1     
TARGETED BUSINESS INCOME TAX CREDIT REVISIONS

2     
2017 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Rebecca P. Edwards

5     
Senate Sponsor: Brian E. Shiozawa

6     

7     LONG TITLE
8     General Description:
9          This bill modifies tax credit provisions related to enterprise zones.
10     Highlighted Provisions:
11          This bill:
12          ▸     modifies the targeted business income tax credit program;
13          ▸     modifies the application requirements for businesses to apply for a targeted business
14     income tax credit;
15          ▸     modifies the Governor's Office of Economic Development (GOED) oversight and
16     reporting responsibilities in administering the targeted business income tax credit
17     program;
18          ▸     limits the amount of tax credits that may be awarded each year;
19          ▸     defines terms; and
20          ▸     makes technical changes.
21     Money Appropriated in this Bill:
22          None
23     Other Special Clauses:
24          This bill provides retrospective operation.
25     Utah Code Sections Affected:
26     AMENDS:
27          63N-2-302, as renumbered and amended by Laws of Utah 2015, Chapter 283
28          63N-2-303, as renumbered and amended by Laws of Utah 2015, Chapter 283
29          63N-2-304, as renumbered and amended by Laws of Utah 2015, Chapter 283
30          63N-2-305, as last amended by Laws of Utah 2016, Third Special Session, Chapter 1
31     

32     Be it enacted by the Legislature of the state of Utah:
33          Section 1. Section 63N-2-302 is amended to read:
34          63N-2-302. Definitions.
35          As used in this part:
36          [(1) "Allocated cap amount" means the total amount of the targeted business income
37     tax credit that a business applicant is allowed to claim for a taxable year that represents a pro
38     rata share of the total amount of $300,000 for each fiscal year allowed under Subsection
39     63N-2-305(2).]
40          [(2)] (1) "Business applicant" means a business that:
41          (a) is a[: (i)] claimant[; (ii)], estate[; or (iii)], or trust; and
42          (b) meets the criteria established in Section 63N-2-304.
43          [(3)] (2) (a) Except as provided in Subsection [(3)] (2)(b), "claimant" means a resident
44     person or a nonresident person.
45          (b) "Claimant" does not include an estate or trust.
46          [(4)] (3) "Community investment project" means a project that includes one or more of
47     the following criteria in addition to the normal operations of the business applicant:
48          (a) [substantial] significant new employment; or
49          (b) significant new capital development[; or].
50          [(c) a combination of both Subsections (4)(a) and (b).]
51          [(5) "Community investment project period" means the total number of years that the
52     office determines a business applicant is eligible for a targeted business income tax credit for
53     each community investment project.]
54          [(6)] (4) "Enterprise zone" means an area within a county or municipality that has been
55     designated as an enterprise zone by the office under Part 2, Enterprise Zone Act.
56          [(7)] (5) "Estate" means a [nonresident estate or a resident estate.] resident estate or a
57     nonresident estate.
58          [(8) "Local zone administrator" means a person:]
59          [(a) designated by the governing authority of the county or municipal applicant as the
60     local zone administrator in an enterprise zone application; and]
61          [(b) approved by the office as the local zone administrator.]
62          [(9)] (6) "Refundable tax credit" [or "tax credit"] means a tax credit that a claimant,
63     estate, or trust may claim:
64          (a) as provided by statute; and
65          (b) regardless of whether, for the taxable year for which the claimant, estate, or trust
66     claims the tax credit, the claimant, estate, or trust has a tax liability under:
67          (i) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
68          (ii) Title 59, Chapter 10, Individual Income Tax Act.
69          [(10)] (7) "Targeted business income tax credit" means a refundable tax credit
70     available under [Section 63N-2-305] this part.
71          [(11)] (8) "Targeted business income tax credit eligibility [form] certificate" means a
72     document [provided annually to the business applicant by the office that complies with the
73     requirements of Subsection 63N-2-305(8).] provided by the office to a business applicant
74     before the applicant may claim a targeted business income tax credit under this part.
75          [(12)] (9) "Trust" means a [nonresident] resident trust or a [resident] nonresident trust.
76          Section 2. Section 63N-2-303 is amended to read:
77          63N-2-303. Powers of the office.
78          The office shall:
79          (1) monitor the implementation and operation of this part and conduct a continuing
80     evaluation of the effectiveness of the targeted business income tax credit in bringing significant
81     new employment and significant new capital development to rural communities;
82          (2) determine a business entity's eligibility for a targeted business income tax credit
83     award;
84          (3) ensure that tax credits are only awarded under this part to a business applicant that
85     has satisfied performance benchmarks as determined by the office;
86          (4) ensure that the amount of targeted business income tax credit awarded to a business
87     applicant through a targeted business income tax credit eligibility certificate is no more than
88     $100,000 for the business applicant's taxable year;
89          (5) ensure that the aggregate amount of targeted business income tax credits awarded to
90     business applicants through targeted business income tax credit eligibility certificates is no
91     more than $300,000 for each fiscal year;
92          (6) as part of the annual written report described in Section 63N-1-301, prepare an
93     annual evaluation that provides:
94          (a) the identity of each business applicant that was provided a targeted business income
95     tax credit eligibility certificate by the office during the year of the annual report; and
96          (b) the total amount awarded in targeted business income tax credit for each
97     development zone; and
98          (7) [In] in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act,
99     and [for purposes of this part, the office shall] in accordance with the provisions of this part,
100     make rules regarding:
101          [(1) to determine] (a) the determination of what constitutes:
102          [(a) substantial] (i) significant new employment;
103          [(b)] (ii) significant new capital development; and
104          [(c) a] (iii) a community investment project; [and (2) to establish a formula for
105     determining the allocated cap amount for each business applicant.]
106          (b) the form and content of an application for a targeted business income tax credit
107     eligibility certificate under this part;
108          (c) documentation or other requirements for a business applicant to receive a targeted
109     business income tax credit eligibility certificate under this part; and
110          (d) administration of targeted business income tax credit awards and the issuing of
111     targeted business income tax credit eligibility certificates, including relevant timelines and
112     deadlines.
113          Section 3. Section 63N-2-304 is amended to read:
114          63N-2-304. Application for targeted business income tax credit.
115          (1) (a) For [taxable years] a taxable year beginning on or after January 1, [2002] 2017,
116     a business applicant may [elect to claim a targeted business income tax credit available under
117     Section 63N-2-305] apply to the office for a targeted business income tax credit eligibility
118     certificate under this part if the business applicant:
119          (i) is located in:
120          (A) an enterprise zone; and
121          (B) a county with[: (I)] a population of less than 25,000; [and (II) an unemployment
122     rate that for six months or more of each calendar year is at least one percentage point higher
123     than the state average;]
124          (ii) meets the requirements of Section 63N-2-212;
125          (iii) provides[: (A)] a community investment project within the enterprise zone; and
126          [(B) a portion of the community investment project during each taxable year for which
127     the business applicant claims the targeted business tax incentive; and]
128          (iv) [in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act,]
129     is not engaged in the following[, as defined by the State Tax Commission by rule]:
130          (A) construction;
131          (B) retail trade; or
132          (C) public utility activities.
133          (b) For a taxable year for which a business applicant claims a targeted business income
134     tax credit available under this part, the business applicant may not claim or carry forward a tax
135     credit available under Section 59-7-610, 59-10-1007, or 63N-2-213.
136          (2) (a) A business applicant seeking to claim a targeted business income tax credit
137     under this part shall [file] submit an application [as provided in Subsection (2)(b) with the local
138     zone administrator] to the office by no later than June 1 of the taxable year in which the
139     business applicant is seeking to claim [a] the targeted business income tax credit.
140          (b) The application described in Subsection (2)(a) shall include:
141          (i) any documentation required by the [local zone administrator] office to demonstrate
142     that the business applicant meets the requirements of Subsection (1);
143          (ii) a plan developed by the business applicant that [outlines] describes:
144          (A) if the community investment project includes [substantial] significant new
145     employment, the projected number and anticipated wage level of the jobs that the business
146     applicant plans to create as the basis for qualifying for a targeted business income tax credit;
147          (B) if the community investment project includes significant new capital development,
148     [a description of] the capital development the business applicant plans to make as the basis for
149     qualifying for a targeted business income tax credit; [and]
150          (C) [a description of] how the business applicant's plan coordinates with[:(I)] the goals
151     of the enterprise zone in which the business applicant is providing a community investment
152     project; [and]
153          [(II)] (D) how the business applicant's plan coordinates with the overall economic
154     development goals of the county or municipality in which the business applicant is providing a
155     community investment project; [and]
156          (E) any matching funds that will be used for the community investment project;
157          (F) how any targeted business income tax credit incentives that were awarded in a
158     previous year have been used for the community investment project by the business applicant;
159     and
160          (G) the requested amount of the targeted business income tax credit; and
161          (iii) any additional information required by the [local zone administrator] office.
162          (3) (a) The [local zone administrator] office shall:
163          (i) evaluate an application filed under Subsection (2); [and]
164          (ii) determine whether the business applicant is potentially eligible for a targeted
165     business income tax credit[.]; and
166          (iii) if the business applicant is potentially eligible for a targeted business income tax
167     credit, determine performance benchmarks and the deadline for meeting those benchmarks that
168     the business applicant must achieve before the office awards a targeted business income tax
169     credit to the business applicant.
170          (b) If the [local zone administrator] office determines that the business applicant is
171     potentially eligible for a targeted business income tax credit, the [local zone administrator ]
172     office shall:
173          (i) [certify that the] notify the business applicant that the business applicant is eligible
174     for [the] a targeted business income tax credit if the business applicant meets the performance
175     benchmarks by the deadline as determined by the office as described in Subsection (3)(a)(iii);
176          [(ii) structure the targeted business income tax credit for the business applicant in
177     accordance with Section 63N-2-305; and]
178          (ii) notify the business applicant of the potential amount of the targeted business
179     income tax credit that may be awarded to the business applicant, which amount may be no
180     more than $100,000 for the business applicant in a taxable year; and
181          (iii) monitor a business applicant to ensure compliance with this section[.] and to
182     measure the business applicant's progress in meeting performance benchmarks.
183          (c) If the business applicant provides evidence to the office, in a form prescribed by the
184     office, that the business applicant has achieved the performance benchmarks by the deadline as
185     determined by the office as described in Subsection (3)(a)(iii), the office shall:
186          (i) certify that the business applicant is eligible for a targeted business income tax
187     credit;
188          (ii) issue a targeted business income tax credit eligibility certificate to the business
189     applicant in accordance with Section 63N-2-305; and
190          (iii) provide a duplicate copy of the targeted business income tax credit eligibility
191     certificate to the State Tax Commission.
192          [(4) A local zone administrator shall report to the office by no later than June 30 of
193     each year:]
194          [(a) (i) any application approved by the local zone administrator during the last fiscal
195     year; and]
196          [(ii) the information established in Subsections 63N-2-305(4)(a) through (d) for each
197     new business applicant; and]
198          [(b) (i) the status of any existing business applicants that the local zone administrator
199     monitors; and]
200          [(ii) any information required by the office to determine the status of an existing
201     business applicant.]
202          [(5) (a) By July 15 of each year, the department shall notify the local zone
203     administrator of the allocated cap amount that each business applicant that the local zone
204     administrator monitors is eligible to claim.]
205          [(b) By September 15 of each year, the local zone administrator shall notify, in writing,
206     each business applicant that the local zone administrator monitors of the allocated cap amount
207     determined by the office under Subsection (5)(a) that the business applicant is eligible to claim
208     for a taxable year.]
209          Section 4. Section 63N-2-305 is amended to read:
210          63N-2-305. Targeted business income tax credit structure -- Revenue and
211     Taxation Interim Committee study.
212          (1) A business applicant that is certified and issued a targeted business income tax
213     credit eligibility certificate by the office under Subsection 63N-2-304(3) [and issued a targeted
214     business tax credit eligibility form by the office under Subsection (8)] may claim a refundable
215     tax credit in the amount specified on the targeted business income tax credit eligibility
216     certificate:
217          (a) against the business applicant's tax liability under:
218          (i) Title 59, Chapter 7, Corporate Franchise and Income Taxes; or
219          (ii) Title 59, Chapter 10, Individual Income Tax Act; and
220          (b) subject to requirements and limitations provided by this part.
221          (2) The total amount of the targeted business income tax credits allowed under this part
222     for all business applicants may not exceed $300,000 in any fiscal year.
223          (3) [(a)] A targeted business income tax credit allowed under this part for each
224     community investment project provided by a business applicant may not[: (i) be claimed by a
225     business applicant for more than seven consecutive taxable years from the date the business
226     applicant first qualifies for a targeted business income tax credit on the basis of a community
227     investment project;(ii)] be carried forward or carried back[;].
228          [(iii) exceed $100,000 in total amount for the community investment project period
229     during which the business applicant is eligible to claim a targeted business income tax credit;
230     or]
231          [(iv) exceed in any year that the targeted business income tax credit is claimed the
232     lesser of:]
233          [(A) 50% of the maximum amount allowed by the local zone administrator; or]
234          [(B) the allocated cap amount determined by the office under Subsection
235     63N-2-304(5).]
236          [(b) A business applicant may apply to the local zone administrator to claim a targeted
237     business income tax credit allowed under this part for each community investment project
238     provided by the business applicant as the basis for its eligibility for a targeted business income
239     tax credit.]
240          [(4) Subject to other provisions of this section, the local zone administrator shall
241     establish for each business applicant that qualifies for a targeted business income tax credit:]
242          [(a) criteria for maintaining eligibility for the targeted business income tax credit that
243     are reasonably related to the community investment project that is the basis for the business
244     applicant's targeted business income tax credit;]
245          [(b) the maximum amount of the targeted business income tax credit the business
246     applicant is allowed for the community investment project period;]
247          [(c) the time period over which the total amount of the targeted business income tax
248     credit may be claimed;]
249          [(d) the maximum amount of the targeted business income tax credit that the business
250     applicant will be allowed to claim each year; and]
251          [(e) requirements for a business applicant to report to the local zone administrator
252     specifying:]
253          [(i) the frequency of the business applicant's reports to the local zone administrator,
254     which shall be made at least quarterly; and]
255          [(ii) the information needed by the local zone administrator to monitor the business
256     applicant's compliance with this Subsection (4) or Section 63N-2-304 that shall be included in
257     the report.]
258          [(5) In accordance with Subsection (4)(e), a business applicant allowed a targeted
259     business income tax credit under this part shall report to the local zone administrator.]
260          [(6) The amount of a targeted business income tax credit that a business applicant is
261     allowed to claim for a taxable year shall be reduced by 25% for each quarter in which the office
262     or the local zone administrator determines that the business applicant has failed to comply with
263     a requirement of Subsection (3) or Section 63N-2-304.]
264          [(7)] (4) The office [or local zone administrator] may audit a business applicant to
265     ensure:
266          (a) eligibility for a targeted business income tax credit; [or] and
267          (b) compliance with this part, including Subsection (3) or Section 63N-2-304.
268          [(8) The office shall issue a targeted business income tax credit eligibility form in a
269     form jointly developed by the State Tax Commission and the office no later than 30 days after
270     the last day of the business applicant's taxable year showing:]
271          [(a) the maximum amount of the targeted business income tax credit that the business
272     applicant is eligible for that taxable year;]
273          [(b) any reductions in the maximum amount of the targeted business income tax credit
274     because of failure to comply with a requirement of Subsection (3) or Section 63N-2-304;]
275          [(c) the allocated cap amount that the business applicant may claim for that taxable
276     year; and]
277          [(d) the actual amount of the targeted business income tax credit that the business
278     applicant may claim for that taxable year.]
279          [(9)] (5) (a) A business applicant shall retain the targeted business income tax credit
280     eligibility [form] certificate provided by the office under [this] Subsection [(9)] 63N-2-304(3).
281          (b) The State Tax Commission may audit a business applicant to ensure:
282          (i) eligibility for a targeted business income tax credit; [or] and
283          (ii) compliance with this part, including Subsection (3) [or] and Section 63N-2-304.
284          [(10)] (6) (a) On or before November 30, 2018, and every three years after 2018, the
285     Revenue and Taxation Interim Committee shall review the tax credit provided by this section
286     and make recommendations concerning whether the tax credit should be continued, modified,
287     or repealed.
288          (b) In conducting the review required by Subsection [(10)] (6)(a), the Revenue and
289     Taxation Interim Committee shall:
290          (i) schedule time on at least one committee agenda to conduct the review;
291          (ii) invite state agencies, individuals, and organizations concerned with the credit under
292     review to provide testimony;
293          (iii) ensure that the recommendations described in this section include an evaluation of:
294          (A) the cost of the tax credit to the state;
295          (B) the purpose and effectiveness of the tax credit; and
296          (C) the extent to which the state benefits from the tax credit; and
297          (iv) undertake other review efforts as determined by the chairs of the Revenue and
298     Taxation Interim Committee.
299          Section 5. Retrospective operation.
300          This bill has retrospective operation for a taxable year beginning on or after January 1,
301     2017.