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     Committee Note:
9          The Economic Development and Workforce Services Interim Committee recommended
10     this bill.
11     General Description:
12          This bill amends provisions related to the Enterprise Zone Act.
13     Highlighted Provisions:
14          This bill:
15          ▸     defines terms;
16          ▸     modifies the population requirements for a county or a municipality to qualify for
17     designation as an enterprise zone;
18          ▸     modifies the requirements to receive an enterprise zone tax credit, including
19     requirements related to obtaining a tax credit certificate from the Governor's Office
20     of Economic Development (GOED);
21          ▸     grants certain rulemaking authority to GOED related to enterprise zone tax credit
22     certificates;
23          ▸     modifies GOED's reporting requirements related to enterprise zone tax credits; and
24          ▸     makes technical changes.
25     Money Appropriated in this Bill:
26          None
27     Other Special Clauses:
28          This bill provides a special effective date.
29          This bill provides retrospective operation.
30     Utah Code Sections Affected:
31     AMENDS:
32          63N-2-202, as renumbered and amended by Laws of Utah 2015, Chapter 283
33          63N-2-203, as renumbered and amended by Laws of Utah 2015, Chapter 283
34          63N-2-204, as renumbered and amended by Laws of Utah 2015, Chapter 283
35          63N-2-210, as renumbered and amended by Laws of Utah 2015, Chapter 283
36          63N-2-211, as renumbered and amended by Laws of Utah 2015, Chapter 283
37          63N-2-213, as renumbered and amended by Laws of Utah 2015, Chapter 283
38     ENACTS:
39          59-7-614.10, Utah Code Annotated 1953
40          59-10-1036, Utah Code Annotated 1953
41     

42     Be it enacted by the Legislature of the state of Utah:
43          Section 1. Section 59-7-614.10 is enacted to read:
44          59-7-614.10. Nonrefundable enterprise zone tax credit.
45          (1) As used in this section:
46          (a) "Business entity" means a corporation that meets the definition of "business entity"
47     as that term is defined in Section 63N-2-202.
48          (b) "Office" means the Governor's Office of Economic Development created in Section
49     63N-1-201.
50          (2) Subject to the provisions of this section, a business entity may claim a
51     nonrefundable enterprise zone tax credit as described in Section 63N-2-213.
52          (3) The enterprise zone tax credit under this section is the amount listed as the tax
53     credit amount on the tax credit certificate that the office issues to the business entity for the
54     taxable year.
55          (4) A business entity may carry forward a tax credit under this section for a period that
56     does not exceed the next three taxable years, if the amount of the tax credit exceeds the
57     business entity's tax liability under this chapter for that taxable year.
58          (5) A business entity may not claim or carry forward a tax credit available under this
59     part for a taxable year during which the business entity has claimed the targeted business
60     income tax credit available under Section 63N-2-305.
61          (6) (a) On or before October 1, 2018, and every five years after October 1, 2018, the
62     Revenue and Taxation Interim Committee shall study the tax credit allowed by this section and
63     make recommendations to the Legislative Management Committee concerning whether the tax
64     credit should be continued, modified, or repealed.
65          (b) For purposes of the study required by this Subsection (6), the office shall provide
66     by electronic means the following information for each calendar year to the Revenue and
67     Taxation Interim Committee:
68          (i) the amount of tax credits provided in each development zone;
69          (ii) the number of new full-time employee positions reported to obtain tax credits in
70     each development zone;
71          (iii) the amount of tax credits awarded for rehabilitating a building in each
72     development zone;
73          (iv) the amount of tax credits awarded for investing in a plant, equipment, or other
74     depreciable property in each development zone;
75          (v) the information related to the tax credit contained in the office's latest report to the
76     Legislature under Section 63N-1-301; and
77          (vi) other information as requested by the Revenue and Taxation Interim Committee.
78          (c) The Revenue and Taxation Interim Committee shall ensure that its
79     recommendations under Subsection (6)(a) include an evaluation of:
80          (i) the cost of the tax credit to the state;
81          (ii) the purpose and effectiveness of the tax credit; and
82          (iii) the extent to which the state benefits from the tax credit.
83          Section 2. Section 59-10-1036 is enacted to read:
84          59-10-1036. Nonrefundable enterprise zone tax credit.
85          (1) As used in this section:
86          (a) "Business entity" means a claimant, estate, or trust that meets the definition of
87     "business entity" as that term is defined in Section 63N-2-202.
88          (b) "Office" means the Governor's Office of Economic Development created in Section
89     63N-1-201.
90          (2) Subject to the provisions of this section, a business entity may claim a
91     nonrefundable enterprise zone tax credit as described in Section 63N-2-213.
92          (3) The enterprise zone tax credit under this section is the amount listed as the tax
93     credit amount on the tax credit certificate that the office issues to the business entity for the
94     taxable year.
95          (4) A business entity may carry forward a tax credit under this section for a period that
96     does not exceed the next three taxable years, if the amount of the tax credit exceeds the
97     business entity's tax liability under this chapter for that taxable year.
98          (5) A business entity may not claim or carry forward a tax credit available under this
99     part for a taxable year during which the business entity has claimed the targeted business
100     income tax credit available under Section 63N-2-305.
101          (6) (a) On or before October 1, 2018, and every five years after October 1, 2018, the
102     Revenue and Taxation Interim Committee shall study the tax credit allowed by this section and
103     make recommendations to the Legislative Management Committee concerning whether the tax
104     credit should be continued, modified, or repealed.
105          (b) For purposes of the study required by this Subsection (6), the office shall provide
106     by electronic means the following information for each calendar year to the Revenue and
107     Taxation Interim Committee:
108          (i) the amount of tax credits provided in each development zone;
109          (ii) the number of new full-time employee positions reported to obtain tax credits in
110     each development zone;
111          (iii) the amount of tax credits awarded for rehabilitating a building in each
112     development zone;
113          (iv) the amount of tax credits awarded for investing in a plant, equipment, or other
114     depreciable property in each development zone;
115          (v) the information related to the tax credit contained in the office's latest report to the
116     Legislature under Section 63N-1-301; and
117          (vi) other information as requested by the Revenue and Taxation Interim Committee.
118          (c) The Revenue and Taxation Interim Committee shall ensure that its
119     recommendations under Subsection (6)(a) include an evaluation of:
120          (i) the cost of the tax credit to the state;
121          (ii) the purpose and effectiveness of the tax credit; and
122          (iii) the extent to which the state benefits from the tax credit.
123          Section 3. Section 63N-2-202 is amended to read:
124          63N-2-202. Definitions.
125          As used in this part:
126          (1) "Business entity" means an entity, sole proprietorship, or individual:
127          (a) including a claimant, estate, or trust; and
128          (b) under which or by whom business is conducted or transacted.
129          (2) "Claimant" means a resident or nonresident person that has:
130          (a) Utah taxable income as defined in Section 59-7-101; or
131          (b) state taxable income under Title 59, Chapter 10, Part 1, Determination and
132     Reporting of Tax Liability and Information.
133          (3) "County applicant" means the governing authority of a county that meets the
134     requirements for designation as an enterprise zone under Section 63N-2-204.
135          (4) "Estate" means a nonresident estate or a resident estate that has state taxable
136     income under Title 59, Chapter 10, Part 2, Trusts and Estates.
137          (5) "Municipal applicant" means the governing authority of a city or town that meets
138     the requirements for designation as an enterprise zone under Section 63N-2-204.
139          (6) "New full-time employee position" means a position that has been newly created in
140     addition to the highest baseline count of employment positions that existed within the business
141     entity during the previous three taxable years and [then] is filled by an employee working at
142     least 30 hours per week:
143          (a) for a period of [not less than] at least six consecutive months; and
144          (b) where the period ends in the tax year for which the credit is claimed.
145          (7) "Nonrefundable tax credit" or "tax credit" means a tax credit that a business entity
146     may:
147          (a) claim:
148          (i) as provided by statute; and
149          (ii) in an amount that does not exceed the business entity's tax liability for a taxable
150     year under:
151          (A) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
152          (B) Title 59, Chapter 10, Individual Income Tax Act; and
153          (b) carry forward or carry back:
154          (i) if allowed by statute; and
155          (ii) to the extent that the amount of the tax credit exceeds the business entity's tax
156     liability for a taxable year under:
157          (A) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
158          (B) Title 59, Chapter 10, Individual Income Tax Act.
159          (8) "Tax incentives" or "tax benefits" means the nonrefundable tax credits described in
160     Section 63N-2-213.
161          (9) "Trust" means a nonresident trust or a resident trust that has state taxable income
162     under Title 59, Chapter 10, Part 2, Trusts and Estates.
163          Section 4. Section 63N-2-203 is amended to read:
164          63N-2-203. Powers of the office.
165          The office shall:
166          (1) monitor the implementation and operation of this part and conduct a continuing
167     evaluation of the progress made in the enterprise zones;
168          (2) evaluate an application for designation as an enterprise zone from a county
169     applicant or a municipal applicant and determine if the applicant qualifies for that designation;
170          (3) provide technical assistance to county applicants and municipal applicants in
171     developing applications for designation as enterprise zones;
172          (4) assist county applicants and municipal applicants designated as enterprise zones in
173     obtaining assistance from the federal government and agencies of the state;
174          (5) assist a qualified business entity in obtaining the benefits of an incentive or
175     inducement program authorized by this part; and
176          (6) as part of the annual written report described in Section [63N-2-301] 63N-1-301,
177     prepare an annual evaluation [based, in part, on data provided by the State Tax Commission
178     that evaluates the] that provides:
179          (a) based on data from the State Tax Commission, the total amount of tax credits
180     claimed under this part;
181          (b) the total amount awarded in tax credits for each development zone;
182          (c) the number of new full-time employee positions reported to obtain tax credits in
183     each development zone;
184          (d) the amount of tax credits awarded for rehabilitating a building in each development
185     zone;
186          (e) the amount of tax credits awarded for investing in a plant, equipment, or other
187     depreciable property in each development zone; and
188          (f) recommendations regarding the effectiveness of the program and any suggestions
189     for legislation.
190          Section 5. Section 63N-2-204 is amended to read:
191          63N-2-204. Criteria for designation of enterprise zones -- Application.
192          (1) A county applicant seeking designation as an enterprise zone shall file an
193     application with the office that, in addition to complying with the other requirements of this
194     part:
195          (a) verifies that the county has a population of not more than [50,000] 70,000; and
196          (b) provides clear evidence of the need for development in the county.
197          (2) A municipal applicant seeking designation as an enterprise zone shall file an
198     application with the office that, in addition to complying with other requirements of this part:
199          (a) verifies that the municipality has a population that does not exceed [15,000]
200     20,000;
201          (b) verifies that the municipality is within a county that has a population of not more
202     than [50,000] 70,000; and
203          (c) provides clear evidence of the need for development in the municipality.
204          (3) An application filed under Subsection (1) or (2) shall be in a form and in
205     accordance with procedures approved by the office, and shall include the following
206     information:
207          (a) a plan developed by the county applicant or municipal applicant that identifies local
208     contributions meeting the requirements of Section 63N-2-205;
209          (b) the county applicant or municipal applicant has a development plan that outlines:
210          (i) the types of investment and development within the zone that the county applicant
211     or municipal applicant expects to take place if the incentives specified in this part are provided;
212          (ii) the specific investment or development reasonably expected to take place;
213          (iii) any commitments obtained from businesses;
214          (iv) the projected number of jobs that will be created and the anticipated wage level of
215     those jobs;
216          (v) any proposed emphasis on the type of jobs created, including any affirmative action
217     plans; and
218          (vi) a copy of the county applicant's or municipal applicant's economic development
219     plan to demonstrate coordination between the zone and overall county or municipal goals;
220          (c) the county applicant's or municipal applicant's proposed means of assessing the
221     effectiveness of the development plan or other programs within the zone once they have been
222     implemented within the zone;
223          (d) any additional information required by the office; and
224          (e) any additional information the county applicant or municipal applicant considers
225     relevant to its designation as an enterprise zone.
226          Section 6. Section 63N-2-210 is amended to read:
227          63N-2-210. Revocation of designations.
228          (1) The office may revoke the designation of an enterprise zone[,] if no businesses
229     utilize the tax incentives during [any] a calendar year.
230          (2) Prior to that action, the office shall conduct a public hearing to determine reasons
231     for inactivity and explore possible alternative actions.
232          Section 7. Section 63N-2-211 is amended to read:
233          63N-2-211. Disqualifying transfers.
234          Except in [counties] a county of the first or second class, tax incentives provided by this
235     part are not available to [companies] a business entity that [close] closes or permanently
236     [curtail] curtails operations in another part of the state in connection with a transfer of any part
237     of its business operations to an enterprise zone, if the closure or permanent curtailment is
238     reasonably expected to diminish employment in that part of the state.
239          Section 8. Section 63N-2-213 is amended to read:
240          63N-2-213. State tax credits.
241          (1) The office shall certify a business entity's eligibility for a tax credit described in this
242     section.
243          (2) A business entity seeking to receive a tax credit as provided in this section shall
244     provide the office with:
245          (a) an application for a tax credit certificate in a form approved by the office, including
246     a certification, by an officer of the business entity, of a signature on the application; and
247          (b) documentation that demonstrates the business entity has met the requirements to
248     receive the tax credit.
249          (3) If, after review of an application and documentation provided by a business entity
250     as described in Subsection (2), the office determines that the application and documentation are
251     inadequate to provide a reasonable justification for authorizing the tax credit, the office shall:
252          (a) deny the tax credit; or
253          (b) inform the business entity that the application or documentation was inadequate
254     and ask the business entity to submit additional documentation.
255          (4) If, after review of an application and documentation provided by a business entity
256     as described in Subsection (2), the office determines that the application and documentation
257     provide reasonable justification for authorizing a tax credit, the office shall:
258          (a) determine the amount of the tax credit to be granted to the business entity;
259          (b) issue a tax credit certificate to the business entity; and
260          (c) provide a duplicate copy of the tax credit certificate to the State Tax Commission.
261          (5) A business entity may not claim a tax credit under this section unless the business
262     entity has a tax credit certificate issued by the office.
263          (6) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
264     office shall make rules describing:
265          (a) the form and content of an application for a tax credit under this section;
266          (b) the documentation requirements for a business entity to receive a tax credit
267     certificate under this section; and
268          (c) administration of the program, including relevant timelines and deadlines.
269          [(1)] (7) Subject to the limitations of Subsections [(2)] (8) through [(4)] (10), and if the
270     requirements of this part are met, the following nonrefundable tax credits against a tax under
271     Title 59, Chapter 7, Corporate Franchise and Income Taxes, or Title 59, Chapter 10, Individual
272     Income Tax Act, are applicable in an enterprise zone:
273          (a) a tax credit of $750 may be claimed by a business entity for each new full-time
274     employee position created within the enterprise zone;
275          (b) an additional $500 tax credit may be claimed if the new full-time employee position
276     created within the enterprise zone pays at least 125% of:
277          (i) the county average monthly nonagricultural payroll wage for the respective industry
278     as determined by the Department of Workforce Services; or
279          (ii) if the county average monthly nonagricultural payroll wage is not available for the
280     respective industry, the total average monthly nonagricultural payroll wage in the respective
281     county where the enterprise zone is located;
282          (c) an additional tax credit of $750 may be claimed if the new full-time employee
283     position created within the enterprise zone is in a business entity that adds value to agricultural
284     commodities through manufacturing or processing;
285          (d) an additional tax credit of $200 may be claimed for two consecutive years for each
286     new full-time employee position created within the enterprise zone that is filled by an
287     employee who is insured under an employer-sponsored health insurance program if the
288     employer pays at least 50% of the premium cost for the year for which the credit is claimed;
289          [(e) a tax credit of 50% of the value of a cash contribution to a private nonprofit
290     corporation, except that the credit claimed may not exceed $100,000:]
291          [(i) that is exempt from federal income taxation under Section 501(c)(3), Internal
292     Revenue Code;]
293          [(ii) whose primary purpose is community and economic development; and]
294          [(iii) that has been accredited by the Governor's Rural Partnership Board;]
295          [(f)] (e) a tax credit of 25% of the first $200,000 spent on rehabilitating a building in
296     the enterprise zone that has been vacant for two years or more; and
297          [(g)] (f) an annual investment tax credit of 10% of the first $250,000 in investment,
298     and 5% of the next $1,000,000 qualifying investment in plant, equipment, or other depreciable
299     property.
300          [(2)] (8) (a) Subject to the limitations of Subsection [(2)] (8)(b), a business entity
301     claiming [tax credits] a tax credit under Subsections [(1)] (7)(a) through (d) may claim the tax
302     [credits for up to] credit for no more than 30 full-time employee positions [per] in a taxable
303     year.
304          (b) A business entity that received a tax credit for one or more new full-time employee
305     positions under Subsections [(1)] (7)(a) through (d) in a prior taxable year may claim a tax
306     credit for a new full-time employee position in a subsequent taxable year under Subsections
307     [(1)] (7)(a) through (d) if:
308          (i) the business entity has created a new full-time position within the enterprise zone;
309     and
310          (ii) the total number of full-time employee positions at the business entity at any point
311     during the tax year for which the tax credit is being claimed is greater than the highest number
312     of full-time employee positions that existed at the business entity [at any point during the
313     taxable year immediately preceding the taxable year for which the credit is being claimed] in
314     the previous three taxable years.
315          (c) Construction jobs are not eligible for the tax credits under Subsections [(1)] (7)(a)
316     through (d).
317          [(3)] (9) If the amount of a tax credit under this section exceeds a business entity's tax
318     liability under this chapter for a taxable year, the business entity may carry forward the amount
319     of the tax credit exceeding the liability for a period that does not exceed the next three taxable
320     years.
321          [(4)] (10) Tax credits under Subsections [(1)] (7)(a) through [(g)] (f) may not be
322     claimed by a business entity primarily engaged in retail trade or by a public utilities business.
323          [(5)] (11) A business entity that has no employees:
324          (a) may not claim tax credits under Subsections [(1)] (7)(a) through (d); and
325          (b) may claim tax credits under Subsections [(1)] (7)(e) through [(g)] (f).
326          (6) A business entity may not claim or carry forward a tax credit available under this
327     part for a taxable year during which the business entity has claimed the targeted business
328     income tax credit available under Section 63N-2-305.
329          Section 9. Effective date.
330          If approved by two-thirds of all the members elected to each house, this bill takes effect
331     upon approval by the governor, or the day following the constitutional time limit of Utah
332     Constitution, Article VII, Section 8, without the governor's signature, or in the case of a veto,
333     the date of veto override.
334          Section 10. Retrospective operation.
335          This bill has retrospective operation for a taxable year beginning on or after January 1,
336     2016.




Legislative Review Note
Office of Legislative Research and General Counsel