! The Capitol Complex is closed to the public due to COVID-19. All meetings will be held virtually online. View procedures and guidelines for remote public comment

S.B. 207 Enrolled

             1     

CORPORATE FRANCHISE AND INCOME TAX AMENDMENTS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Curtis S. Bramble

             5     
House Sponsor: Ryan D. Wilcox

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends corporate franchise and income tax provisions.
             10      Highlighted Provisions:
             11          This bill:
             12          .    enacts a subtraction from unadjusted income for an increase in income due to
             13      claiming certain federal tax credits.
             14      Money Appropriated in this Bill:
             15          None
             16      Other Special Clauses:
             17          This bill has retrospective operation for a taxable year beginning on or after January 1,
             18      2014.
             19      Utah Code Sections Affected:
             20      AMENDS:
             21           59-7-106 , as last amended by Laws of Utah 2010, Chapters 6 and 198
             22     
             23      Be it enacted by the Legislature of the state of Utah:
             24          Section 1. Section 59-7-106 is amended to read:
             25           59-7-106. Subtractions from unadjusted income.
             26          (1) In computing adjusted income the following amounts shall be subtracted from
             27      unadjusted income:
             28          (a) the foreign dividend gross-up included in gross income for federal income tax
             29      purposes under Section 78, Internal Revenue Code;


             30          (b) subject to Subsection (2), the net capital loss, as defined for federal purposes, if the
             31      taxpayer elects to deduct the net capital loss on the return filed under this chapter for the
             32      taxable year for which the net capital loss is incurred;
             33          (c) the decrease in salary expense deduction for federal income tax purposes due to
             34      claiming the federal work opportunity credit under Section 51, Internal Revenue Code;
             35          (d) the decrease in qualified research and basic research expense deduction for federal
             36      income tax purposes due to claiming the federal credit for increasing research activities under
             37      Section 41, Internal Revenue Code;
             38          (e) the decrease in qualified clinical testing expense deduction for federal income tax
             39      purposes due to claiming the federal credit for clinical testing expenses for certain drugs for
             40      rare diseases or conditions under Section 45C, Internal Revenue Code;
             41          (f) any decrease in any expense deduction for federal income tax purposes due to
             42      claiming any other federal credit;
             43          (g) the safe harbor lease adjustment required under Subsections 59-7-111 (1)(b) and
             44      (2)(b);
             45          (h) any income on the federal corporation income tax return that has been previously
             46      taxed by Utah;
             47          (i) an amount included in federal taxable income that is due to a refund of a tax,
             48      including a franchise tax, an income tax, a corporate stock and business tax, or an occupation
             49      tax:
             50          (i) if that tax is imposed for the privilege of:
             51          (A) doing business; or
             52          (B) exercising a corporate franchise;
             53          (ii) if that tax is paid by the corporation to:
             54          (A) Utah;
             55          (B) another state of the United States;
             56          (C) a foreign country;
             57          (D) a United States possession; or


             58          (E) the Commonwealth of Puerto Rico; and
             59          (iii) to the extent that tax was added to unadjusted income under Section 59-7-105 ;
             60          (j) a charitable contribution, to the extent the charitable contribution is allowed as a
             61      subtraction under Section 59-7-109 ;
             62          (k) subject to Subsection (3), 50% of a dividend considered to be received or received
             63      from a subsidiary that:
             64          (i) is a member of the unitary group;
             65          (ii) is organized or incorporated outside of the United States; and
             66          (iii) is not included in a combined report under Section 59-7-402 or 59-7-403 ;
             67          (l) subject to Subsection (4) and Section 59-7-401 , 50% of the adjusted income of a
             68      foreign operating company;
             69          (m) the amount of gain or loss that is included in unadjusted income but not recognized
             70      for federal purposes on stock sold or exchanged by a member of a selling consolidated group as
             71      defined in Section 338, Internal Revenue Code, if an election has been made in accordance
             72      with Section 338(h)(10), Internal Revenue Code;
             73          (n) the amount of gain or loss that is included in unadjusted income but not recognized
             74      for federal purposes on stock sold, exchanged, or distributed by a corporation in accordance
             75      with Section 336(e), Internal Revenue Code, if an election under Section 336(e), Internal
             76      Revenue Code, has been made for federal purposes;
             77          (o) subject to Subsection (5), an adjustment to the following due to a difference
             78      between basis for federal purposes and basis as computed under Section 59-7-107 :
             79          (i) an amortization expense;
             80          (ii) a depreciation expense;
             81          (iii) a gain;
             82          (iv) a loss; or
             83          (v) an item similar to Subsections (1)(o)(i) through (iv);
             84          (p) an interest expense that is not deducted on a federal corporation income tax return
             85      under Section 265(b) or 291(e), Internal Revenue Code;


             86          (q) 100% of dividends received from a subsidiary that is an insurance company if that
             87      subsidiary that is an insurance company is:
             88          (i) exempt from this chapter under Subsection 59-7-102 (1)(c); and
             89          (ii) under common ownership;
             90          (r) subject to Subsection 59-7-105 (12), the amount of a qualified investment as defined
             91      in Section 53B-8a-102 that:
             92          (i) a corporation that is an account owner as defined in Section 53B-8a-102 makes
             93      during the taxable year;
             94          (ii) the corporation described in Subsection (1)(r)(i) does not deduct on a federal
             95      corporation income tax return; and
             96          (iii) does not exceed the maximum amount of the qualified investment that may be
             97      subtracted from unadjusted income for a taxable year in accordance with Subsection
             98      53B-8a-106 (1); [and]
             99          (s) for purposes of income included in a combined report under Part 4, Combined
             100      Reporting, the entire amount of the dividends a member of a unitary group receives or is
             101      considered to receive from a captive real estate investment trust[.]; and
             102          (t) the increase in income for federal income tax purposes due to claiming a:
             103          (i) qualified tax credit bond credit under Section 54A, Internal Revenue Code; or
             104          (ii) qualified zone academy bond under Section 1397E, Internal Revenue Code.
             105          (2) For purposes of Subsection (1)(b):
             106          (a) the subtraction shall be made by claiming the subtraction on a return filed:
             107          (i) under this chapter for the taxable year for which the net capital loss is incurred; and
             108          (ii) by the due date of the return, including extensions; and
             109          (b) a net capital loss for a taxable year shall be:
             110          (i) subtracted for the taxable year for which the net capital loss is incurred; or
             111          (ii) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue
             112      Code.
             113          (3) (a) For purposes of calculating the subtraction provided for in Subsection (1)(k), a


             114      taxpayer shall first subtract from a dividend considered to be received or received an expense
             115      directly attributable to that dividend.
             116          (b) For purposes of Subsection (3)(a), the amount of an interest expense that is
             117      considered to be directly attributable to a dividend is calculated by multiplying the interest
             118      expense by a fraction:
             119          (i) the numerator of which is the taxpayer's average investment in the dividend paying
             120      subsidiaries; and
             121          (ii) the denominator of which is the taxpayer's average total investment in assets.
             122          (c) (i) For purposes of calculating the subtraction allowed by Subsection (1)(k), in
             123      determining income apportionable to this state, a portion of the factors of a foreign subsidiary
             124      that has dividends that are partially subtracted under Subsection (1)(k) shall be included in the
             125      combined report factors as provided in this Subsection (3)(c).
             126          (ii) For purposes of Subsection (3)(c)(i), the portion of the factors of a foreign
             127      subsidiary that has dividends that are partially subtracted under Subsection (1)(k) that shall be
             128      included in the combined report factors is calculated by multiplying each factor of the foreign
             129      subsidiary by a fraction:
             130          (A) not to exceed 100%; and
             131          (B) (I) the numerator of which is the amount of the dividend paid by the foreign
             132      subsidiary that is included in adjusted income; and
             133          (II) the denominator of which is the current year earnings and profits of the foreign
             134      subsidiary as determined under the Internal Revenue Code.
             135          (4) (a) For purposes of Subsection (1)(l), a taxpayer may not make a subtraction under
             136      Subsection (1)(l):
             137          (i) if the taxpayer elects to file a worldwide combined report as provided in Section
             138      59-7-403 ; or
             139          (ii) for the following:
             140          (A) income generated from intangible property; or
             141          (B) a capital gain, dividend, interest, rent, royalty, or other similar item that is


             142      generated from an asset held for investment and not from a regular business trading activity.
             143          (b) In calculating the subtraction provided for in Subsection (1)(l), a foreign operating
             144      company:
             145          (i) may not subtract an amount provided for in Subsection (1)(k) or (l); and
             146          (ii) prior to determining the subtraction under Subsection (1)(l), shall eliminate a
             147      transaction that occurs between members of a unitary group.
             148          (c) For purposes of the subtraction provided for in Subsection (1)(l), in determining
             149      income apportionable to this state, the factors for a foreign operating company shall be
             150      included in the combined report factors in the same percentages as the foreign operating
             151      company's adjusted income is included in the combined adjusted income.
             152          (d) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             153      commission may by rule define what constitutes:
             154          (i) income generated from intangible property; or
             155          (ii) a capital gain, dividend, interest, rent, royalty, or other similar item that is
             156      generated from an asset held for investment and not from a regular business trading activity.
             157          (5) (a) For purposes of the subtraction provided for in Subsection (1)(o), the amount of
             158      a reduction in basis shall be allowed as an expense for the taxable year in which a federal tax
             159      credit is claimed if:
             160          (i) there is a reduction in federal basis for a federal tax credit; and
             161          (ii) there is no corresponding tax credit allowed in this state.
             162          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             163      commission may by rule define what constitutes an item similar to Subsections (1)(o)(i)
             164      through (iv).
             165          Section 2. Retrospective operation.
             166          This bill has retrospective operation for a taxable year beginning on or after January 1,
             167      2014.


[Bill Documents][Bills Directory]