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First Substitute S.B. 137

Senator Wayne L. Niederhauser proposes the following substitute bill:


             1     
MINERAL PRODUCTION TAX WITHHOLDING

             2     
AMENDMENTS

             3     
2008 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Wayne L. Niederhauser

             6     
House Sponsor: John Dougall

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends the Mineral Production Tax Withholding Amendments chapter.
             11      Highlighted Provisions:
             12          This bill:
             13          .    exempts a business entity that files an exemption certificate with the mineral
             14      producer and the State Tax Commission from the deduction and withholding
             15      requirements of the Mineral Production Tax Withholding chapter;
             16          .    allows a business entity to file an exemption certificate if the business entity:
             17              .    files certain tax returns;
             18              .    expects to claim a refund on certain tax returns of at least 75% of the amount
             19      that would otherwise be required to be deducted and withheld; and
             20              .    consents to the jurisdiction of the State Tax Commission to enforce certain
             21      penalties or amounts required to be deducted and withheld;
             22          .    establishes procedures for filing an exemption certificate;
             23          .    addresses penalties;
             24          .    prohibits a business entity from filing an exemption certificate for five taxable years
             25      under certain circumstances;


             26          .    addresses return filing requirements for a producer; and
             27          .    makes technical changes.
             28      Monies Appropriated in this Bill:
             29          None
             30      Other Special Clauses:
             31          This bill takes effect on July 1, 2008.
             32      Utah Code Sections Affected:
             33      AMENDS:
             34          59-6-101, as last amended by Laws of Utah 2006, Chapter 223
             35          59-6-102, as last amended by Laws of Utah 2006, Chapters 221 and 223
             36          59-6-103, as last amended by Laws of Utah 1988, Chapter 3
             37      ENACTS:
             38          59-6-102.1, Utah Code Annotated 1953
             39     
             40      Be it enacted by the Legislature of the state of Utah:
             41          Section 1. Section 59-6-101 is amended to read:
             42           59-6-101. Definitions.
             43          As used in this chapter:
             44          (1) "Business entity" means a claimant that is a
             45          (a) C corporation;
             46          (b) S corporation;
             47          (c) general partnership;
             48          (d) limited liability company;
             49          (e) limited liability partnership;
             50          (f) limited partnership; or
             51          (g) business entity similar to Subsections (1)(c) through (f):
             52          (i) with respect to which the business entity's income or losses are divided among and
             53      passed through to taxpayers; and
             54          (ii) as defined by the commission by rule made in accordance with Title 63, Chapter
             55      46a, Utah Administrative Rulemaking Act.
             56          [(1)] (2) (a) Except as provided in Subsection [(1)] (2)(b), "claimant" means a resident


             57      or nonresident person.
             58          (b) "Claimant" does not include an estate or trust.
             59          [(2)] (3) "Estate" means a nonresident estate or a resident estate.
             60          [(3)] (4) "Minerals" means [either]:
             61          (a) metalliferous minerals as defined in Section 59-2-102 [,];
             62          (b) nonmetalliferous minerals as defined in Section 59-2-102 [,]; or [both.]
             63          (c) a combination of Subsections (4)(a) and (b).
             64          [(4)] (5) "Producer" means [any] a person [who] that;
             65          (a) produces or extracts minerals from deposits in this state; or [who]
             66          (b) is the first purchaser of minerals produced or extracted from deposits in this state.
             67          [(5)] (6) "Refundable tax credit" or "tax credit" means a tax credit that a claimant,
             68      estate, or trust may claim:
             69          (a) as provided by statute; and
             70          (b) regardless of whether the claimant, estate, or trust has a tax liability:
             71          (i) for a tax [described in Subsection 59-6-102 (3)] imposed under:
             72          (A) Chapter 7, Corporate Franchise and Income Taxes;
             73          (B) Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay
             74      Corporate Franchise or Income Tax Act; or
             75          (C) Chapter 10, Individual Income Tax Act; and
             76          (ii) for the taxable year for which the claimant, estate, or trust claims the tax credit.
             77          (7) "Taxable year" means the taxable year of a claimant, estate, or trust under:
             78          (a) Chapter 7, Corporate Franchise and Income Taxes;
             79          (b) Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay
             80      Corporate Franchise or Income Tax Act; or
             81          (c) Chapter 10, Individual Income Tax Act.
             82          (8) "Tax return" means a return required by:
             83          (a) Chapter 7, Corporate Franchise and Income Taxes;
             84          (b) Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay
             85      Corporate Franchise or Income Tax Act; or
             86          (c) Chapter 10, Individual Income Tax Act.
             87          [(6)] (9) "Trust" means a nonresident trust or a resident trust.


             88          (10) "Withholding return" means a return a producer is required to file under this
             89      chapter.
             90          Section 2. Section 59-6-102 is amended to read:
             91           59-6-102. Producer's obligation to deduct and withhold payments -- Amount --
             92      Exempt payments -- Credit against tax.
             93          (1) Except as provided in Subsection (2), each producer shall deduct and withhold
             94      from each payment being made to any person in respect to production of minerals in this state,
             95      but not including that to which the producer is entitled, an amount equal to 5% of the amount
             96      which would have otherwise been payable to the person entitled to the payment.
             97          (2) [Notwithstanding Subsection (1), the] The obligation to deduct and withhold from
             98      payments as provided in Subsection (1) does not apply to those payments which are payable to:
             99          (a) the United States, this state, or an agency or political subdivision of the United
             100      States or this state;
             101          (b) an organization that is exempt from the taxes imposed by Chapter 7, Corporate
             102      Franchise and Income Taxes, in accordance with Subsection 59-7-102 (1)(a); [or]
             103          (c) an Indian or Indian tribe if the amounts accruing are subject to the supervision of
             104      the United States or an agency of the United States[.]; or
             105          (d) a business entity that files an exemption certificate in accordance with Section
             106      59-6-102.1 .
             107          (3) A claimant, estate, or trust that files a tax return with the [state in accordance with
             108      the following is entitled to] commission may claim a refundable tax credit against the tax
             109      reflected on the tax return for the amount withheld by the producer under Subsection (1)[:].
             110          [(a) Chapter 7, Corporate Franchise and Income Taxes;]
             111          [(b) Chapter 8, Gross Receipts Tax on Certain Corporations not Required to Pay
             112      Corporate Franchise or Income Tax Act; or]
             113          [(c) Chapter 10, Individual Income Tax Act.]
             114          Section 3. Section 59-6-102.1 is enacted to read:
             115          59-6-102.1. Exemption certificate -- Penalties.
             116          (1) For a taxable year, a business entity may file an exemption certificate claiming an
             117      exemption from the deduction and withholding requirements of this chapter if:
             118          (a) for that taxable year, the business entity is required to file a tax return with the


             119      commission;
             120          (b) for that taxable year, the business entity expects to claim a refund on a tax return of
             121      at least 75% of the amount that would otherwise be required to be deducted and withheld under
             122      this chapter; and
             123          (c) regardless of whether the business entity sells or otherwise disposes of the business
             124      entity's interest in the production of minerals, the business entity consents to the jurisdiction of
             125      the commission to enforce:
             126          (i) an amount required to be deducted and withheld under this chapter; or
             127          (ii) a penalty imposed under this chapter.
             128          (2) A business entity filing an exemption certificate in accordance with Subsection (1)
             129      shall file the exemption certificate:
             130          (a) with the:
             131          (i) producer; and
             132          (ii) commission; and
             133          (b) on a form prescribed by the commission.
             134          (3) (a) In addition to any other penalty provided by law, a business entity is subject to
             135      the penalty described in Subsection (3)(b) if the business entity:
             136          (i) files an exemption certificate in accordance with this section; and
             137          (ii) does not file a tax return with the commission for the taxable year for which the
             138      business entity files the exemption certificate described in Subsection (3)(a)(i).
             139          (b) For purposes of Subsection (3)(a), the penalty is 100% of the amount that the
             140      producer would have deducted and withheld under this chapter for the taxable year had the
             141      business entity not filed an exemption certificate under this section for that taxable year.
             142          (c) The commission shall collect the penalty described in Subsection (3)(b).
             143          (4) If a business entity is subject to the penalty described in Subsection (3), the
             144      business entity may not file an exemption certificate under this section for five taxable years
             145      beginning with the taxable year that the business entity is subject to the penalty described in
             146      Subsection (3).
             147          (5) In addition to any other penalty provided by law, a business entity is subject to a
             148      penalty of 5% of the amount that a producer would otherwise be required to deduct and
             149      withhold under this chapter for the taxable year if:


             150          (a) the business entity files an exemption certificate under this section for a taxable
             151      year; and
             152          (b) had the business entity not filed the exemption certificate under this section for the
             153      taxable year, the business entity:
             154          (i) would have been allowed to claim a refund on a tax return for the taxable year in an
             155      amount less than 75% of the amount required to be deducted and withheld under this chapter
             156      for the taxable year; or
             157          (ii) would not have been allowed to claim a refundable tax credit under Section
             158      59-6-102 for the taxable year.
             159          Section 4. Section 59-6-103 is amended to read:
             160           59-6-103. Returns and payments required of producers.
             161          (1) [Any] (a) Subject to Subsection (1)(b), a producer required to deduct and withhold
             162      [any tax under Section 59-6-102 shall pay to] an amount under this chapter shall file a
             163      withholding return with the commission:
             164          (i) for the amounts required to be deducted and withheld [from payments resulting
             165      from the production of minerals which were made] under this chapter during the preceding
             166      calendar quarter[. The withholding amounts are]; and
             167          (ii) on a form prescribed by the commission.
             168          (b) A withholding return described in Subsection (1)(a) is due on or before the last day
             169      of April, July, October, and January.
             170          [(2) The producer shall file a return with each payment to the commission. The return,
             171      in a form prescribed by the commission, shall show:]
             172          (c) A withholding return described in Subsection (1)(a) shall contain:
             173          [(a)] (i) the name and address of each person receiving a payment subject to the
             174      deduction and withholding requirements [during the quarter involved] of this chapter for the
             175      calendar quarter for which the withholding return is filed;
             176          [(b) the amount to which each person was entitled before deduction and withholding
             177      and also the amount withheld and deducted;]
             178          (ii) for each person described in Subsection (1)(c)(i), the amount of payment the person
             179      would have received from the production of minerals:
             180          (A) by the producer had the deduction and withholding required by this chapter not


             181      been made; and
             182          (B) for the calendar quarter for which the withholding return is filed;
             183          (iii) for each person described in Subsection (1)(c)(i), the amount of deduction and
             184      withholding under this chapter for the calendar quarter for which the withholding return is
             185      filed;
             186          [(c)] (iv) the name or description of the property from which the [production was
             187      obtained; and] production of minerals occurs that results in a payment subject to deduction and
             188      withholding under this chapter; and
             189          [(d)] (v) for each person described in Subsection (1)(c)(i), the interest of the person in
             190      [this production.] the production of minerals that results in a payment subject to deduction and
             191      withholding under this chapter.
             192          (2) (a) If a producer receives an exemption certificate filed in accordance with Section
             193      59-6-102.1 from a business entity, the producer shall file a withholding return with the
             194      commission:
             195          (i) on a form prescribed by the commission; and
             196          (ii) on or before the January 31 following the last day of the taxable year for which the
             197      producer receives the exemption certificate from the business entity.
             198          (b) The withholding return required by Subsection (2)(a) shall contain:
             199          (i) the name and address of the business entity that files the exemption certificate in
             200      accordance with Section 59-6-102.1 ;
             201          (ii) the amount of the payment made by the producer to the business entity that would
             202      have been subject to deduction and withholding under this chapter had the business entity not
             203      filed the exemption certificate in accordance with Section 59-6-102.1 ;
             204          (iii) the name or description of the property from which the production of minerals
             205      occurs that would have resulted in a payment subject to deduction and withholding under this
             206      chapter had the business entity not filed the exemption certificate in accordance with Section
             207      59-6-102.1 ; and
             208          (iv) the interest of the business entity in the production of minerals that would have
             209      resulted in a payment subject to deduction and withholding under this chapter had the business
             210      entity not filed the exemption certificate in accordance with Section 59-6-102.1 .
             211          Section 5. Effective date.


             212          This bill takes effect on July 1, 2008.


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