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S.B. 125





Chief Sponsor: Curtis S. Bramble

House Sponsor: Kevin S. Garn

             6      Cosponsors:Howard A. StephensonJohn L. Valentine              7     
             8      LONG TITLE
             9      General Description:
             10          This bill modifies a property tax provision relating to intangible property.
             11      Highlighted Provisions:
             12          This bill:
             13          .    expands the definition of intangible property for property tax purposes to include
             14      renewable energy tax credits and incentives.
             15      Monies Appropriated in this Bill:
             16          None
             17      Other Special Clauses:
             18          None
             19      Utah Code Sections Affected:
             20      AMENDS:
             21          59-2-102, as last amended by Laws of Utah 2008, Chapters 61, 231, 283, 301, 360, and
             22      382
             24      Be it enacted by the Legislature of the state of Utah:
             25          Section 1. Section 59-2-102 is amended to read:
             26           59-2-102. Definitions.
             27          As used in this chapter and title:

             28          (1) "Aerial applicator" means aircraft or rotorcraft used exclusively for the purpose of
             29      engaging in dispensing activities directly affecting agriculture or horticulture with an
             30      airworthiness certificate from the Federal Aviation Administration certifying the aircraft or
             31      rotorcraft's use for agricultural and pest control purposes.
             32          (2) "Air charter service" means an air carrier operation which requires the customer to
             33      hire an entire aircraft rather than book passage in whatever capacity is available on a scheduled
             34      trip.
             35          (3) "Air contract service" means an air carrier operation available only to customers
             36      who engage the services of the carrier through a contractual agreement and excess capacity on
             37      any trip and is not available to the public at large.
             38          (4) "Aircraft" is as defined in Section 72-10-102 .
             39          (5) (a) Except as provided in Subsection (5)(b), "airline" means an air carrier that:
             40          (i) operates:
             41          (A) on an interstate route; and
             42          (B) on a scheduled basis; and
             43          (ii) offers to fly one or more passengers or cargo on the basis of available capacity on a
             44      regularly scheduled route.
             45          (b) "Airline" does not include an:
             46          (i) air charter service; or
             47          (ii) air contract service.
             48          (6) "Assessment roll" means a permanent record of the assessment of property as
             49      assessed by the county assessor and the commission and may be maintained manually or as a
             50      computerized file as a consolidated record or as multiple records by type, classification, or
             51      categories.
             52          (7) (a) "Certified revenue levy" means a property tax levy that provides an amount of
             53      ad valorem property tax revenue equal to the sum of:
             54          (i) the amount of ad valorem property tax revenue to be generated statewide in the
             55      previous year from imposing a minimum basic tax rate, as specified in Subsection
             56      53A-17a-135 (1)(a); and
             57          (ii) the product of:
             58          (A) new growth, as defined in:

             59          (I) Section 59-2-924 ; and
             60          (II) rules of the commission; and
             61          (B) the minimum basic tax rate certified by the commission for the previous year.
             62          (b) For purposes of this Subsection (7), "ad valorem property tax revenue" does not
             63      include property tax revenue received by a taxing entity from personal property that is:
             64          (i) assessed by a county assessor in accordance with Part 3, County Assessment; and
             65          (ii) semiconductor manufacturing equipment.
             66          (c) For purposes of calculating the certified revenue levy described in this Subsection
             67      (7), the commission shall use:
             68          (i) the taxable value of real property assessed by a county assessor contained on the
             69      assessment roll;
             70          (ii) the taxable value of real and personal property assessed by the commission; and
             71          (iii) the taxable year end value of personal property assessed by a county assessor
             72      contained on the prior year's assessment roll.
             73          (8) "County-assessed commercial vehicle" means:
             74          (a) any commercial vehicle, trailer, or semitrailer which is not apportioned under
             75      Section 41-1a-301 and is not operated interstate to transport the vehicle owner's goods or
             76      property in furtherance of the owner's commercial enterprise;
             77          (b) any passenger vehicle owned by a business and used by its employees for
             78      transportation as a company car or vanpool vehicle; and
             79          (c) vehicles which are:
             80          (i) especially constructed for towing or wrecking, and which are not otherwise used to
             81      transport goods, merchandise, or people for compensation;
             82          (ii) used or licensed as taxicabs or limousines;
             83          (iii) used as rental passenger cars, travel trailers, or motor homes;
             84          (iv) used or licensed in this state for use as ambulances or hearses;
             85          (v) especially designed and used for garbage and rubbish collection; or
             86          (vi) used exclusively to transport students or their instructors to or from any private,
             87      public, or religious school or school activities.
             88          (9) (a) Except as provided in Subsection (9)(b), for purposes of Section 59-2-801 ,
             89      "designated tax area" means a tax area created by the overlapping boundaries of only the

             90      following taxing entities:
             91          (i) a county; and
             92          (ii) a school district.
             93          (b) Notwithstanding Subsection (9)(a), "designated tax area" includes a tax area created
             94      by the overlapping boundaries of:
             95          (i) the taxing entities described in Subsection (9)(a); and
             96          (ii) (A) a city or town if the boundaries of the school district under Subsection (9)(a)
             97      and the boundaries of the city or town are identical; or
             98          (B) a special service district if the boundaries of the school district under Subsection
             99      (9)(a) are located entirely within the special service district.
             100          (10) "Eligible judgment" means a final and unappealable judgment or order under
             101      Section 59-2-1330 :
             102          (a) that became a final and unappealable judgment or order no more than 14 months
             103      prior to the day on which the notice required by Section 59-2-919.1 is required to be mailed;
             104      and
             105          (b) for which a taxing entity's share of the final and unappealable judgment or order is
             106      greater than or equal to the lesser of:
             107          (i) $5,000; or
             108          (ii) 2.5% of the total ad valorem property taxes collected by the taxing entity in the
             109      previous fiscal year.
             110          (11) (a) "Escaped property" means any property, whether personal, land, or any
             111      improvements to the property, subject to taxation and is:
             112          (i) inadvertently omitted from the tax rolls, assigned to the incorrect parcel, or assessed
             113      to the wrong taxpayer by the assessing authority;
             114          (ii) undervalued or omitted from the tax rolls because of the failure of the taxpayer to
             115      comply with the reporting requirements of this chapter; or
             116          (iii) undervalued because of errors made by the assessing authority based upon
             117      incomplete or erroneous information furnished by the taxpayer.
             118          (b) Property which is undervalued because of the use of a different valuation
             119      methodology or because of a different application of the same valuation methodology is not
             120      "escaped property."

             121          (12) "Fair market value" means the amount at which property would change hands
             122      between a willing buyer and a willing seller, neither being under any compulsion to buy or sell
             123      and both having reasonable knowledge of the relevant facts. For purposes of taxation, "fair
             124      market value" shall be determined using the current zoning laws applicable to the property in
             125      question, except in cases where there is a reasonable probability of a change in the zoning laws
             126      affecting that property in the tax year in question and the change would have an appreciable
             127      influence upon the value.
             128          (13) "Farm machinery and equipment," for purposes of the exemption provided under
             129      Section 59-2-1101 , means tractors, milking equipment and storage and cooling facilities, feed
             130      handling equipment, irrigation equipment, harvesters, choppers, grain drills and planters, tillage
             131      tools, scales, combines, spreaders, sprayers, haying equipment, and any other machinery or
             132      equipment used primarily for agricultural purposes; but does not include vehicles required to be
             133      registered with the Motor Vehicle Division or vehicles or other equipment used for business
             134      purposes other than farming.
             135          (14) "Geothermal fluid" means water in any form at temperatures greater than 120
             136      degrees centigrade naturally present in a geothermal system.
             137          (15) "Geothermal resource" means:
             138          (a) the natural heat of the earth at temperatures greater than 120 degrees centigrade;
             139      and
             140          (b) the energy, in whatever form, including pressure, present in, resulting from, created
             141      by, or which may be extracted from that natural heat, directly or through a material medium.
             142          (16) (a) "Goodwill" means:
             143          (i) acquired goodwill that is reported as goodwill on the books and records:
             144          (A) of a taxpayer; and
             145          (B) that are maintained for financial reporting purposes; or
             146          (ii) the ability of a business to:
             147          (A) generate income:
             148          (I) that exceeds a normal rate of return on assets; and
             149          (II) resulting from a factor described in Subsection (16)(b); or
             150          (B) obtain an economic or competitive advantage resulting from a factor described in
             151      Subsection (16)(b).

             152          (b) The following factors apply to Subsection (16)(a)(ii):
             153          (i) superior management skills;
             154          (ii) reputation;
             155          (iii) customer relationships;
             156          (iv) patronage; or
             157          (v) a factor similar to Subsections (16)(b)(i) through (iv).
             158          (c) "Goodwill" does not include:
             159          (i) the intangible property described in Subsection (20)(a) or (b);
             160          (ii) locational attributes of real property, including:
             161          (A) zoning;
             162          (B) location;
             163          (C) view;
             164          (D) a geographic feature;
             165          (E) an easement;
             166          (F) a covenant;
             167          (G) proximity to raw materials;
             168          (H) the condition of surrounding property; or
             169          (I) proximity to markets;
             170          (iii) value attributable to the identification of an improvement to real property,
             171      including:
             172          (A) reputation of the designer, builder, or architect of the improvement;
             173          (B) a name given to, or associated with, the improvement; or
             174          (C) the historic significance of an improvement; or
             175          (iv) the enhancement or assemblage value specifically attributable to the interrelation
             176      of the existing tangible property in place working together as a unit.
             177          (17) "Governing body" means:
             178          (a) for a county, city, or town, the legislative body of the county, city, or town;
             179          (b) for a local district under Title 17B, Limited Purpose Local Government Entities -
             180      Local Districts, the local district's board of trustees;
             181          (c) for a school district, the local board of education; or
             182          (d) for a special service district under Title 17D, Chapter 1, Special Service District

             183      Act:
             184          (i) the legislative body of the county or municipality that created the special service
             185      district, to the extent that the county or municipal legislative body has not delegated authority
             186      to an administrative control board established under Section 17D-1-301 ; or
             187          (ii) the administrative control board, to the extent that the county or municipal
             188      legislative body has delegated authority to an administrative control board established under
             189      Section 17D-1-301 .
             190          (18) (a) For purposes of Section 59-2-103 :
             191          (i) "household" means the association of persons who live in the same dwelling,
             192      sharing its furnishings, facilities, accommodations, and expenses; and
             193          (ii) "household" includes married individuals, who are not legally separated, that have
             194      established domiciles at separate locations within the state.
             195          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             196      commission may make rules defining the term "domicile."
             197          (19) (a) Except as provided in Subsection (19)(c), "improvement" means a building,
             198      structure, fixture, fence, or other item that is permanently attached to land, regardless of
             199      whether the title has been acquired to the land, if:
             200          (i) (A) attachment to land is essential to the operation or use of the item; and
             201          (B) the manner of attachment to land suggests that the item will remain attached to the
             202      land in the same place over the useful life of the item; or
             203          (ii) removal of the item would:
             204          (A) cause substantial damage to the item; or
             205          (B) require substantial alteration or repair of a structure to which the item is attached.
             206          (b) "Improvement" includes:
             207          (i) an accessory to an item described in Subsection (19)(a) if the accessory is:
             208          (A) essential to the operation of the item described in Subsection (19)(a); and
             209          (B) installed solely to serve the operation of the item described in Subsection (19)(a);
             210      and
             211          (ii) an item described in Subsection (19)(a) that:
             212          (A) is temporarily detached from the land for repairs; and
             213          (B) remains located on the land.

             214          (c) Notwithstanding Subsections (19)(a) and (b), "improvement" does not include:
             215          (i) an item considered to be personal property pursuant to rules made in accordance
             216      with Section 59-2-107 ;
             217          (ii) a moveable item that is attached to land:
             218          (A) for stability only; or
             219          (B) for an obvious temporary purpose;
             220          (iii) (A) manufacturing equipment and machinery; or
             221          (B) essential accessories to manufacturing equipment and machinery;
             222          (iv) an item attached to the land in a manner that facilitates removal without substantial
             223      damage to:
             224          (A) the land; or
             225          (B) the item; or
             226          (v) a transportable factory-built housing unit as defined in Section 59-2-1502 if that
             227      transportable factory-built housing unit is considered to be personal property under Section
             228      59-2-1503 .
             229          (20) "Intangible property" means:
             230          (a) property that is capable of private ownership separate from tangible property,
             231      including:
             232          (i) moneys;
             233          (ii) credits;
             234          (iii) bonds;
             235          (iv) stocks;
             236          (v) representative property;
             237          (vi) franchises;
             238          (vii) licenses;
             239          (viii) trade names;
             240          (ix) copyrights; and
             241          (x) patents;
             242          (b) a low-income housing tax credit; [or]
             243          (c) goodwill[.]; or
             244          (d) a renewable energy tax credit or incentive, including:

             245          (i) a federal renewable energy production tax credit under Section 45, Internal Revenue
             246      Code;
             247          (ii) a federal energy credit for qualified renewable electricity production facilities under
             248      Section 48, Internal Revenue Code;
             249          (iii) a federal grant for a renewable energy property under American Recovery and
             250      Reinvestment Act of 2009, Pub. L. No. 111-5, Section 1603; and
             251          (iv) a tax credit under Subsection 59-7-614 (2)(c).
             252          (21) "Low-income housing tax credit" means:
             253          (a) a federal low-income housing tax credit under Section 42, Internal Revenue Code;
             254      or
             255          (b) a low-income housing tax credit under:
             256          (i) Section 59-7-607 ; or
             257          (ii) Section 59-10-1010 .
             258          (22) "Metalliferous minerals" includes gold, silver, copper, lead, zinc, and uranium.
             259          (23) "Mine" means a natural deposit of either metalliferous or nonmetalliferous
             260      valuable mineral.
             261          (24) "Mining" means the process of producing, extracting, leaching, evaporating, or
             262      otherwise removing a mineral from a mine.
             263          (25) (a) "Mobile flight equipment" means tangible personal property that is:
             264          (i) owned or operated by an:
             265          (A) air charter service;
             266          (B) air contract service; or
             267          (C) airline; and
             268          (ii) (A) capable of flight;
             269          (B) attached to an aircraft that is capable of flight; or
             270          (C) contained in an aircraft that is capable of flight if the tangible personal property is
             271      intended to be used:
             272          (I) during multiple flights;
             273          (II) during a takeoff, flight, or landing; and
             274          (III) as a service provided by an air charter service, air contract service, or airline.
             275          (b) (i) "Mobile flight equipment" does not include a spare part other than a spare

             276      engine that is rotated:
             277          (A) at regular intervals; and
             278          (B) with an engine that is attached to the aircraft.
             279          (ii) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             280      commission may make rules defining the term "regular intervals."
             281          (26) "Nonmetalliferous minerals" includes, but is not limited to, oil, gas, coal, salts,
             282      sand, rock, gravel, and all carboniferous materials.
             283          (27) "Personal property" includes:
             284          (a) every class of property as defined in Subsection (28) which is the subject of
             285      ownership and not included within the meaning of the terms "real estate" and "improvements";
             286          (b) gas and water mains and pipes laid in roads, streets, or alleys;
             287          (c) bridges and ferries;
             288          (d) livestock which, for the purposes of the exemption provided under Section
             289      59-2-1112 , means all domestic animals, honeybees, poultry, fur-bearing animals, and fish; and
             290          (e) outdoor advertising structures as defined in Section 72-7-502 .
             291          (28) (a) "Property" means property that is subject to assessment and taxation according
             292      to its value.
             293          (b) "Property" does not include intangible property as defined in this section.
             294          (29) "Public utility," for purposes of this chapter, means the operating property of a
             295      railroad, gas corporation, oil or gas transportation or pipeline company, coal slurry pipeline
             296      company, electrical corporation, telephone corporation, sewerage corporation, or heat
             297      corporation where the company performs the service for, or delivers the commodity to, the
             298      public generally or companies serving the public generally, or in the case of a gas corporation
             299      or an electrical corporation, where the gas or electricity is sold or furnished to any member or
             300      consumers within the state for domestic, commercial, or industrial use. Public utility also
             301      means the operating property of any entity or person defined under Section 54-2-1 except water
             302      corporations.
             303          (30) "Real estate" or "real property" includes:
             304          (a) the possession of, claim to, ownership of, or right to the possession of land;
             305          (b) all mines, minerals, and quarries in and under the land, all timber belonging to
             306      individuals or corporations growing or being on the lands of this state or the United States, and

             307      all rights and privileges appertaining to these; and
             308          (c) improvements.
             309          (31) "Residential property," for the purposes of the reductions and adjustments under
             310      this chapter, means any property used for residential purposes as a primary residence. It does
             311      not include property used for transient residential use or condominiums used in rental pools.
             312          (32) (a) "State-assessed commercial vehicle" means:
             313          (i) any commercial vehicle, trailer, or semitrailer which operates interstate or intrastate
             314      to transport passengers, freight, merchandise, or other property for hire; or
             315          (ii) any commercial vehicle, trailer, or semitrailer which operates interstate and
             316      transports the vehicle owner's goods or property in furtherance of the owner's commercial
             317      enterprise.
             318          (b) "State-assessed commercial vehicle" does not include vehicles used for hire which
             319      are specified in Subsection (8)(c) as county-assessed commercial vehicles.
             320          (33) "Taxable value" means fair market value less any applicable reduction allowed for
             321      residential property under Section 59-2-103 .
             322          (34) "Tax area" means a geographic area created by the overlapping boundaries of one
             323      or more taxing entities.
             324          (35) "Taxing entity" means any county, city, town, school district, special taxing
             325      district, local district under Title 17B, Limited Purpose Local Government Entities - Local
             326      Districts, or other political subdivision of the state with the authority to levy a tax on property.
             327          (36) "Tax roll" means a permanent record of the taxes charged on property, as extended
             328      on the assessment roll and may be maintained on the same record or records as the assessment
             329      roll or may be maintained on a separate record properly indexed to the assessment roll. It
             330      includes tax books, tax lists, and other similar materials.

Legislative Review Note
    as of 1-27-10 2:39 PM

Office of Legislative Research and General Counsel

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