1     
ENTERPRISE ZONE AMENDMENTS

2     
2016 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Scott D. Sandall

5     
Senate Sponsor: Ralph Okerlund

6     

7     LONG TITLE
8     General Description:
9          This bill amends provisions related to the Enterprise Zone Act.
10     Highlighted Provisions:
11          This bill:
12          ▸     defines terms;
13          ▸     modifies the population requirements for a county or a municipality to qualify for
14     designation as an enterprise zone;
15          ▸     modifies the requirements to receive an enterprise zone tax credit, including
16     requirements related to obtaining a tax credit certificate from the Governor's Office
17     of Economic Development (GOED);
18          ▸     grants certain rulemaking authority to GOED related to enterprise zone tax credit
19     certificates;
20          ▸     modifies GOED's reporting requirements related to enterprise zone tax credits; and
21          ▸     makes technical changes.
22     Money Appropriated in this Bill:
23          None
24     Other Special Clauses:
25          This bill provides a special effective date.
26          This bill provides retrospective operation.
27     Utah Code Sections Affected:
28     AMENDS:
29          63N-2-202, as renumbered and amended by Laws of Utah 2015, Chapter 283
30          63N-2-203, as renumbered and amended by Laws of Utah 2015, Chapter 283
31          63N-2-204, as renumbered and amended by Laws of Utah 2015, Chapter 283
32          63N-2-210, as renumbered and amended by Laws of Utah 2015, Chapter 283
33          63N-2-211, as renumbered and amended by Laws of Utah 2015, Chapter 283
34          63N-2-213, as renumbered and amended by Laws of Utah 2015, Chapter 283
35     ENACTS:
36          59-7-614.10, Utah Code Annotated 1953
37          59-10-1036, Utah Code Annotated 1953
38     

39     Be it enacted by the Legislature of the state of Utah:
40          Section 1. Section 59-7-614.10 is enacted to read:
41          59-7-614.10. Nonrefundable enterprise zone tax credit.
42          (1) As used in this section:
43          (a) "Business entity" means a corporation that meets the definition of "business entity"
44     as that term is defined in Section 63N-2-202.
45          (b) "Office" means the Governor's Office of Economic Development created in Section
46     63N-1-201.
47          (2) Subject to the provisions of this section, a business entity may claim a
48     nonrefundable enterprise zone tax credit as described in Section 63N-2-213.
49          (3) The enterprise zone tax credit under this section is the amount listed as the tax
50     credit amount on the tax credit certificate that the office issues to the business entity for the
51     taxable year.
52          (4) A business entity may carry forward a tax credit under this section for a period that
53     does not exceed the next three taxable years, if the amount of the tax credit exceeds the
54     business entity's tax liability under this chapter for that taxable year.
55          (5) A business entity may not claim or carry forward a tax credit available under this
56     part for a taxable year during which the business entity has claimed the targeted business
57     income tax credit available under Section 63N-2-305.
58          (6) (a) On or before October 1, 2018, and every five years after October 1, 2018, the
59     Revenue and Taxation Interim Committee shall study the tax credit allowed by this section and
60     make recommendations to the Legislative Management Committee concerning whether the tax
61     credit should be continued, modified, or repealed.
62          (b) For purposes of the study required by this Subsection (6), the office shall provide
63     by electronic means the following information for each calendar year to the Revenue and
64     Taxation Interim Committee:
65          (i) the amount of tax credits provided in each development zone;
66          (ii) the number of new full-time employee positions reported to obtain tax credits in
67     each development zone;
68          (iii) the amount of tax credits awarded for rehabilitating a building in each
69     development zone;
70          (iv) the amount of tax credits awarded for investing in a plant, equipment, or other
71     depreciable property in each development zone;
72          (v) the information related to the tax credit contained in the office's latest report to the
73     Legislature under Section 63N-1-301; and
74          (vi) other information as requested by the Revenue and Taxation Interim Committee.
75          (c) The Revenue and Taxation Interim Committee shall ensure that its
76     recommendations under Subsection (6)(a) include an evaluation of:
77          (i) the cost of the tax credit to the state;
78          (ii) the purpose and effectiveness of the tax credit; and
79          (iii) the extent to which the state benefits from the tax credit.
80          Section 2. Section 59-10-1036 is enacted to read:
81          59-10-1036. Nonrefundable enterprise zone tax credit.
82          (1) As used in this section:
83          (a) "Business entity" means a claimant, estate, or trust that meets the definition of
84     "business entity" as that term is defined in Section 63N-2-202.
85          (b) "Office" means the Governor's Office of Economic Development created in Section
86     63N-1-201.
87          (2) Subject to the provisions of this section, a business entity may claim a
88     nonrefundable enterprise zone tax credit as described in Section 63N-2-213.
89          (3) The enterprise zone tax credit under this section is the amount listed as the tax
90     credit amount on the tax credit certificate that the office issues to the business entity for the
91     taxable year.
92          (4) A business entity may carry forward a tax credit under this section for a period that
93     does not exceed the next three taxable years, if the amount of the tax credit exceeds the
94     business entity's tax liability under this chapter for that taxable year.
95          (5) A business entity may not claim or carry forward a tax credit available under this
96     part for a taxable year during which the business entity has claimed the targeted business
97     income tax credit available under Section 63N-2-305.
98          (6) (a) On or before October 1, 2018, and every five years after October 1, 2018, the
99     Revenue and Taxation Interim Committee shall study the tax credit allowed by this section and
100     make recommendations to the Legislative Management Committee concerning whether the tax
101     credit should be continued, modified, or repealed.
102          (b) For purposes of the study required by this Subsection (6), the office shall provide
103     by electronic means the following information for each calendar year to the Revenue and
104     Taxation Interim Committee:
105          (i) the amount of tax credits provided in each development zone;
106          (ii) the number of new full-time employee positions reported to obtain tax credits in
107     each development zone;
108          (iii) the amount of tax credits awarded for rehabilitating a building in each
109     development zone;
110          (iv) the amount of tax credits awarded for investing in a plant, equipment, or other
111     depreciable property in each development zone;
112          (v) the information related to the tax credit contained in the office's latest report to the
113     Legislature under Section 63N-1-301; and
114          (vi) other information as requested by the Revenue and Taxation Interim Committee.
115          (c) The Revenue and Taxation Interim Committee shall ensure that its
116     recommendations under Subsection (6)(a) include an evaluation of:
117          (i) the cost of the tax credit to the state;
118          (ii) the purpose and effectiveness of the tax credit; and
119          (iii) the extent to which the state benefits from the tax credit.
120          Section 3. Section 63N-2-202 is amended to read:
121          63N-2-202. Definitions.
122          As used in this part:
123          (1) "Business entity" means an entity, sole proprietorship, or individual:
124          (a) including a claimant, estate, or trust; and
125          (b) under which or by whom business is conducted or transacted.
126          (2) "Claimant" means a resident or nonresident person that has:
127          (a) Utah taxable income as defined in Section 59-7-101; or
128          (b) state taxable income under Title 59, Chapter 10, Part 1, Determination and
129     Reporting of Tax Liability and Information.
130          (3) "County applicant" means the governing authority of a county that meets the
131     requirements for designation as an enterprise zone under Section 63N-2-204.
132          (4) "Estate" means a nonresident estate or a resident estate that has state taxable
133     income under Title 59, Chapter 10, Part 2, Trusts and Estates.
134          (5) "Municipal applicant" means the governing authority of a city or town that meets
135     the requirements for designation as an enterprise zone under Section 63N-2-204.
136          (6) "New full-time employee position" means a position that has been newly created in
137     addition to the highest baseline count of employment positions that existed within the business
138     entity during the previous three taxable years and [then] is filled by an employee working at
139     least 30 hours per week:
140          (a) for a period of [not less than] at least six consecutive months; and
141          (b) where the period ends in the tax year for which the credit is claimed.
142          (7) "Nonrefundable tax credit" or "tax credit" means a tax credit that a business entity
143     may:
144          (a) claim:
145          (i) as provided by statute; and
146          (ii) in an amount that does not exceed the business entity's tax liability for a taxable
147     year under:
148          (A) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
149          (B) Title 59, Chapter 10, Individual Income Tax Act; and
150          (b) carry forward or carry back:
151          (i) if allowed by statute; and
152          (ii) to the extent that the amount of the tax credit exceeds the business entity's tax
153     liability for a taxable year under:
154          (A) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
155          (B) Title 59, Chapter 10, Individual Income Tax Act.
156          (8) "Tax incentives" or "tax benefits" means the nonrefundable tax credits described in
157     Section 63N-2-213.
158          (9) "Trust" means a nonresident trust or a resident trust that has state taxable income
159     under Title 59, Chapter 10, Part 2, Trusts and Estates.
160          Section 4. Section 63N-2-203 is amended to read:
161          63N-2-203. Powers of the office.
162          The office shall:
163          (1) monitor the implementation and operation of this part and conduct a continuing
164     evaluation of the progress made in the enterprise zones;
165          (2) evaluate an application for designation as an enterprise zone from a county
166     applicant or a municipal applicant and determine if the applicant qualifies for that designation;
167          (3) provide technical assistance to county applicants and municipal applicants in
168     developing applications for designation as enterprise zones;
169          (4) assist county applicants and municipal applicants designated as enterprise zones in
170     obtaining assistance from the federal government and agencies of the state;
171          (5) assist a qualified business entity in obtaining the benefits of an incentive or
172     inducement program authorized by this part; and
173          (6) as part of the annual written report described in Section [63N-2-301] 63N-1-301,
174     prepare an annual evaluation [based, in part, on data provided by the State Tax Commission
175     that evaluates the] that provides:
176          (a) based on data from the State Tax Commission, the total amount of tax credits
177     claimed under this part;
178          (b) the total amount awarded in tax credits for each development zone;
179          (c) the number of new full-time employee positions reported to obtain tax credits in
180     each development zone;
181          (d) the amount of tax credits awarded for rehabilitating a building in each development
182     zone;
183          (e) the amount of tax credits awarded for investing in a plant, equipment, or other
184     depreciable property in each development zone; and
185          (f) recommendations regarding the effectiveness of the program and any suggestions
186     for legislation.
187          Section 5. Section 63N-2-204 is amended to read:
188          63N-2-204. Criteria for designation of enterprise zones -- Application.
189          (1) A county applicant seeking designation as an enterprise zone shall file an
190     application with the office that, in addition to complying with the other requirements of this
191     part:
192          (a) verifies that the county has a population of not more than [50,000] 70,000; and
193          (b) provides clear evidence of the need for development in the county.
194          (2) A municipal applicant seeking designation as an enterprise zone shall file an
195     application with the office that, in addition to complying with other requirements of this part:
196          (a) verifies that the municipality has a population that does not exceed [15,000]
197     20,000;
198          (b) verifies that the municipality is within a county that has a population of not more
199     than [50,000] 70,000; and
200          (c) provides clear evidence of the need for development in the municipality.
201          (3) An application filed under Subsection (1) or (2) shall be in a form and in
202     accordance with procedures approved by the office, and shall include the following
203     information:
204          (a) a plan developed by the county applicant or municipal applicant that identifies local
205     contributions meeting the requirements of Section 63N-2-205;
206          (b) the county applicant or municipal applicant has a development plan that outlines:
207          (i) the types of investment and development within the zone that the county applicant
208     or municipal applicant expects to take place if the incentives specified in this part are provided;
209          (ii) the specific investment or development reasonably expected to take place;
210          (iii) any commitments obtained from businesses;
211          (iv) the projected number of jobs that will be created and the anticipated wage level of
212     those jobs;
213          (v) any proposed emphasis on the type of jobs created, including any affirmative action
214     plans; and
215          (vi) a copy of the county applicant's or municipal applicant's economic development
216     plan to demonstrate coordination between the zone and overall county or municipal goals;
217          (c) the county applicant's or municipal applicant's proposed means of assessing the
218     effectiveness of the development plan or other programs within the zone once they have been
219     implemented within the zone;
220          (d) any additional information required by the office; and
221          (e) any additional information the county applicant or municipal applicant considers
222     relevant to its designation as an enterprise zone.
223          Section 6. Section 63N-2-210 is amended to read:
224          63N-2-210. Revocation of designations.
225          (1) The office may revoke the designation of an enterprise zone[,] if no businesses
226     utilize the tax incentives during [any] a calendar year.
227          (2) Prior to that action, the office shall conduct a public hearing to determine reasons
228     for inactivity and explore possible alternative actions.
229          Section 7. Section 63N-2-211 is amended to read:
230          63N-2-211. Disqualifying transfers.
231          Except in [counties] a county of the first or second class, tax incentives provided by this
232     part are not available to [companies] a business entity that [close] closes or permanently
233     [curtail] curtails operations in another part of the state in connection with a transfer of any part
234     of its business operations to an enterprise zone, if the closure or permanent curtailment is
235     reasonably expected to diminish employment in that part of the state.
236          Section 8. Section 63N-2-213 is amended to read:
237          63N-2-213. State tax credits.
238          (1) The office shall certify a business entity's eligibility for a tax credit described in this
239     section.
240          (2) A business entity seeking to receive a tax credit as provided in this section shall
241     provide the office with:
242          (a) an application for a tax credit certificate in a form approved by the office, including
243     a certification, by an officer of the business entity, of a signature on the application; and
244          (b) documentation that demonstrates the business entity has met the requirements to
245     receive the tax credit.
246          (3) If, after review of an application and documentation provided by a business entity
247     as described in Subsection (2), the office determines that the application and documentation are
248     inadequate to provide a reasonable justification for authorizing the tax credit, the office shall:
249          (a) deny the tax credit; or
250          (b) inform the business entity that the application or documentation was inadequate
251     and ask the business entity to submit additional documentation.
252          (4) If, after review of an application and documentation provided by a business entity
253     as described in Subsection (2), the office determines that the application and documentation
254     provide reasonable justification for authorizing a tax credit, the office shall:
255          (a) determine the amount of the tax credit to be granted to the business entity;
256          (b) issue a tax credit certificate to the business entity; and
257          (c) provide a duplicate copy of the tax credit certificate to the State Tax Commission.
258          (5) A business entity may not claim a tax credit under this section unless the business
259     entity has a tax credit certificate issued by the office.
260          (6) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
261     office shall make rules describing:
262          (a) the form and content of an application for a tax credit under this section;
263          (b) the documentation requirements for a business entity to receive a tax credit
264     certificate under this section; and
265          (c) administration of the program, including relevant timelines and deadlines.
266          [(1)] (7) Subject to the limitations of Subsections [(2)] (8) through [(4)] (10), and if the
267     requirements of this part are met, the following nonrefundable tax credits against a tax under
268     Title 59, Chapter 7, Corporate Franchise and Income Taxes, or Title 59, Chapter 10, Individual
269     Income Tax Act, are applicable in an enterprise zone:
270          (a) a tax credit of $750 may be claimed by a business entity for each new full-time
271     employee position created within the enterprise zone;
272          (b) an additional $500 tax credit may be claimed if the new full-time employee position
273     created within the enterprise zone pays at least 125% of:
274          (i) the county average monthly nonagricultural payroll wage for the respective industry
275     as determined by the Department of Workforce Services; or
276          (ii) if the county average monthly nonagricultural payroll wage is not available for the
277     respective industry, the total average monthly nonagricultural payroll wage in the respective
278     county where the enterprise zone is located;
279          (c) an additional tax credit of $750 may be claimed if the new full-time employee
280     position created within the enterprise zone is in a business entity that adds value to agricultural
281     commodities through manufacturing or processing;
282          (d) an additional tax credit of $200 may be claimed for two consecutive years for each
283     new full-time employee position created within the enterprise zone that is filled by an
284     employee who is insured under an employer-sponsored health insurance program if the
285     employer pays at least 50% of the premium cost for the year for which the credit is claimed;
286          [(e) a tax credit of 50% of the value of a cash contribution to a private nonprofit
287     corporation, except that the credit claimed may not exceed $100,000:]
288          [(i) that is exempt from federal income taxation under Section 501(c)(3), Internal
289     Revenue Code;]
290          [(ii) whose primary purpose is community and economic development; and]
291          [(iii) that has been accredited by the Governor's Rural Partnership Board;]
292          [(f)] (e) a tax credit of 25% of the first $200,000 spent on rehabilitating a building in
293     the enterprise zone that has been vacant for two years or more; and
294          [(g)] (f) an annual investment tax credit of 10% of the first $250,000 in investment,
295     and 5% of the next $1,000,000 qualifying investment in plant, equipment, or other depreciable
296     property.
297          [(2)] (8) (a) Subject to the limitations of Subsection [(2)] (8)(b), a business entity
298     claiming [tax credits] a tax credit under Subsections [(1)] (7)(a) through (d) may claim the tax
299     [credits for up to] credit for no more than 30 full-time employee positions [per] in a taxable
300     year.
301          (b) A business entity that received a tax credit for one or more new full-time employee
302     positions under Subsections [(1)] (7)(a) through (d) in a prior taxable year may claim a tax
303     credit for a new full-time employee position in a subsequent taxable year under Subsections
304     [(1)] (7)(a) through (d) if:
305          (i) the business entity has created a new full-time position within the enterprise zone;
306     and
307          (ii) the total number of full-time employee positions at the business entity at any point
308     during the tax year for which the tax credit is being claimed is greater than the highest number
309     of full-time employee positions that existed at the business entity [at any point during the
310     taxable year immediately preceding the taxable year for which the credit is being claimed] in
311     the previous three taxable years.
312          (c) Construction jobs are not eligible for the tax credits under Subsections [(1)] (7)(a)
313     through (d).
314          [(3)] (9) If the amount of a tax credit under this section exceeds a business entity's tax
315     liability under this chapter for a taxable year, the business entity may carry forward the amount
316     of the tax credit exceeding the liability for a period that does not exceed the next three taxable
317     years.
318          [(4)] (10) Tax credits under Subsections [(1)] (7)(a) through [(g)] (f) may not be
319     claimed by a business entity primarily engaged in retail trade or by a public utilities business.
320          [(5)] (11) A business entity that has no employees:
321          (a) may not claim tax credits under Subsections [(1)] (7)(a) through (d); and
322          (b) may claim tax credits under Subsections [(1)] (7)(e) through [(g)] (f).
323          [(6)] (12) A business entity may not claim or carry forward a tax credit available under
324     this part for a taxable year during which the business entity has claimed the targeted business
325     income tax credit available under Section 63N-2-305.
326          Section 9. Effective date.
327          If approved by two-thirds of all the members elected to each house, this bill takes effect
328     upon approval by the governor, or the day following the constitutional time limit of Utah
329     Constitution, Article VII, Section 8, without the governor's signature, or in the case of a veto,
330     the date of veto override.
331          Section 10. Retrospective operation.
332          This bill has retrospective operation for a taxable year beginning on or after January 1,
333     2016.