1     
PASS-THROUGH ENTITY TAX AMENDMENTS

2     
2017 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Steve Eliason

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Senate Sponsor: Curtis S. Bramble

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7     LONG TITLE
8     General Description:
9          This bill amends individual income tax provisions related to pass-through entities.
10     Highlighted Provisions:
11          This bill:
12          ▸     addresses state taxable income for pass-through entities; and
13          ▸     makes technical and conforming changes.
14     Money Appropriated in this Bill:
15          None
16     Other Special Clauses:
17          This bill provides retrospective operation.
18     Utah Code Sections Affected:
19     AMENDS:
20          59-10-117, as last amended by Laws of Utah 2011, Chapter 53
21     

22     Be it enacted by the Legislature of the state of Utah:
23          Section 1. Section 59-10-117 is amended to read:
24          59-10-117. State taxable income derived from Utah sources.
25          (1) For purposes of Section 59-10-116, state taxable income derived from Utah sources
26     includes [those items includable in] state taxable income attributable to or resulting from:
27          (a) the ownership in this state of any interest in real or tangible personal property,
28     including real property or property rights from which gross income from mining as [defined]
29     described by Section 613(c), Internal Revenue Code, is derived;
30          (b) the carrying on of a business, trade, profession, or occupation in this state;
31          (c) an addition to adjusted gross income required by Subsection 59-10-114(1)(c), (d),
32     or (h) to the extent that the addition was previously subtracted from state taxable income;
33          (d) a subtraction from adjusted gross income required by Subsection 59-10-114(2)(c)
34     for a refund described in Subsection 59-10-114(2)(c) to the extent that the refund subtracted is
35     related to a tax imposed by this state; or
36          (e) an adjustment to adjusted gross income required by Section 59-10-115 to the extent
37     the adjustment is related to an item described in Subsections (1)(a) through (d).
38          (2) For [the] purposes of Subsection (1):
39          (a) income from intangible personal property, including annuities, dividends, interest,
40     and gains from the disposition of intangible personal property, shall constitute income derived
41     from Utah sources only to the extent that the income is from property employed in a trade,
42     business, profession, or occupation carried on in this state;
43          (b) a deduction with respect to a capital loss, net long-term capital gain, or net
44     operating loss shall be:
45          (i) based solely on income, gain, loss, and deduction connected with Utah sources,
46     under rules prescribed by the commission in accordance with Title 63G, Chapter 3, Utah
47     Administrative Rulemaking Act[, but]; and
48          (ii) otherwise [shall be] determined in the same manner as the corresponding federal
49     deductions;
50          (c) a salary, wage, commission, or compensation for personal services rendered outside
51     this state may not be considered to be derived from Utah sources;
52          (d) a [nonresident shareholder's distributive] share of [ordinary] income, gain, loss,
53     [and] deduction, or credit of a nonresident pass-through entity taxpayer, as defined in Section
54     59-10-1402, derived from or connected with Utah sources shall be determined [under] in
55     accordance with Section 59-10-118;
56          (e) a nonresident, other than a dealer holding property primarily for sale to customers
57     in the ordinary course of the dealer's trade or business, may not be considered to carry on a
58     trade, business, profession, or occupation in this state solely by reason of the purchase or sale
59     of property for the nonresident's own account;
60          (f) if a trade, business, profession, or occupation is carried on partly within and partly
61     without this state, an item of income, gain, loss, or a deduction derived from or connected with
62     Utah sources shall be determined in accordance with Section 59-10-118;
63          [(g) a nonresident partner's distributive share of partnership income, gain, loss,
64     deduction, or credit derived from or connected with Utah sources shall be determined under
65     Part 14, Pass-Through Entities and Pass-Through Entity Taxpayers Act;]
66          [(h)] (g) the share of a nonresident estate or trust or a nonresident beneficiary of any
67     estate or trust in income, gain, loss, or deduction derived from or connected with Utah sources
68     shall be determined under Section 59-10-207; and
69          [(i)] (h) any dividend, interest, or distributive share of income, gain, or loss from a real
70     estate investment trust, as defined in Section 59-7-101, distributed or allocated to a nonresident
71     investor in the trust, including any shareholder, beneficiary, or owner of a beneficial interest in
72     the trust, shall:
73          (i) be income from intangible personal property under Subsection (2)(a)[,]; and [shall]
74          (ii) constitute income derived from Utah sources only to the extent the nonresident
75     investor is employing its beneficial interest in the trust in a trade, business, profession, or
76     occupation carried on by the investor in this state.
77          Section 2. Retrospective operation.
78          This bill has retrospective operation for a taxable year beginning on or after January 1,
79     2017.