable year but exempt from state income taxes under the laws of the United States, but
             1695      the amount subtracted under this Subsection (2) shall be reduced by any interest on
             1696      indebtedness incurred or continued to purchase or carry the obligations or securities described
             1697      in this Subsection (2), and by any expenses incurred in the production of interest or dividend
             1698      income described in this Subsection (2) to the extent that such expenses, including amortizable
             1699      bond premiums, are deductible in determining federal taxable income;
             1700          [(b) 1/2 of the net amount of any income tax paid or payable to the United States after
             1701      all allowable credits, as per the United States fiduciary income tax return of the taxpayer for the


             1702      same taxable year;]
             1703          [(c)] (b) income of an irrevocable resident trust if:
             1704          (i) the income would not be treated as state taxable income derived from Utah sources
             1705      under Section 59-10-204 if received by a nonresident trust;
             1706          (ii) the trust first became a resident trust on or after January 1, 2004;
             1707          (iii) no assets of the trust were held, at any time after January 1, 2003, in another
             1708      resident irrevocable trust created by the same settlor or the spouse of the same settlor;
             1709          (iv) the trustee of the trust is a trust company as defined in Subsection 7-5-1 (1)(d);
             1710          (v) the amount subtracted under this Subsection (2)(b) is reduced to the extent the
             1711      settlor or any other person is treated as an owner of any portion of the trust under Subtitle A,
             1712      Subchapter J, Subpart E of the Internal Revenue Code; and
             1713          (vi) the amount subtracted under this Subsection (2)(b) is reduced by any interest on
             1714      indebtedness incurred or continued to purchase or carry the assets generating the income
             1715      described in this Subsection (2)(b), and by any expenses incurred in the production of income
             1716      described in this Subsection (2)(b), to the extent that those expenses, including amortizable
             1717      bond premiums, are deductible in determining federal taxable income;
             1718          [(d)] (c) if the conditions of Subsection (4)(a) are met, the amount of income of a
             1719      resident or nonresident estate or trust derived from a deceased Ute tribal member:
             1720          (i) during a time period that the Ute tribal member resided on homesteaded land
             1721      diminished from the Uintah and Ouray Reservation; and
             1722          (ii) from a source within the Uintah and Ouray Reservation;
             1723          [(e) (i) for taxable years beginning on or after January 1, 2003, the total amount of a
             1724      resident or nonresident estate's or trust's short-term capital gain or long-term capital gain on a
             1725      capital gain transaction:]
             1726          [(A) that occurs on or after January 1, 2003;]
             1727          [(B) if 70% or more of the gross proceeds of the capital gain transaction are expended:]
             1728          [(I) to purchase qualifying stock in a Utah small business corporation; and]
             1729          [(II) within a 12-month period after the day on which the capital gain transaction
             1730      occurs; and]
             1731          [(C) if, prior to the purchase of the qualifying stock described in Subsection
             1732      (2)(e)(i)(B)(I), the resident or nonresident estate or trust did not have an ownership interest in


             1733      the Utah small business corporation that issued the qualifying stock; and]
             1734          [(ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1735      the commission may make rules:]
             1736          [(A) defining the term "gross proceeds"; and]
             1737          [(B) for purposes of Subsection (2)(e)(i)(C), prescribing the circumstances under which
             1738      a resident or nonresident estate or trust has an ownership interest in a Utah small business
             1739      corporation;]
             1740          [(f) for the taxable year beginning on or after January 1, 2005, but beginning on or
             1741      before December 31, 2005, the first $2,200 of income of a resident or nonresident estate or
             1742      trust that is derived from a deceased qualifying military servicemember:]
             1743          [(i) for service:]
             1744          [(A) as a qualifying military servicemember; or]
             1745          [(B) under an order into active service in accordance with Section 39-1-5 ; and]
             1746          [(ii) to the extent that income is included in total income on that resident or nonresident
             1747      estate's or trust's federal income tax return for estates and trusts for that taxable year;]
             1748          [(g)] (d) any amount:
             1749          (i) received by a resident or nonresident estate or trust;
             1750          (ii) that constitutes a refund of taxes imposed by:
             1751          (A) a state; or
             1752          (B) the District of Columbia; and
             1753          (iii) to the extent that amount is included in total income on that resident or nonresident
             1754      estate's or trust's federal tax return for estates and trusts for that taxable year;
             1755          [(h)] (e) the amount of a railroad retirement benefit:
             1756          (i) paid:
             1757          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
             1758      seq.;
             1759          (B) to a resident or nonresident estate or trust derived from a deceased resident or
             1760      nonresident individual; and
             1761          (C) for the taxable year; and
             1762          (ii) to the extent that railroad retirement benefit is included in total income on that
             1763      resident or nonresident estate's or trust's federal tax return for estates and trusts;


             1764          [(i)] (f) an amount:
             1765          (i) received by a resident or nonresident estate or trust if that amount is derived from a
             1766      deceased enrolled member of an American Indian tribe; and
             1767          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
             1768      part on that amount in accordance with:
             1769          (A) federal law;
             1770          (B) a treaty; or
             1771          (C) a final decision issued by a court of competent jurisdiction;
             1772          [(j) (i) subject to Subsection (1)(e)(i), for taxable years beginning on or after January 1,
             1773      2007, the amount of a qualified investment as defined in Section 53B-8a-102 that:]
             1774          [(A) a resident or nonresident estate or trust that is an account owner as defined in
             1775      Section 53B-8a-102 makes during the taxable year;]
             1776          [(B) the resident or nonresident estate or trust described in Subsection (2)(j)(i)(A) does
             1777      not deduct on a federal tax return for estates and trusts; and]
             1778          [(C) does not exceed the maximum amount of the qualified investment that may be
             1779      subtracted from federal taxable income for a taxable year in accordance with Subsections
             1780      53B-8a-106 (1)(e) and (f); and]
             1781          [(ii) subject to Subsection (1)(e)(ii), for the taxable year beginning on or after January
             1782      1, 2007, but beginning on or before December 31, 2007 only, and in addition to any subtraction
             1783      a resident or nonresident estate or trust that is an account owner as defined in Section
             1784      53B-8a-102 makes in accordance with Subsection (2)(j)(i), the amount of a qualified
             1785      investment as defined in Section 53B-8a-102 that:]
             1786          [(A) a resident or nonresident estate or trust that is an account owner as defined in
             1787      Section 53B-8a-102 could have subtracted under Subsection (2)(j)(i) for the taxable year
             1788      beginning on or after January 1, 2006, but beginning on or before December 31, 2006, had the
             1789      subtraction under Subsection (2)(j)(i) been in effect for the taxable year beginning on or after
             1790      January 1, 2006, but beginning on or before December 31, 2006;]
             1791          [(B) the resident or nonresident estate or trust described in Subsection (2)(j)(ii)(A)
             1792      makes during the taxable year beginning on or after January 1, 2006, but beginning on or
             1793      before December 31, 2006;]
             1794          [(C) the resident or nonresident estate or trust described in Subsection (2)(j)(ii)(A) does


             1795      not deduct on a federal tax return for estates and trusts; and]
             1796          [(D) does not exceed the maximum amount of the qualified investment that may be
             1797      subtracted from federal taxable income:]
             1798          [(I) for the taxable year beginning on or after January 1, 2006, but beginning on or
             1799      before December 31, 2006; and]
             1800          [(II) in accordance with Subsections 53B-8a-106 (1)(e) and (f); and]
             1801          (g) the amount that a qualified nongrantor charitable lead trust deducts under Section
             1802      642(c), Internal Revenue Code, as a charitable contribution deduction, as allowed on the
             1803      qualified nongrantor charitable lead trust's federal income tax return for estates and trusts for
             1804      the taxable year; and
             1805          [(k)] (h) any fiduciary adjustments required by Section 59-10-210 .
             1806          (3) Notwithstanding Subsection (1)[(c)](b), interest from bonds, notes, and other
             1807      evidences of indebtedness issued by an entity described in Subsections (1)[(c)](b)(i) through
             1808      (iv) may not be added to [federal taxable] unadjusted income of a resident or nonresident estate
             1809      or trust if, as annually determined by the commission:
             1810          (a) for an entity described in Subsection (1)[(c)](b)(i) or (ii), the entity and all of the
             1811      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             1812      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
             1813          (b) for an entity described in Subsection (1)[(c)](b)(iii) or (iv), the following do not
             1814      impose a tax based on income on any part of the bonds, notes, and other evidences of
             1815      indebtedness of this state:
             1816          (i) the entity; or
             1817          (ii) (A) the state in which the entity is located; or
             1818          (B) the District of Columbia, if the entity is located within the District of Columbia.
             1819          (4) (a) A subtraction for an amount described in Subsection (2)[(d)](c) is allowed only
             1820      if:
             1821          (i) the income is derived from a deceased Ute tribal member; and
             1822          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             1823      requirements of this Subsection (4).
             1824          (b) The agreement described in Subsection (4)(a):
             1825          (i) may not:


             1826          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             1827          (B) provide a subtraction under this section greater than or different from the
             1828      subtraction described in Subsection (2)[(d)](c); or
             1829          (C) affect the power of the state to establish rates of taxation; and
             1830          (ii) shall:
             1831          (A) provide for the implementation of the subtraction described in Subsection
             1832      (2)[(d)](c);
             1833          (B) be in writing;
             1834          (C) be signed by:
             1835          (I) the governor; and
             1836          (II) the chair of the Business Committee of the Ute tribe;
             1837          (D) be conditioned on obtaining any approval required by federal law; and
             1838          (E) state the effective date of the agreement.
             1839          (c) (i) The governor shall report to the commission by no later than February 1 of each
             1840      year regarding whether or not an agreement meeting the requirements of this Subsection (4) is
             1841      in effect.
             1842          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
             1843      subtraction permitted under Subsection (2)[(d)](c) is not allowed for taxable years beginning
             1844      on or after the January 1 following the termination of the agreement.
             1845          (d) For purposes of Subsection (2)[(d)](c) and in accordance with Title 63, Chapter
             1846      46a, Utah Administrative Rulemaking Act, the commission may make rules:
             1847          (i) for determining whether income is derived from a source within the Uintah and
             1848      Ouray Reservation; and
             1849          (ii) that are substantially similar to how adjusted gross income derived from Utah
             1850      sources is determined under Section 59-10-117 .
             1851          Section 36. Section 59-10-204 is amended to read:
             1852           59-10-204. State taxable income of a nonresident estate or trust.
             1853          [The] For a taxable year, the state taxable income of a nonresident estate or trust [shall
             1854      be its state taxable] is an amount calculated by:
             1855          (1) determining the unadjusted income [as calculated in Section 59-10-201.1 ,] of the
             1856      nonresident estate or trust for that taxable year after making the adjustments required by:


             1857          (a) Section 59-10-202 ;
             1858          (b) Section 59-10-207 ;
             1859          (c) Section 59-10-209.1 ; or
             1860          (d) Section 59-10-210 ; and
             1861          (2) calculating the portion of the amount determined under Subsection (1) that is
             1862      derived from Utah sources determined in accordance with the principles of Section 59-10-117 [,
             1863      and adjusted as provided in Section 59-10-207 ].
             1864          Section 37. Section 59-10-205 is amended to read:
             1865           59-10-205. Tax on income derived from Utah sources.
             1866          [A tax] (1) Except as provided in Subsection (2), a tax is imposed on a nonresidential
             1867      estate or trust in an amount equal to the product of:
             1868          (a) the nonresident estate's or trust's state taxable income[, as calculated in Section
             1869      59-10-204 , of every nonresident estate or trust in accordance with the rates prescribed in
             1870      Section 59-10-104 for individuals filing separately. The tax shall only be applied to income
             1871      derived from Utah sources as adjusted by Section 59-10-207 , including such items from
             1872      another estate or trust of which the first estate or trust is a beneficiary.] as determined under
             1873      Section 59-10-204 ; and
             1874          (b) the percentage listed in Subsection 59-10-104 (2).
             1875          (2) The following are not subject to a tax imposed by this part:
             1876          (a) a nonresident estate or trust that is not required to file a federal income tax return
             1877      for estates and trusts for the taxable year; or
             1878          (b) a nonresident trust taxed as a corporation.
             1879          Section 38. Section 59-10-207 is amended to read:
             1880           59-10-207. Share of a nonresident estate or trust and beneficiaries in state taxable
             1881      income.
             1882          (1) The following shall be determined as provided in this section:
             1883          [(1) The](a) the share of a nonresident estate or trust [and its beneficiaries in items] or
             1884      a nonresident beneficiary of a nonresident estate or trust in an item of income, gain, loss, [and]
             1885      or deduction [entering into the definition of] that constitutes distributable net income; and [the
             1886      share]
             1887          (b) for purposes of Section 59-10-116 , the share of a nonresident beneficiary of any


             1888      estate or trust in estate or trust income, gain, loss, [and] or deduction [shall be determined as
             1889      follows:].
             1890          (2) (a) [To] The modifications described in Sections 59-10-202 and 59-10-210 shall be
             1891      added to or subtracted from the amount of [items] an item of income, gain, loss, [and] or
             1892      deduction that [enter into the definition of] constitutes distributable net income [there shall be
             1893      added or subtracted, as the case may be, the modifications described in Sections 59-10-202 and
             1894      59-10-210 ] to the extent [they relate to items] the item relates to an item of income, gain, loss,
             1895      [and] or deduction that also [enter into the definition of] constitutes distributable net income.
             1896      [No]
             1897          (b) A modification [shall] may not be made under this section [that has the effect of
             1898      duplicating] if the modification duplicates an item already reflected in [the definition of]
             1899      distributable net income.
             1900          [(b)] (3) (a) The amount determined under Subsection [(1)] (2)(a) shall be allocated
             1901      among the estate or trust and [its] the beneficiaries [(including solely for the purpose of this
             1902      allocation, resident beneficiaries)] of the estate or trust, including a resident beneficiary, in
             1903      proportion to [their respective shares of federal] the estate's, trust's, or beneficiary's share of
             1904      distributable net income. [The amounts so allocated shall have]
             1905          (b) An amount allocated in accordance with Subsection (3)(a) has the same character
             1906      as for federal income tax purposes.
             1907          [(c)] (4) (a) If [the] an estate or trust [has no federal] does not have distributable net
             1908      income for the taxable year, the share of each beneficiary in the [net] amount determined under
             1909      Subsection [(1)] (2)(a) shall be in proportion to [his] the beneficiary's share of the estate or trust
             1910      income for [such] that taxable year, under state law or the terms of the governing instrument,
             1911      that is required to be distributed currently and any other amounts of [such] that income
             1912      distributed in [such] that taxable year. [Any]
             1913          (b) For purposes of this Subsection (4), any balance of [such] net income shall be
             1914      allocated to the estate or trust.
             1915          [(2) The] (5) (a) In accordance with Title 63, Chapter 46a, Utah Administrative
             1916      Rulemaking Act, the commission may by rule establish [such] one or more other [method or]
             1917      methods of determining the [respective] shares of [the beneficiaries] a beneficiary and of [the]
             1918      an estate or trust in [its]:


             1919          (i) income derived from sources in this state[,]; and [in the]
             1920          (ii) modifications related [thereto, as may be appropriate and equitable. The] to
             1921      income, gain, loss, or deduction.
             1922          (b) A fiduciary may elect to use [any other methods prescribed in] a method allowed by
             1923      this Subsection (5) only [when] if the allocation of [such respective shares] a share under [this
             1924      section would result] Subsection (3) or (4):
             1925          (i) results in an inequity in the allocation [which]; and
             1926          (ii) the inequity described in Subsection (5)(b)(i) is substantial [both]:
             1927          (A) in amount; and
             1928          (B) in relation to the total amount of the modifications [referred to] described in
             1929      Subsection [(1)] (2)(a).
             1930          Section 39. Section 59-10-209.1 is amended to read:
             1931           59-10-209.1. Adjustments to unadjusted income.
             1932          (1) The commission shall allow an adjustment to [state taxable] unadjusted income of a
             1933      resident or nonresident estate or trust if the resident or nonresident estate or trust would
             1934      otherwise:
             1935          (a) receive a double tax benefit under this chapter; or
             1936          (b) suffer a double tax detriment under this chapter.
             1937          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1938      commission may make rules to allow for the adjustment to [state taxable] unadjusted income
             1939      required by Subsection (1).
             1940          Section 40. Section 59-10-210 is amended to read:
             1941           59-10-210. Fiduciary adjustments.
             1942          (1) A share of the fiduciary adjustments described in Subsection (2) shall be added to
             1943      or subtracted from [federal taxable] unadjusted income:
             1944          (a) of:
             1945          (i) a resident or nonresident estate or trust; or
             1946          (ii) a resident or nonresident beneficiary of a resident or nonresident estate or trust; and
             1947          (b) as provided in this section.
             1948          (2) For purposes of Subsection (1), the fiduciary adjustments are the following
             1949      amounts:


             1950          (a) the additions to and subtractions from [federal taxable] unadjusted income of a
             1951      resident or nonresident estate or trust required by Section 59-10-202 [, except for Subsection
             1952      59-10-202 (2)(b)]; and
             1953          (b) a tax credit claimed by a resident or nonresident estate or trust as allowed by:
             1954          (i) Section 59-6-102 ;
             1955          (ii) Part 10, Nonrefundable Tax Credit Act;
             1956          (iii) Part 11, Refundable Tax Credit Act;
             1957          (iv) Section 59-13-202 ;
             1958          (v) Section 63-38f-413 ; or
             1959          (vi) Section 63-38f-503 .
             1960          (3) (a) The respective shares of an estate or trust and its beneficiaries, including for the
             1961      purpose of this allocation a nonresident beneficiary, in the state fiduciary adjustments, shall be
             1962      allocated in proportion to their respective shares of federal distributable net income of the
             1963      estate or trust.
             1964          (b) If the estate or trust described in Subsection (3)(a) has no federal distributable net
             1965      income for the taxable year, the share of each beneficiary in the fiduciary adjustments shall be
             1966      allocated in proportion to that beneficiary's share of the estate or trust income for the taxable
             1967      year that is, under state law or the governing instrument, required to be distributed currently
             1968      plus any other amounts of that income distributed in that taxable year.
             1969          (c) After making the allocations required by Subsections (3)(a) and (b), any balance of
             1970      the fiduciary adjustments shall be allocated to the estate or trust.
             1971          (4) (a) The commission shall allow a fiduciary to use a method for determining the
             1972      allocation of the fiduciary adjustments described in Subsection (2) other than the method
             1973      described in Subsection (3) if using the method described in Subsection (3) results in an
             1974      inequity:
             1975          (i) in allocating the fiduciary adjustments described in Subsection (2); and
             1976          (ii) if the inequity is substantial:
             1977          (A) in amount; and
             1978          (B) in relation to the total amount of the fiduciary adjustments described in Subsection
             1979      (2).
             1980          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the


             1981      commission may make rules authorizing a fiduciary to use a method for determining the
             1982      allocation of the fiduciary adjustments described in Subsection (2) other than the method
             1983      described in Subsection (3) if using the method described in Subsection (3) results in an
             1984      inequity:
             1985          (i) in allocating the fiduciary adjustments described in Subsection (2); and
             1986          (ii) if the inequity is substantial:
             1987          (A) in amount; and
             1988          (B) in relation to the total amount of the fiduciary adjustments described in Subsection
             1989      (2).
             1990          Section 41. Section 59-10-507 is amended to read:
             1991           59-10-507. Return by a pass-through entity.
             1992          (1) [For purposes of] As used in this section[, "taxable]:
             1993          (a) "Pass-through entity" is as defined in Section 59-10-1402 .
             1994          (b) "Taxable year" means a year or other time period that would be a taxable year of a
             1995      [partnership if the partnership] pass-through entity if the pass-through entity were subject to
             1996      taxation under this chapter.
             1997          (2) A [partnership] pass-through entity having any income derived from sources in this
             1998      state shall make a return for the taxable year as prescribed by the commission.
             1999          (3) For purposes of Subsection (2), a [partnership's] pass-through entity's income
             2000      derived from sources in this state shall be determined in accordance with [Section 59-10-303]
             2001      the principles of Section 59-10-1405 .
             2002          Section 42. Section 59-10-1002.1 , which is renumbered from Section 59-10-1016 is
             2003      renumbered and amended to read:
             2004           [59-10-1016].     59-10-1002.1. Removal of tax credit from tax return and
             2005      prohibition on claiming or carrying forward a tax credit -- Conditions for removal and
             2006      prohibition on claiming or carrying forward a tax credit -- Commission reporting
             2007      requirements.
             2008          (1) As used in this section, "tax return" means a tax return filed in accordance with this
             2009      chapter.
             2010          (2) Beginning two taxable years after the requirements of Subsection (3) are met:
             2011          (a) the commission shall remove a tax credit allowed under this part from each tax


             2012      return on which the tax credit appears; and
             2013          (b) a claimant, estate, or trust filing a tax return may not claim or carry forward the tax
             2014      credit.
             2015          (3) The commission shall remove a tax credit allowed under this part from a tax return
             2016      and a claimant, estate, or trust filing a tax return may not claim or carry forward [a] the tax
             2017      credit as provided in Subsection (2) if:
             2018          (a) the total amount of the tax credit claimed or carried forward by all claimants,
             2019      estates, or trusts filing tax returns is less than $10,000 per year for three consecutive taxable
             2020      years beginning on or after January 1, 2002; and
             2021          (b) less than ten claimants, estates, and trusts per year for the three consecutive taxable
             2022      years described in Subsection (3)(a), file a tax return claiming or carrying forward the tax
             2023      credit.
             2024          (4) The commission shall, on or before the November interim meeting of the year after
             2025      the taxable year in which the requirements of Subsection (3) are met:
             2026          (a) report to the Revenue and Taxation Interim Committee that in accordance with this
             2027      section:
             2028          (i) the commission is required to remove a tax credit from each tax return on which the
             2029      tax credit appears; and
             2030          (ii) a claimant, estate, or trust filing a tax return may not claim or carry forward the tax
             2031      credit; and
             2032          (b) notify each state agency required by statute to assist in the administration of the tax
             2033      credit that in accordance with this section:
             2034          (i) the commission is required to remove a tax credit from each tax return on which the
             2035      tax credit appears; and
             2036          (ii) a claimant, estate, or trust filing a tax return may not claim or carry forward the tax
             2037      credit.
             2038          Section 43. Section 59-10-1002.2 , which is renumbered from Section 59-10-1206.9 is
             2039      renumbered and amended to read:
             2040           [59-10-1206.9].     59-10-1002.2. Apportionment of tax credits.
             2041          (1) A nonresident individual or a part-year resident individual that claims a tax credit
             2042      in accordance with Section [ 59-10-1206.1 , 59-10-1206.2 , or 59-10-1206.3 ] 59-10-1017 ,


             2043      59-10-1018 , 59-10-1019 , or 59-10-1021 , may only claim an apportioned amount of the tax
             2044      credit equal to:
             2045          [(1)] (a) for a nonresident individual, the product of:
             2046          [(a)] (i) the state income tax percentage for the nonresident individual; and
             2047          [(b)] (ii) the amount of the tax credit that the nonresident individual would have been
             2048      allowed to claim but for the apportionment requirements of this section; or
             2049          [(2)] (b) for a part-year resident individual, the product of:
             2050          [(a)] (i) the state income tax percentage for the part-year resident individual; and
             2051          [(b)] (ii) the amount of the tax credit that the part-year resident individual would have
             2052      been allowed to claim but for the apportionment requirements of this section.
             2053          (2) A nonresident estate or trust that claims a tax credit in accordance with Section
             2054      59-10-1017 or 59-10-1020 may only claim an apportioned amount of the tax credit equal to the
             2055      product of:
             2056          (a) the state income tax percentage for the nonresident estate or trust; and
             2057          (b) the amount of the tax credit that the nonresident estate or trust would have been
             2058      allowed to claim but for the apportionment requirements of this section.
             2059          Section 44. Section 59-10-1017 , which is renumbered from Section 59-10-1206.1 is
             2060      renumbered and amended to read:
             2061           [59-10-1206.1].     59-10-1017. Utah Educational Savings Plan tax credit.
             2062          (1) As used in this section:
             2063          (a) "Account owner" is as defined in Section 53B-8a-102 .
             2064          [(b) "Claimant" means a resident or nonresident individual that has state taxable
             2065      income under this part.]
             2066          [(c)] (b) "Higher education costs" is as defined in Section 53B-8a-102 .
             2067          [(d)] (c) "Maximum amount of a qualified investment for the taxable year" means, for
             2068      a taxable year:
             2069          (i) for a claimant, estate, or trust that is an account owner, if that claimant, estate, or
             2070      trust is [a person] other than husband and wife account owners who file a single return jointly,
             2071      the maximum amount of a qualified investment:
             2072          (A) listed in Subsection 53B-8a-106 (1)(e)(ii); and
             2073          (B) increased or decreased for that taxable year in accordance with Subsection


             2074      53B-8a-106 (1)(f); or
             2075          (ii) for claimants who are husband and wife account owners who file a single return
             2076      jointly, the maximum amount of a qualified investment:
             2077          (A) listed in Subsection 53B-8a-106 (1)(e)(iii); and
             2078          (B) increased or decreased for that taxable year in accordance with Subsection
             2079      53B-8a-106 (1)(f).
             2080          [(e)] (d) "Qualified investment" is as defined in Section 53B-8a-102 .
             2081          (2) [For taxable years beginning on or after January 1, 2007, a] Except as provided in
             2082      Section 59-10-1002.2 , a claimant, estate, or trust that is an account owner may claim a
             2083      nonrefundable tax credit equal to the product of:
             2084          (a) the lesser of:
             2085          (i) the amount of a qualified investment the claimant, estate, or trust:
             2086          (A) makes during the taxable year; and
             2087          (B) does not deduct:
             2088          (I) for a claimant, on the claimant's federal individual income tax return; or
             2089          (II) for an estate or trust, on the estate's or trust's federal income tax return; or
             2090          (ii) the maximum amount of a qualified investment for the taxable year if the amount
             2091      described in Subsection (2)(a)(i) is greater than the maximum amount of a qualified investment
             2092      for the taxable year; and
             2093          [(b) (i) for the taxable year beginning on or after January 1, 2007, but beginning on or
             2094      before December 31, 2007, 5.35%; or]
             2095          [(ii) for taxable years beginning on or after January 1, 2008, 5%.]
             2096          (b) 5%.
             2097          (3) A tax credit under this section may not be carried forward or carried back.
             2098          Section 45. Section 59-10-1018 , which is renumbered from Section 59-10-1206.2 is
             2099      renumbered and amended to read:
             2100           [59-10-1206.2].     59-10-1018. Definitions -- Nonrefundable taxpayer tax
             2101      credits.
             2102          (1) As used in this section:
             2103          [(a) "Claimant" means a resident or nonresident individual that has state taxable
             2104      income under this part.]


             2105          [(b)] (a) "Head of household filing status" means a head of household, as defined in
             2106      Section 2(b), Internal Revenue Code, who files a single return.
             2107          [(c)] (b) "Joint filing status" means:
             2108          (i) a husband and wife who file a single return jointly; or
             2109          (ii) a surviving spouse, as defined in Section 2(a), Internal Revenue Code, who files a
             2110      single return.
             2111          [(d)] (c) "Single filing status" means:
             2112          (i) a single individual who files a single return; or
             2113          (ii) a married individual who:
             2114          (A) does not file a single return jointly with that individual's spouse; and
             2115          (B) files a single return.
             2116          (2) Except as provided in Section [ 59-10-1206.9 ] 59-10-1002.2 , and subject to
             2117      Subsections (3) through (5), [for taxable years beginning on or after January 1, 2008,] a
             2118      claimant may claim a nonrefundable tax credit against taxes otherwise due under this part equal
             2119      to the sum of:
             2120          (a) (i) for a claimant that deducts the standard deduction on the claimant's federal
             2121      individual income tax return for the taxable year, 6% of the amount the claimant deducts as
             2122      allowed as the standard deduction on the claimant's federal individual income tax return for
             2123      that taxable year; or
             2124          (ii) for a claimant that itemizes deductions on the claimant's federal individual income
             2125      tax return for the taxable year, the product of:
             2126          (A) the difference between:
             2127          (I) the amount the claimant deducts as allowed as an itemized deduction on the
             2128      claimant's federal individual income tax return for that taxable year; and
             2129          (II) any amount of state or local income taxes the claimant deducts as allowed as an
             2130      itemized deduction on the claimant's federal individual income tax return for that taxable year;
             2131      and
             2132          (B) 6%; and
             2133          (b) [6%] the product of:
             2134          (i) 75% of the total amount the claimant [would have been allowed to claim] deducts
             2135      as allowed as a personal exemption deduction on the claimant's [state] federal individual


             2136      income tax return [had the claimant filed an individual income tax return under Part 1,
             2137      Determination and Reporting of Tax Liability and Information, for the taxable year] for that
             2138      taxable year; and
             2139          (ii) 6%.
             2140          (3) A claimant may not carry forward or carry back a tax credit under this section.
             2141          (4) The tax credit allowed by Subsection (2) shall be reduced by $.013 for each dollar
             2142      by which a claimant's state taxable income exceeds:
             2143          (a) for a claimant who has a single filing status, $12,000;
             2144          (b) for a claimant who has a head of household filing status, $18,000; or
             2145          (c) for a claimant who has a joint filing status, $24,000.
             2146          (5) (a) For taxable years beginning on or after January 1, 2009, the commission shall
             2147      increase or decrease the following dollar amounts by a percentage equal to the percentage
             2148      difference between the consumer price index for the preceding calendar year and the consumer
             2149      price index for calendar year 2007:
             2150          (i) the dollar amount listed in Subsection (4)(a); and
             2151          (ii) the dollar amount listed in Subsection (4)(b).
             2152          (b) After the commission increases or decreases the dollar amounts listed in Subsection
             2153      (5)(a), the commission shall round those dollar amounts listed in Subsection (5)(a) to the
             2154      nearest whole dollar.
             2155          (c) After the commission rounds the dollar amounts as required by Subsection (5)(b),
             2156      the commission shall increase or decrease the dollar amount listed in Subsection (4)(c) so that
             2157      the dollar amount listed in Subsection (4)(c) is equal to the product of:
             2158          (i) the dollar amount listed in Subsection (4)(a); and
             2159          (ii) two.
             2160          (d) For purposes of Subsection (5)(a), the commission shall calculate the consumer
             2161      price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.
             2162          Section 46. Section 59-10-1019 , which is renumbered from Section 59-10-1206.3 is
             2163      renumbered and amended to read:
             2164           [59-10-1206.3].     59-10-1019. Definitions -- Nonrefundable retirement tax
             2165      credits.
             2166          (1) As used in this section:


             2167          (a) "Eligible age 65 or older retiree" means a [resident or nonresident individual]
             2168      claimant, regardless of whether that [individual] claimant is retired, who:
             2169          (i) is 65 years of age or older; and
             2170          (ii) was born on or before December 31, 1952[; and].
             2171          [(iii) has state taxable income under this part.]
             2172          (b) (i) "Eligible retirement income" means income received by an eligible under age 65
             2173      retiree as a pension or annuity if that pension or annuity is:
             2174          (A) paid to the eligible under age 65 retiree or the surviving spouse of an eligible under
             2175      age 65 retiree; and
             2176          (B) (I) paid from an annuity contract purchased by an employer under a plan that meets
             2177      the requirements of Section 404(a)(2), Internal Revenue Code;
             2178          (II) purchased by an employee under a plan that meets the requirements of Section 408,
             2179      Internal Revenue Code; or
             2180          (III) paid by:
             2181          (Aa) the United States;
             2182          (Bb) a state or a political subdivision of a state; or
             2183          (Cc) the District of Columbia.
             2184          (ii) "Eligible retirement income" does not include amounts received by the spouse of a
             2185      living eligible under age 65 retiree because of the eligible under age 65 retiree's having been
             2186      employed in a community property state.
             2187          (c) "Eligible under age 65 retiree" means a [resident or nonresident individual]
             2188      claimant, regardless of whether that [individual] claimant is retired, who:
             2189          (i) is younger than 65 years of age;
             2190          (ii) was born on or before December 31, 1952; and
             2191          (iii) has eligible retirement income for the taxable year for which a tax credit is claimed
             2192      under this section[; and].
             2193          [(iv) has state taxable income under this part.]
             2194          (d) "Head of household filing status" is as defined in Section [ 59-10-1206.2 ]
             2195      59-10-1018 .
             2196          (e) "Joint filing status" is as defined in Section [ 59-10-1206.2 ] 59-10-1018 .
             2197          (f) "Married filing separately status" means a married individual who:


             2198          (i) does not file a single return jointly with that individual's spouse; and
             2199          (ii) files a single return.
             2200          (g) "Modified adjusted gross income" means the sum of an eligible age 65 or older
             2201      retiree's or eligible under age 65 retiree's:
             2202          (i) adjusted gross income for the taxable year for which a tax credit is claimed under
             2203      this section; and
             2204          (ii) any interest income that is not included in adjusted gross income for the taxable
             2205      year described in Subsection (1)(g)(i).
             2206          (h) "Single filing status" means a single individual who files a single return.
             2207          (2) Except as provided in Section [ 59-10-1206.9 ] 59-10-1002.2 and subject to
             2208      Subsections (3) through (6)[, for taxable years beginning on or after January 1, 2008]:
             2209          (a) each eligible age 65 or older retiree may claim a nonrefundable tax credit of $450
             2210      against taxes otherwise due under this part; or
             2211          (b) each eligible under age 65 retiree may claim a nonrefundable tax credit against
             2212      taxes otherwise due under this part in an amount equal to the lesser of:
             2213          (i) $288; or
             2214          (ii) the product of:
             2215          (A) the eligible under age 65 retiree's eligible retirement income for the taxable year for
             2216      which the eligible under age 65 retiree claims a tax credit under this section; and
             2217          (B) 6%.
             2218          (3) A tax credit under this section may not be carried forward or carried back.
             2219          (4) The sum of the tax credits allowed by Subsection (2)(a) claimed on one return filed
             2220      under this part shall be reduced by $.025 for each dollar by which an eligible age 65 or older
             2221      retiree's modified adjusted gross income exceeds:
             2222          (a) for an eligible age 65 or older retiree who has a married filing separately status,
             2223      $16,000;
             2224          (b) for an eligible age 65 or older retiree who has a single filing status, $25,000; or
             2225          (c) for an eligible age 65 or older retiree who has a head of household filing status or a
             2226      joint filing status, $32,000.
             2227          (5) The sum of the tax credits allowed by Subsection (2)(b) claimed on one return filed
             2228      under this part shall be reduced by $.025 for each dollar by which an eligible under age 65


             2229      retiree's modified adjusted gross income exceeds:
             2230          (a) for an eligible under age 65 retiree who has a married filing separately status,
             2231      $16,000;
             2232          (b) for an eligible under age 65 retiree who has a single filing status, $25,000; or
             2233          (c) for an eligible under age 65 retiree who has a head of household filing status or a
             2234      joint filing status, $32,000.
             2235          (6) For purposes of determining the ownership of items of retirement income under this
             2236      section, common law doctrine shall be applied in all cases even though some items of
             2237      retirement income may have originated from service or investments in a community property
             2238      state.
             2239          Section 47. Section 59-10-1020 is enacted to read:
             2240          59-10-1020. Nonrefundable estate or trust tax credit.
             2241          (1) For taxable years beginning on or after January 1, 2008, an estate or trust may claim
             2242      a nonrefundable tax credit against taxes otherwise due under Part 2, Trusts and Estates, equal
             2243      to the product of:
             2244          (a) the sum of:
             2245          (i) the amount that a resident or nonresident estate or trust deducts under Section 163,
             2246      Internal Revenue Code, for interest paid or accrued, as allowed on the resident or nonresident
             2247      estate's or trust's federal income tax return for estates and trusts for the taxable year;
             2248          (ii) the amount that a resident or nonresident estate or trust deducts under Section 164,
             2249      Internal Revenue Code, for taxes paid or accrued other than for any amount paid or accrued for
             2250      state or local income taxes for the taxable year, as allowed on the resident or nonresident
             2251      estate's or trust's federal income tax return for estates and trusts for the taxable year;
             2252          (iii) the amount that a resident or nonresident estate or trust other than a qualified
             2253      nongrantor charitable lead trust deducts under Section 642(c), Internal Revenue Code, as a
             2254      charitable contribution deduction, as allowed on the resident or nonresident estate's or trust's
             2255      federal income tax return for estates and trusts for the taxable year;
             2256          (iv) subject to Subsection (3), the amount that a resident or nonresident estate or trust
             2257      deducts as an attorney, accountant, or return preparer fee, as allowed on the resident or
             2258      nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             2259      year; and


             2260          (v) subject to Subsection (3), the amount that a resident or nonresident estate or trust
             2261      deducts as an other deduction or miscellaneous itemized deduction, as allowed on the resident
             2262      or nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
             2263      year; and
             2264          (b) 6%.
             2265          (2) An estate or trust may not carry forward or carry back a tax credit under this
             2266      section.
             2267          (3) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act:
             2268          (a) for purposes of Subsection (1)(a)(iv), the commission may make rules for
             2269      determining what constitutes an attorney, accountant, or return preparer fee if that attorney,
             2270      accountant, or return preparer fee is consistent with an attorney, accountant, or return preparer
             2271      fee that may be deducted on a federal income tax return for estates and trusts; or
             2272          (b) for purposes of Subsection (1)(a)(v), the commission may make rules for
             2273      determining what constitutes an other deduction or miscellaneous itemized deduction if that
             2274      other deduction or miscellaneous itemized deduction is consistent with an other deduction or
             2275      miscellaneous itemized deduction that may be deducted on a federal income tax return for
             2276      estates and trusts.
             2277          Section 48. Section 59-10-1021 is enacted to read:
             2278          59-10-1021. Nonrefundable medical care savings account tax credit.
             2279          (1) As used in this section:
             2280          (a) "Account administrator" is as defined in Section 31A-32a-102 .
             2281          (b) "Account holder" is as defined in Section 31A-32a-102 .
             2282          (c) "Eligible medical expense" is as defined in Section 31A-32a-102 .
             2283          (d) "Eligible spouse claimants" means claimants who are spouses if:
             2284          (i) the claimants file a single return jointly as husband and wife;
             2285          (ii) neither spouse is covered by:
             2286          (A) health care insurance as defined in Section 31A-1-301 ; or
             2287          (B) a self-funded plan that covers the other spouse; and
             2288          (iii) each spouse is an account holder.
             2289          (e) "Medical care savings account" is as defined in Section 31A-32a-102 .
             2290          (2) Except as provided in Section 59-10-1002.2 and subject to Subsections (3) and (4),


             2291      for taxable years beginning on or after January 1, 2008, a claimant may claim a nonrefundable
             2292      tax credit for:
             2293          (a) a contribution:
             2294          (i) made during the taxable year;
             2295          (ii) made to a medical care savings account in accordance with Title 31A, Chapter 32a,
             2296      Medical Care Savings Account Act;
             2297          (iii) that is accepted by the account administrator; and
             2298          (iv) that the claimant does not deduct on the claimant's federal individual income tax
             2299      return under Section 220, Internal Revenue Code; and
             2300          (b) interest on the contribution described in Subsection (2)(a).
             2301          (3) (a) For eligible spouse claimants, a tax credit under this section is equal to the
             2302      product of:
             2303          (i) the greater of:
             2304          (A) the sum of:
             2305          (I) the amount contributed in accordance with Title 31A, Chapter 32a, Medical Care
             2306      Savings Account Act, by or on behalf of the husband, not to exceed the amount described in
             2307      Subsection 31A-32a-103 (2)(a)(i); and
             2308          (II) the amount contributed in accordance with Title 31A, Chapter 32a, Medical Care
             2309      Savings Account Act, by or on behalf of the wife, not to exceed the amount described in
             2310      Subsection 31A-32a-103 (2)(a)(i); or
             2311          (B) an amount equal to the sum of all eligible medical expenses paid by the eligible
             2312      spouse claimants on behalf of:
             2313          (I) the husband;
             2314          (II) the wife; or
             2315          (III) a dependent of the:
             2316          (Aa) husband; or
             2317          (Bb) wife; and
             2318          (ii) 5%.
             2319          (b) For a claimant other than eligible spouse claimants, a tax credit under this section is
             2320      equal to the product of:
             2321          (i) the greater of:


             2322          (A) the amount contributed by or on behalf of the claimant, not to exceed the amount
             2323      described in Subsection 31A-32a-103 (2)(a)(i); or
             2324          (B) an amount equal to the sum of all eligible medical expenses paid by the claimant
             2325      on behalf of:
             2326          (I) the claimant;
             2327          (II) the claimant's spouse; or
             2328          (III) a dependent of the claimant; and
             2329          (ii) 5%.
             2330          (4) A tax credit under this section may not be carried forward or carried back.
             2331          Section 49. Section 59-10-1106 is amended to read:
             2332           59-10-1106. Renewable energy tax credit.
             2333          (1) As used in this section:
             2334          (a) "Active solar system" is as defined in Section 59-10-1014 .
             2335          (b) "Biomass system" is as defined in Section 59-10-1014 .
             2336          (c) "Business entity" is as defined in Section 59-10-1014 .
             2337          (d) "Commercial energy system" means any active solar, passive solar, geothermal
             2338      electricity, direct-use geothermal, geothermal heat-pump system, wind, hydroenergy, or
             2339      biomass system used to supply energy to a commercial unit or as a commercial enterprise.
             2340          (e) "Commercial enterprise" means a business entity [whose purpose is to produce]
             2341      that:
             2342          (i) is a claimant, estate, or trust; and
             2343          (ii) has the purpose of producing electrical, mechanical, or thermal energy for sale from
             2344      a commercial energy system.
             2345          (f) (i) "Commercial unit" means any building or structure that a business entity that is a
             2346      claimant, estate, or trust uses to transact its business.
             2347          (ii) Notwithstanding Subsection (1)(f)(i):
             2348          (A) in the case of an active solar system used for agricultural water pumping or a wind
             2349      system, each individual energy generating device shall be a commercial unit; and
             2350          (B) if an energy system is the building or structure that a business entity that is a
             2351      claimant, estate, or trust uses to transact its business, a commercial unit is the complete energy
             2352      system itself.


             2353          (g) "Direct-use geothermal system" is as defined in Section 59-10-1014 .
             2354          (h) "Geothermal electricity" is as defined in Section 59-10-1014 .
             2355          (i) "Geothermal heat-pump system" is as defined in Section 59-10-1014 .
             2356          (j) "Hydroenergy system" is as defined in Section 59-10-1014 .
             2357          [(k) "Individual taxpayer" means any person who is a taxpayer as defined in Section
             2358      59-10-103 and an individual as defined in Section 59-10-103 .]
             2359          [(l)] (k) "Passive solar system" is as defined in Section 59-10-1014 .
             2360          [(m)] (l) "Utah Geological Survey" means the Utah Geological Survey established in
             2361      Section 63-73-5 .
             2362          [(n)] (m) "Wind system" is as defined in Section 59-10-1014 .
             2363          (2) (a) (i) [For taxable years beginning on or after January 1, 2007, a] A business entity
             2364      that is a claimant, estate, or trust that purchases or participates in the financing of a commercial
             2365      energy system situated in Utah is entitled to a refundable tax credit as provided in this
             2366      Subsection (2)(a) if the commercial energy system does not use wind, geothermal electricity, or
             2367      biomass equipment capable of producing a total of 660 or more kilowatts of electricity and:
             2368          (A) the commercial energy system supplies all or part of the energy required by
             2369      commercial units owned or used by the business entity that is a claimant, estate, or trust; or
             2370          (B) the business entity that is a claimant, estate, or trust sells all or part of the energy
             2371      produced by the commercial energy system as a commercial enterprise.
             2372          (ii) (A) A business entity that is a claimant, estate, or trust is entitled to a tax credit of
             2373      up to 10% of the reasonable costs of any commercial energy system installed, including
             2374      installation costs, against any tax due under this chapter for the taxable year in which the
             2375      commercial energy system is completed and placed in service.
             2376          (B) Notwithstanding Subsection (2)(a)(ii)(A), the total amount of the credit under this
             2377      Subsection (2)(a) may not exceed $50,000 per commercial unit.
             2378          (C) The credit under this Subsection (2)(a) is allowed for any commercial energy
             2379      system completed and placed in service on or after January 1, 2007.
             2380          (iii) A business entity that is a claimant, estate, or trust that leases a commercial energy
             2381      system installed on a commercial unit is eligible for the tax credit under this Subsection (2)(a)
             2382      if the lessee can confirm that the lessor irrevocably elects not to claim the credit.
             2383          (iv) Only the principal recovery portion of the lease payments, which is the cost


             2384      incurred by a business entity that is a claimant, estate, or trust in acquiring a commercial energy
             2385      system, excluding interest charges and maintenance expenses, is eligible for the tax credit
             2386      under this Subsection (2)(a).
             2387          (v) A business entity that is a claimant, estate, or trust that leases a commercial energy
             2388      system is eligible to use the tax credit under this Subsection (2)(a) for a period no greater than
             2389      seven years from the initiation of the lease.
             2390          (b) (i) [For taxable years beginning on or after January 1, 2007, a] A business entity
             2391      that is a claimant, estate, or trust that owns a commercial energy system situated in Utah using
             2392      wind, geothermal electricity, or biomass equipment capable of producing a total of 660 or more
             2393      kilowatts of electricity is entitled to a refundable tax credit as provided in this section if:
             2394          (A) the commercial energy system supplies all or part of the energy required by
             2395      commercial units owned or used by the business entity that is a claimant, estate, or trust; or
             2396          (B) the business entity that is a claimant, estate, or trust sells all or part of the energy
             2397      produced by the commercial energy system as a commercial enterprise.
             2398          (ii) A business entity that is a claimant, estate, or trust is entitled to a tax credit under
             2399      this Subsection (2)(b) equal to the product of:
             2400          (A) 0.35 cents; and
             2401          (B) the kilowatt hours of electricity produced and either used or sold during the taxable
             2402      year.
             2403          (iii) The credit allowed by this Subsection (2)(b):
             2404          (A) may be claimed for production occurring during a period of 48 months beginning
             2405      with the month in which the commercial energy system is placed in service; and
             2406          (B) may not be carried forward or back.
             2407          (iv) A business entity that is a claimant, estate, or trust that leases a commercial energy
             2408      system installed on a commercial unit is eligible for the tax credit under this section if the
             2409      lessee can confirm that the lessor irrevocably elects not to claim the credit.
             2410          (3) The tax credits provided for under this section are in addition to any tax credits
             2411      provided under the laws or rules and regulations of the United States.
             2412          (4) (a) The Utah Geological Survey may set standards for commercial energy systems
             2413      claiming a tax credit under Subsection (2)(a) that cover the safety, reliability, efficiency,
             2414      leasing, and technical feasibility of the systems to ensure that the systems eligible for the tax


             2415      credit use the state's renewable and nonrenewable energy resources in an appropriate and
             2416      economic manner.
             2417          (b) A tax credit may not be taken under this section until the Utah Geological Survey
             2418      has certified that the commercial energy system has been completely installed and is a viable
             2419      system for saving or production of energy from renewable resources.
             2420          (5) The Utah Geological Survey and the commission may make rules in accordance
             2421      with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, that are necessary to
             2422      implement this section.
             2423          (6) (a) On or before October 1, 2012, and every five years thereafter, the Utah Tax
             2424      Review Commission shall review each tax credit provided by this section and make
             2425      recommendations to the Revenue and Taxation Interim Committee concerning whether the
             2426      credit should be continued, modified, or repealed.
             2427          (b) The Utah Tax Review Commission's report under Subsection (6)(a) shall include
             2428      information concerning the cost of the credit, the purpose and effectiveness of the credit, and
             2429      the state's benefit from the credit.
             2430          Section 50. Section 59-10-1301 is enacted to read:
             2431     
Part 13. Individual Income Tax Contribution Act

             2432          59-10-1301. Title.
             2433          This part is known as the "Individual Income Tax Contribution Act."
             2434          Section 51. Section 59-10-1302 is enacted to read:
             2435          59-10-1302. Definitions.
             2436          As used in this part, "contribution" means a contribution a resident or nonresident
             2437      individual makes on an individual income tax return as allowed by this part.
             2438          Section 52. Section 59-10-1303 is enacted to read:
             2439          59-10-1303. Contributions -- Amount -- Procedure for designating a contribution
             2440      -- Joint return -- Contribution irrevocable.
             2441          (1) A resident or nonresident individual that makes a contribution under this part, other
             2442      than Section 59-10-1311 , may designate as the contribution any whole dollar amount of $1 or
             2443      more.
             2444          (2) If a resident or nonresident individual designating a contribution under this part
             2445      other than Section 59-10-1311 :


             2446          (a) is owed an individual income tax refund for the taxable year, the amount of the
             2447      contribution under this part shall be deducted from the resident or nonresident individual's
             2448      individual income tax refund; or
             2449          (b) is not owed an individual income tax refund for the taxable year, the resident or
             2450      nonresident individual may remit a contribution under this part with the resident or nonresident
             2451      individual's individual income tax return.
             2452          (3) If a husband and wife file a single individual income tax return jointly, a
             2453      contribution under this part, other than Section 59-10-1311 , shall be a joint contribution.
             2454          (4) A contribution under this part is irrevocable for the taxable year for which the
             2455      resident or nonresident individual makes the contribution.
             2456          Section 53. Section 59-10-1304 , which is renumbered from Section 59-10-551 is
             2457      renumbered and amended to read:
             2458           [59-10-551].     59-10-1304. Removal of designation and prohibitions on
             2459      collection for certain contributions on income tax form -- Conditions for removal and
             2460      prohibitions on collection -- Commission reporting requirements.
             2461          (1) (a) If a contribution or combination of contributions described in Subsection (1)(b)
             2462      generate less than $30,000 per year for three consecutive years, the commission shall remove
             2463      the designation for the contribution from the individual income tax return and may not collect
             2464      the contribution from a resident or nonresident individual beginning two taxable years after the
             2465      three-year period for which the contribution generates less than $30,000 per year.
             2466          (b) The following contributions apply to Subsection (1)(a):
             2467          (i) the contribution provided for in Section [ 59-10-530 ] 59-10-1305 ;
             2468          (ii) the contribution provided for in Section [ 59-10-530.5 ] 59-10-1306 ;
             2469          (iii) the sum of the contributions provided for in Subsection [ 59-10-549 ]
             2470      59-10-1307 (1)(a);
             2471          (iv) the contribution provided for in Subsection [ 59-10-549 ] 59-10-1307 (1)(b);
             2472          (v) the contribution provided for in Section [ 59-10-550 ] 59-10-1308 ;
             2473          (vi) the contribution provided for in Section [ 59-10-550.1 ] 59-10-1309 ; or
             2474          (vii) the contribution provided for in Section [ 59-10-550.2 ] 59-10-1310 .
             2475          (2) If the commission removes the designation for a contribution under Subsection (1),
             2476      the commission shall report to the Revenue and Taxation Interim Committee that the


             2477      commission removed the designation on or before the November interim meeting of the year in
             2478      which the commission determines to remove the designation.
             2479          Section 54. Section 59-10-1305 , which is renumbered from Section 59-10-530 is
             2480      renumbered and amended to read:
             2481           [59-10-530].     59-10-1305. Nongame wildlife contribution -- Credit to
             2482      Wildlife Resources Account.
             2483          [(1) The Legislature hereby declares that wildlife species which are endangered,
             2484      threatened with extinction, not commonly pursued, killed, or consumed either for sport or
             2485      profit, and are not nuisance predators presently being brought under control by the state
             2486      referred to herein as "nongame wildlife," have need of special protection and that it is in the
             2487      public interest to preserve, protect, perpetuate, and enhance nongame wildlife resources of this
             2488      state through preservation of a satisfactory environment and an ecological balance. The
             2489      Legislature specifically recognizes that such nongame wildlife includes protected wildlife,
             2490      endangered and threatened wildlife, aquatic wildlife, specialized habitat wildlife, both
             2491      terrestrial and aquatic types, and mollusks, crustaceans, and other invertebrates under the
             2492      jurisdiction of the Division of Wildlife Resources. This section is enacted to provide a means
             2493      by which such protection may be financially aided through a voluntary check-off designation
             2494      on state income tax return forms. The intent of the Legislature is that this program of the
             2495      income tax check-off is supplemental to any other funding and in no way is intended to take the
             2496      place of the funding that would otherwise be appropriated for this purpose.]
             2497          (1) As used in this section, "nongame wildlife" means wildlife species that are:
             2498          (a) (i) protected;
             2499          (ii) endangered; or
             2500          (iii) threatened with extinction;
             2501          (b) under the jurisdiction of the Division of Wildlife Resources, including:
             2502          (i) aquatic wildlife;
             2503          (ii) a crustacean;
             2504          (iii) an invertebrate;
             2505          (iv) a mollusk; or
             2506          (v) specialized habitat wildlife, including an aquatic or terrestrial type of specialized
             2507      habitat wildlife;


             2508          (c) not commonly pursued, killed, or consumed for sport or profit; and
             2509          (d) not nuisance predators presently being brought under control by the state.
             2510          (2) Except as provided in Section [ 59-10-551 , each individual taxpayer required to file
             2511      a return pursuant to Section 59-10-502 ] 59-10-1304 , a resident or nonresident individual that
             2512      files an individual income tax return under this chapter may designate on the resident or
             2513      nonresident individual's individual income tax return a contribution [of $1, $5, $10, or another
             2514      amount not less than $1, or no contribution, to the state Nongame Wildlife Program] as
             2515      provided in this part to preserve, protect, perpetuate, and enhance nongame wildlife resources
             2516      of the state through preservation of a satisfactory environment and an ecological balance. [If
             2517      the return is a joint return, any amount designated as a contribution to this program is to be
             2518      deducted from the individual's state tax refund and shall be a joint contribution. This option,
             2519      once exercised, is irrevocable during the tax year in which it was effective.]
             2520          [(3) The commission may promulgate rules to effectuate the provisions of this section.]
             2521          [(4)] (3) The commission shall:
             2522          (a) determine annually the total amount of contributions designated [pursuant to] in
             2523      accordance with this section; and [shall report such amount to the state treasurer who shall
             2524      credit such amount]
             2525          (b) credit the amount described in Subsection (3)(a) to the Wildlife Resources Account
             2526      [as provided for in Section 23-14-14 ] in accordance with Section 23-14-13 .
             2527          [(5) This section applies to calendar-year taxpayers beginning January 1, 1980, and to
             2528      fiscal-year taxpayers for any part of the taxable year accruing after December 31, 1979, and to
             2529      all taxable years thereafter.]
             2530          Section 55. Section 59-10-1306 , which is renumbered from Section 59-10-530.5 is
             2531      renumbered and amended to read:
             2532           [59-10-530.5].     59-10-1306. Homeless contribution -- Credit to Pamela
             2533      Atkinson Homeless Trust Account.
             2534          (1) [(a)] Except as provided in Section [ 59-10-551 , each taxpayer required to file a
             2535      return pursuant to Section 59-10-502 may designate on the return a contribution of $2, $5, $10,
             2536      or another amount not less than $2, or no contribution,] 59-10-1304 , a resident or nonresident
             2537      individual that files an individual income tax return under this chapter may designate on the
             2538      resident or nonresident individual's individual income tax return a contribution to the Pamela


             2539      Atkinson Homeless Trust Account as provided in this part.
             2540          [(b) Any amount designated as a contribution to this program is to be deducted from
             2541      the individual's state tax refund and, if a joint return, shall be a joint contribution.]
             2542          [(c) This option, once exercised, is irrevocable during the tax year in which it was
             2543      effective.]
             2544          [(d) If no refund is due, the taxpayer may remit the contribution with the return.]
             2545          [(2) The commission may make rules to implement this section.]
             2546          [(3)] (2) The commission shall:
             2547          (a) determine annually the total amount of contributions designated [pursuant to] in
             2548      accordance with this section; and [shall report such amount to the state treasurer who shall
             2549      credit such amount]
             2550          (b) credit the amount described in Subsection (2)(a) to the Pamela Atkinson Homeless
             2551      Trust Account [as provided for in] created by Section 9-4-803 .
             2552          [(4) This section applies to calendar-year taxpayers beginning January 1, 1988, and to
             2553      fiscal-year taxpayers for any part of the taxable year accruing after December 31, 1988, and to
             2554      all taxable years thereafter.]
             2555          Section 56. Section 59-10-1307 , which is renumbered from Section 59-10-549 is
             2556      renumbered and amended to read:
             2557           [59-10-549].     59-10-1307. Contributions for education.
             2558          (1) Except as provided in Section [59-10-551 , a taxpayer that files a return pursuant to
             2559      Section 59-10-502 ] 59-10-1304 , a resident or nonresident individual that files an individual
             2560      income tax return under this chapter may designate on the resident or nonresident individual's
             2561      individual income tax return a contribution as provided in this [section] part to:
             2562          (a) (i) the foundation of any school district if that foundation is exempt from federal
             2563      income taxation under Section 501(c)(3), Internal Revenue Code; or
             2564          (ii) a school district described in Title 53A, Chapter 2, School Districts, if the school
             2565      district has not established a foundation; or
             2566          (b) a college campus of the Utah College of Applied Technology listed in Section
             2567      53B-2a-105 [; or].
             2568          [(c) for taxable years beginning on or after January 1, 2004, but beginning on or before
             2569      December 31, 2006, the Uniform School Fund.]


             2570          [(2) (a) A taxpayer may designate as a contribution under this section any whole dollar
             2571      amount of $1 or more.]
             2572          [(b) (i) If the taxpayer is owed an individual income tax refund for the taxable year, the
             2573      amount of a contribution under this section shall be deducted from the taxpayer's individual
             2574      income tax refund.]
             2575          [(ii) If the taxpayer is not owed an individual income tax refund for the taxable year,
             2576      the taxpayer may remit a contribution under this section with the taxpayer's individual income
             2577      tax return.]
             2578          [(c) If a taxpayer files a joint return, the contribution under this section shall be a joint
             2579      contribution.]
             2580          [(d) A contribution under this section is irrevocable during the taxable year for which
             2581      the taxpayer makes the contribution.]
             2582          [(3)] (2) If a [taxpayer] resident or nonresident individual designates an amount as a
             2583      contribution under:
             2584          (a) Subsection (1)(a)(i), but does not designate a particular school district foundation to
             2585      receive the contribution, the contribution shall be made to the Utah State Office of Education to
             2586      be distributed to one or more associations of foundations:
             2587          (i) if those foundations that are members of the association are established in
             2588      accordance with Section 53A-4-205 ; and
             2589          (ii) as determined by the Utah State Office of Education; or
             2590          (b) Subsection (1)(a)(ii), but does not designate a particular school district to receive
             2591      the contribution, the contribution shall be made to the Utah State Office of Education.
             2592          [(4) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             2593      the commission may make rules to implement this section.]
             2594          [(5)] (3) The commission shall:
             2595          (a) determine annually the total amount of contributions designated to each entity
             2596      described in Subsection (1) in accordance with this section; and
             2597          [(b) report this amount to the state treasurer.]
             2598          [(6) The state treasurer shall credit any contributions reported to the state treasurer in
             2599      accordance with Subsection (5):]
             2600          [(a)] (b) subject to Subsection [(3)] (2), [if a taxpayer designates a contribution to an


             2601      entity listed in Subsection (1)(a) or (b) in accordance with this section, to the entity that is
             2602      designated by the taxpayer; or] credit the amounts described in Subsection (1) to the entities.
             2603          [(b) if a taxpayer designates a contribution to the Uniform School Fund under
             2604      Subsection (1)(c) in accordance with this section, to the Uniform School Fund.]
             2605          Section 57. Section 59-10-1308 , which is renumbered from Section 59-10-550 is
             2606      renumbered and amended to read:
             2607           [59-10-550].     59-10-1308. Children's organ transplants contribution --
             2608      Credit to Kurt Oscarson Children's Organ Transplant Trust Account.
             2609          (1) Except as provided in Section [ 59-10-551 , a taxpayer who files a return pursuant to
             2610      Section 59-10-502 ] 59-10-1304 , a resident or nonresident individual that files an individual
             2611      income tax return under this chapter may designate on the resident or nonresident individual's
             2612      individual income tax return a contribution [of the amount of his refund, if any, or any other
             2613      amount in excess of $1 to the trust account created in] to the Kurt Oscarson Children's Organ
             2614      Transplant Trust Account created by Section 26-18a-4 .
             2615          [(2) Any amount designated as a contribution to this trust account shall be deducted
             2616      from the individual's state tax refund and, if a joint return, is a joint contribution. This option,
             2617      once exercised, is irrevocable during the tax year in which it was effective. If no refund is due,
             2618      the taxpayer may remit any contribution over $1 with the return.]
             2619          [(3) The commission may make rules to implement this section.]
             2620          [(4)] (2) The commission shall:
             2621          (a) determine annually the total amount of contributions designated [under] in
             2622      accordance with this section; and [shall report the amount to the state treasurer, who shall]
             2623          (b) credit the amount described in Subsection (2)(a) to the [restricted account] Kurt
             2624      Oscarson Children's Organ Transplant Trust Account created [in] by Section 26-18a-4 .
             2625          [(5) This section applies to calendar-year taxpayers beginning January 1, 1992, and to
             2626      fiscal-year taxpayers for any part of the taxable year accruing after December 31, 1992, and to
             2627      each subsequent taxable year.]
             2628          Section 58. Section 59-10-1309 , which is renumbered from Section 59-10-550.1 is
             2629      renumbered and amended to read:
             2630           [59-10-550.1].     59-10-1309. Contribution to Wolf Depredation and
             2631      Management Restricted Account.


             2632          (1) Except as provided in Section [ 59-10-551 , for taxable years beginning on or after
             2633      January 1, 2004] 59-10-1304 , a resident or nonresident individual that files an individual
             2634      income tax return under this chapter may designate on the resident or nonresident individual's
             2635      individual income tax return a contribution as provided in this section to be:
             2636          (a) deposited into the Wolf Depredation and Management Restricted Account created
             2637      by Section 23-14-14.1 ; and
             2638          (b) used for the purposes described in Section 23-14-14.1 .
             2639          [(2) (a) A resident or nonresident individual may designate as a contribution under this
             2640      section any whole dollar amount of $1 or more.]
             2641          [(b) If a resident or nonresident individual designating a contribution under this
             2642      section:]
             2643          [(i) is owed an individual income tax refund for the taxable year, the amount of the
             2644      contribution under this section shall be deducted from the resident or nonresident individual's
             2645      individual income tax refund; or]
             2646          [(ii) is not owed an individual income tax refund for the taxable year, the resident or
             2647      nonresident individual may remit a contribution under this section with the resident or
             2648      nonresident individual's individual income tax return.]
             2649          [(c) If a husband and wife file a single individual income tax return jointly, a
             2650      contribution under this section shall be a joint contribution.]
             2651          [(d) A contribution under this section is irrevocable for the taxable year for which the
             2652      resident or nonresident individual makes the contribution.]
             2653          [(3)] (2) The commission shall:
             2654          (a) determine annually the total amount of contributions designated in accordance with
             2655      this section; and
             2656          (b) credit the amount described in Subsection [(3)] (2)(a) to the Wolf Depredation and
             2657      Management Restricted Account created by Section 23-14-14.1 .
             2658          Section 59. Section 59-10-1310 , which is renumbered from Section 59-10-550.2 is
             2659      renumbered and amended to read:
             2660           [59-10-550.2].     59-10-1310. Contribution to Cat and Dog Community Spay
             2661      and Neuter Program Restricted Account.
             2662          (1) Except as provided in Section [59-10-551 , for taxable years beginning on or after


             2663      January 1, 2006] 59-10-1304 , a resident or nonresident individual that files an individual
             2664      income tax return under this chapter may designate on the resident or nonresident individual's
             2665      individual income tax return a contribution as provided in this section to be:
             2666          (a) deposited into the Cat and Dog Community Spay and Neuter Program Restricted
             2667      Account created by Section 26-48-102 ; and
             2668          (b) distributed by the Department of Health as provided in Section 26-48-102 .
             2669          [(2) (a) A resident or nonresident individual may designate as a contribution under this
             2670      section any whole dollar amount of $1 or more.]
             2671          [(b) If a resident or nonresident individual designating a contribution under this
             2672      section:]
             2673          [(i) is owed an individual income tax refund for the taxable year, the amount of the
             2674      contribution under this section shall be deducted from the resident or nonresident individual's
             2675      individual income tax refund; or]
             2676          [(ii) is not owed an individual income tax refund for the taxable year, the resident or
             2677      nonresident individual may remit a contribution under this section with the resident or
             2678      nonresident individual's individual income tax return.]
             2679          [(c) If a husband and wife file a single individual income tax return jointly, a
             2680      contribution under this section shall be a joint contribution.]
             2681          [(d) A contribution under this section is irrevocable for the taxable year for which the
             2682      resident or nonresident individual makes the contribution.]
             2683          [(3)] (2) The commission shall:
             2684          (a) determine annually the total amount of contributions designated in accordance with
             2685      this section; and
             2686          (b) credit the amount described in Subsection [(3)] (2)(a) to the Cat and Dog
             2687      Community Spay and Neuter Program Restricted Account created by Section 26-48-102 .
             2688          Section 60. Section 59-10-1311 , which is renumbered from Section 59-10-547 is
             2689      renumbered and amended to read:
             2690           [59-10-547].     59-10-1311. Election Campaign Fund contribution --
             2691      Transfer from General Fund -- Form and procedure.
             2692          [(1) (a) Every individual other than a nonresident alien whose income tax liability, less
             2693      any credit allowed by this chapter, for any taxable year is $2 or more may designate that $2 be


             2694      paid into the Election Campaign Fund established under Section 59-10-548 .]
             2695          (1) (a) A resident or nonresident individual, other than a nonresident alien, may
             2696      designate on the resident or nonresident individual's individual income tax return a contribution
             2697      of $2 to the Election Campaign Fund created by Section 59-10-1312 , if the resident or
             2698      nonresident individual:
             2699          (i) has a liability under this chapter for a taxable year of $2 or more; and
             2700          (ii) files a return under this chapter.
             2701          (b) The commission shall transfer $2 from the General Fund to the Election Campaign
             2702      Fund for each [campaign designation] contribution made on an individual income tax return
             2703      under this Subsection (1).
             2704          (c) The transfer described in Subsection (1)(b) shall [come] be made from revenue
             2705      generated from [the] state sales and use tax revenues collected in accordance with Chapter 12,
             2706      Sales and Use Tax Act.
             2707          (2) (a) A [designation] contribution under Subsection (1) may be made with respect to
             2708      any taxable year at the time [of filing the] a resident or nonresident individual files a return for
             2709      that taxable year.
             2710          (b) The [form for the return shall be prepared by the] commission [to include provision
             2711      for a campaign] shall include the contribution [designation] allowed by this section:
             2712          (i) on a return under this chapter; and
             2713          (ii) for any political party as defined by Section 20A-1-102 that has qualified as a
             2714      political party in the first six months of the calendar year for which the return is prepared.
             2715          [(c) The political parties shall be placed on the form in alphabetical order.]
             2716          [(d) Any individual who chooses to designate funds to the Election Campaign Fund
             2717      shall place a check mark opposite the name of the political party on the form provided by the
             2718      commission.]
             2719          [(e) The form shall also contain a box in which the taxpayer can]
             2720          (c) The commission shall place a political party described in Subsection (2)(b) on a
             2721      return described in Subsection (2)(b) in alphabetical order.
             2722          (d) The commission shall include on a return described in Subsection (2)(b):
             2723          (i) the option for a resident or nonresident individual to indicate that no contribution is
             2724      to be made to any political party[.]; and


             2725          (ii) a statement that a contribution a resident or nonresident individual, other than a
             2726      nonresident alien, makes under this section may not:
             2727          (A) increase the resident or nonresident individual's tax liability under this chapter; or
             2728          (B) reduce the resident or nonresident individual's refund under this chapter.
             2729          Section 61. Section 59-10-1312 , which is renumbered from Section 59-10-548 is
             2730      renumbered and amended to read:
             2731           [59-10-548].     59-10-1312. Election Campaign Fund -- Creation -- Funding
             2732      for account -- Disbursement and distribution -- State treasurer requirement to provide a
             2733      list of contributions designated to each political party.
             2734          (1) (a) As used in this section, "fund" means the Election Campaign Fund created by
             2735      this section.
             2736          [(1) (a)] (b) There is [established] created an agency fund [to be] known as the
             2737      "Election Campaign Fund."
             2738          [(b)] (c) The fund shall consist of all amounts deposited to [it as provided in] the fund
             2739      in accordance with Section [ 59-10-547 ] 59-10-1311 .
             2740          (2) On or before four months after the due date [of the returns] for filing a return
             2741      required by this chapter in which [designations of payment to the fund have been made] a
             2742      contribution is made in accordance with Section 59-10-1311 , the state treasurer shall:
             2743          (a) disburse that portion of the amounts deposited in the fund since the last
             2744      disbursement:
             2745          (i) that [were] are designated for a political party; and
             2746          (ii) to the political party to which [they were] the amounts are designated; and
             2747          (b) provide to the political party described in Subsection (2)(a)(ii) a list disclosing, for
             2748      each county, the total amount designated by [taxpayers] resident or nonresident individuals,
             2749      other than nonresident aliens, in that county.
             2750          Section 62. Section 59-10-1401 is enacted to read:
             2751     
Part 14. Income Tax Treatment of Pass-Through Entities Act

             2752          59-10-1401. Title.
             2753          This part is known as the "Income Tax Treatment of Pass-Through Entities Act."
             2754          Section 63. Section 59-10-1402 is enacted to read:
             2755          59-10-1402. Definitions.


             2756          As used in this part:
             2757          (1) "Limited liability company" includes a foreign limited liability company.
             2758          (2) (a) "Pass-through entity" means a business entity that is:
             2759          (i) a general partnership;
             2760          (ii) a limited liability company;
             2761          (iii) a limited liability partnership;
             2762          (iv) a limited partnership; or
             2763          (v) a business entity similar to Subsections (2)(a)(i) through (iv):
             2764          (A) with respect to which the business entity's income or losses are divided among and
             2765      passed through to taxpayers; and
             2766          (B) as defined by the commission by rule made in accordance with Title 63, Chapter
             2767      46a, Utah Administrative Rulemaking Act.
             2768          (b) "Pass-through entity" does not include a trust.
             2769          (3) "Taxpayer" means:
             2770          (a) for a general partnership, a partner;
             2771          (b) for a limited liability company, a member;
             2772          (c) for a limited liability partnership, a partner;
             2773          (d) for a limited partnership, a partner; or
             2774          (e) for a business entity described in Subsection (2)(a)(v), a member, partner,
             2775      shareholder, or other title designated by the commission by rule made in accordance with Title
             2776      63, Chapter 46a, Utah Administrative Rulemaking Act.
             2777          Section 64. Section 59-10-1403 , which is renumbered from Section 59-10-301 is
             2778      renumbered and amended to read:
             2779           [59-10-301].     59-10-1403. Pass-through entities -- Income tax treatment --
             2780      Returns -- Limited liability companies.
             2781          [A partnership] (1) Subject to Subsection (3), a pass-through entity is not subject to
             2782      [the] a tax imposed by this chapter. [Persons carrying on business as partners are liable for the
             2783      tax imposed by this chapter only in their separate or individual capacities.]
             2784          (2) The income or losses of a pass-through entity shall be divided among and passed
             2785      through to taxpayers.
             2786          (3) A pass-through entity is subject to the return filing requirements of Section


             2787      59-10-507 .
             2788          (4) A pass-through entity that is a limited liability company that transacts business in
             2789      the state shall be classified for purposes of taxation under this title in the same manner as the
             2790      limited liability company is classified for federal income tax purposes.
             2791          Section 65. Section 59-10-1404 , which is renumbered from Section 59-10-302 is
             2792      renumbered and amended to read:
             2793           [59-10-302].     59-10-1404. Character of an item of income, gain, loss, or
             2794      deduction.
             2795          (1) Each item of [partnership] income, gain, loss, or deduction of a pass-through entity
             2796      has the same character for a [partner] taxpayer under this chapter as [it] that item of income,
             2797      gain, loss, or deduction has for federal income tax purposes. [When an item]
             2798          (2) If an item of income, gain, loss, or deduction described in Subsection (1) is not
             2799      characterized for federal income tax purposes, [it] that item of income, gain, loss, or deduction
             2800      has the same character for a [partner] taxpayer as if the item of income, gain, loss, or deduction
             2801      is:
             2802          (a) realized directly from the source from which the item of income, gain, loss, or
             2803      deduction is realized by the [partnership,] pass-through entity; or
             2804          (b) incurred in the same manner as incurred by the [partnership] pass-through entity.
             2805          [(2)] (3) In determining state taxable income of a resident [partner any modification]
             2806      taxpayer, any addition or subtraction described in Section 59-10-114 [which] that relates to an
             2807      item of [partnership] income, gain, loss, or deduction of a pass-through entity shall be made in
             2808      accordance with the [partner's] taxpayer's distributive share[, for federal income tax purposes,]:
             2809          (a) of the [items] item to which the [modification] addition or subtraction relates[.
             2810      Where a partner's]; and
             2811          (b) for federal income tax purposes.
             2812          (4) If a taxpayer's distributive share of [any such item] an item of income, gain, loss, or
             2813      deduction described in Subsection (3) is not required to be taken into account separately for
             2814      federal income tax purposes, the [partner's] taxpayer's distributive share of [such] that item of
             2815      income, gain, loss, or deduction shall be determined in accordance with [his] that taxpayer's
             2816      distributive share[, for federal income tax purposes,]:
             2817          (a) of [partnership] income or loss relating to the pass-through entity generally; and


             2818          (b) for federal income tax purposes.
             2819          Section 66. Section 59-10-1405 , which is renumbered from Section 59-10-303 is
             2820      renumbered and amended to read:
             2821           [59-10-303].     59-10-1405. Nonresident taxpayer's share of income, gain,
             2822      loss, or deduction of a pass-through entity.
             2823          (1) [In determining the] Subject to Subsection (2), the adjusted gross income of a
             2824      nonresident [partner of any partnership, there shall be included only that part] taxpayer shall be
             2825      adjusted by only that portion of the taxpayer's distributive share of an item of income, gain,
             2826      loss, or deduction of a pass-through entity derived from or connected with sources in this state
             2827      [of the partner's distributive share of items of partnership income, gain, loss, and deduction
             2828      entering into the partner's adjusted gross income, as such part is determined under rules
             2829      prescribed by the commission in accordance with the general rules in Section 59-10-116 ].
             2830          (2) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             2831      commission may make rules for determining the adjustment required by Subsection (1) if those
             2832      rules are consistent with the principles of Section 59-10-116 .
             2833          [(2)] (3) In determining the [sources] source of a nonresident [partner's] taxpayer's
             2834      income, [no effect shall be given to a provision in the partnership agreement which] the
             2835      following provisions in a pass-through entity agreement may not be considered:
             2836          (a) a provision that:
             2837          [(a)] (i) characterizes [payments] a payment to the [partner] taxpayer as being for
             2838      [services or for]:
             2839          (A) a service; or
             2840          (B) the use of capital[, or];
             2841          (b) except as provided in Subsection (5), a provision that allocates to the [partner]
             2842      taxpayer, as income or gain from [sources] a source outside this state, a greater proportion of
             2843      the [partner's] taxpayer's distributive share of [partnership] income or gain of the pass-through
             2844      entity than the ratio of [partnership] income or gain of the pass-through entity from sources
             2845      outside this state to [partnership] income or gain of the pass-through entity from all sources[,
             2846      except as authorized in Subsection (4)];
             2847          [(b)] (c) except as provided in Subsection (5) a provision that allocates to the [partner]
             2848      taxpayer a greater proportion of [a partnership] an item of loss or deduction of the pass-through


             2849      entity connected with sources in this state than the [partner's] taxpayer's proportionate share[,
             2850      for federal income tax purposes,] of [partnership] loss or deduction generally[, except as
             2851      authorized in Subsection (4).]:
             2852          (i) relating to the pass-through entity; and
             2853          (ii) for federal income tax purposes.
             2854          [(3)] (4) Any [modification] addition or subtraction described in Section 59-10-114
             2855      that relates to an item of [partnership] income, gain, loss, or deduction[,] of a pass-through
             2856      entity shall be made in accordance with the [partner's] taxpayer's distributive share [for federal
             2857      income tax purposes of the item to which the modification relates, but limited to the portion of
             2858      such item derived from or connected with sources in this state.]:
             2859          (a) of the portion of the item of income, gain, loss, or deduction required to be added or
             2860      subtracted under Section 59-10-114 that is derived from or connected with sources in the state;
      &