Chief Sponsor: Curtis S. Bramble

House Sponsor: John Knotwell


8     General Description:
9          This bill creates a process for a pass-through entity to obtain a refund of qualifying
10     excess withholding.
11     Highlighted Provisions:
12          This bill:
13          ▸     defines terms;
14          ▸     creates a process for a pass-through entity to obtain a refund of qualifying excess
15     withholding, if the qualifying excess withholding exceeds tax liability by a certain
16     threshold; and
17          ▸     makes technical changes.
18     Money Appropriated in this Bill:
19          None
20     Other Special Clauses:
21          None
22     Utah Code Sections Affected:
23     AMENDS:
24          59-10-529, as last amended by Laws of Utah 2013, Chapter 74
25          59-10-1403, as last amended by Laws of Utah 2016, Chapter 87
26     ENACTS:
27          59-10-1403.3, Utah Code Annotated 1953


29     Be it enacted by the Legislature of the state of Utah:
30          Section 1. Section 59-10-529 is amended to read:
31          59-10-529. Overpayment of tax -- Credits -- Refunds.
32          (1) If there has been an overpayment of any tax imposed by this chapter, the amount of
33     overpayment is credited as follows:
34          (a) against an income tax due from a taxpayer;
35          (b) against:
36          (i) the amount of a judgment against a taxpayer, including a final judgment or order
37     requiring payment of a fine or of restitution to a victim under Title 77, Chapter 38a, Crime
38     Victims Restitution Act, obtained through due process of law by an entity of state or local
39     government; or
40          (ii) subject to Subsection (4)(a)(i), a child support obligation that is due or past due, as
41     determined by the Office of Recovery Services in the Department of Human Services and after
42     notice and an opportunity for an adjudicative proceeding, as provided in Subsection [(2)]
43     (4)(a)(iii); or
44          (c) subject to [Subsection] Subsections (3), (5), (6), [or] and (7), as bail[,] to ensure the
45     appearance of a taxpayer before the appropriate authority to resolve an outstanding warrant
46     against the taxpayer for which bail is due, if a court of competent jurisdiction has not approved
47     an alternative form of payment.
48          (2) If a balance remains after an overpayment is credited in accordance with Subsection
49     (1), the balance shall be refunded to the taxpayer.
50          (3) Bail described in Subsection (1)(c) may be applied to any fine or forfeiture:
51          (a) that is due and related to a warrant that is outstanding on or after February 16, 1984;
52     and
53          (b) in accordance with Subsections (5) and (6).
54          (4) (a) The amount of an overpayment may be credited against an obligation described
55     in Subsection (1)(b)(ii) if the Office of Recovery Services has sent written notice to the
56     taxpayer's last-known address or the address on file under Section 62A-11-304.4, stating:
57          (i) the amount of child support that is due or past due as of the date of the notice or
58     other specified date;

59          (ii) that any overpayment shall be applied to reduce the amount of due or past-due child
60     support specified in the notice; and
61          (iii) that the taxpayer may contest the amount of past-due child support specified in the
62     notice by filing a written request for an adjudicative proceeding with the office within 15 days
63     of the notice being sent.
64          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
65     Office of Recovery Services shall establish rules to implement this Subsection (4), including
66     procedures, in accordance with the other provisions of this section, to ensure:
67          (i) prompt reimbursement to a taxpayer of any amount of an overpayment that was
68     credited against a child support obligation in error; and
69          (ii) prompt distribution of properly credited funds to the obligee parent.
70          (5) The amount of an overpayment may be credited against bail described in
71     Subsection (1)(c) if:
72          (a) a court has issued a warrant for the arrest of the taxpayer for failure to post bail,
73     appear, or otherwise satisfy the terms of a citation, summons, or court order; and
74          (b) a notice of intent to apply the overpayment as bail on the issued warrant has been
75     sent to the taxpayer's current address on file with the commission.
76          (6) (a) (i) The commission shall deliver an overpayment applied as bail to the court that
77     issued the warrant of arrest.
78          (ii) The clerk of the court is authorized to endorse the check or commission warrant of
79     payment on behalf of the payees and deposit the money in the court treasury.
80          (b) (i) The court receiving an overpayment applied as bail shall order withdrawal of the
81     warrant for arrest of the taxpayer if:
82          (A) the case is a case for which a personal appearance of the taxpayer is not required;
83     and
84          (B) the dollar amount of the overpayment represents the full dollar amount of bail.
85          (ii) In a case except for a case described in Subsection (6)(b)(i):
86          (A) the court receiving the overpayment applied as bail is not required to order the
87     withdrawal of the warrant of arrest of the taxpayer during the 40-day period; and
88          (B) the taxpayer may be arrested on the warrant.
89          (c) (i) If a taxpayer fails to respond to the notice required by Subsection (5)(b), or to

90     resolve the warrant within 40 days after the notice is sent under Subsection (5)(b), the
91     overpayment applied as bail is forfeited.
92          (ii) A court may issue another warrant or allow the original warrant to remain in force
93     if:
94          (A) the taxpayer has not complied with an order of the court;
95          (B) the taxpayer has failed to appear and respond to a criminal charge for which a
96     personal appearance is required; or
97          (C) the taxpayer has paid partial but not full bail in a case for which a personal
98     appearance is not required.
99          (d) If the alleged violations named in a warrant are later resolved in favor of the
100     taxpayer, the bail amount shall be remitted to the taxpayer.
101          (7) The fine and bail forfeiture provisions of this section apply to all warrants, fines,
102     fees, and surcharges issued in cases charging a taxpayer with a felony, a misdemeanor, or an
103     infraction described in this section, which are outstanding on or after February 16, 1984.
104          (8) If the amount [allowable] allowed as a credit for tax withheld from a taxpayer
105     exceeds the tax to which the credit relates, the excess is considered an overpayment.
106          (9) (a) Subject to Subsection (9)(b), a taxpayer shall claim [for] a credit or refund of an
107     overpayment that is attributable to a net operating loss carry back or carry forward [shall be
108     filed] within three years [from the due date of] after the day on which the return for the taxable
109     year of the net operating loss is due.
110          (b) The three-year period described in Subsection (9)(a) shall be extended by any
111     extension of time provided in statute for filing the return described in Subsection (9)(a).
112          (10) If there is no tax liability for a period in which an amount is paid under this
113     chapter, the amount is an overpayment.
114          (11) If a tax under this chapter is assessed or collected after the expiration of the
115     applicable period of limitation, that amount is an overpayment.
116          (12) (a) A taxpayer may file a claim for a credit or refund of an overpayment within
117     two years [from the date] after the day on which a notice of change, notice of correction, or
118     amended return is required to be filed with the commission if the taxpayer is required to:
119          (i) report a change or correction in income reported on the taxpayer's federal income
120     tax return;

121          (ii) report a change or correction that is treated in the same manner as if the change or
122     correction were an overpayment for federal income tax purposes; or
123          (iii) file an amended return with the commission.
124          (b) If a report or amended return is not filed within 90 days after the day on which the
125     report or amended return is due, interest on any resulting refund or credit ceases to accrue after
126     the 90-day period.
127          (c) The amount of the credit or refund may not exceed the amount of the reduction in
128     tax attributable to the federal change, correction, or items amended on the taxpayer's amended
129     federal income tax return.
130          (d) Except as provided in Subsection (12)(a), this Subsection (12) does not affect the
131     amount or the time within which a claim for credit or refund may be filed.
132          (13) A credit or refund may not be allowed or made if an overpayment is less than $1.
133          (14) In the case of an overpayment of tax by an employer under Part 4, Withholding of
134     Tax, an employer shall receive a refund or credit [shall be made to the employer] only to the
135     extent that the amount of the overpayment is not deducted and withheld from wages under this
136     chapter.
137          (15) (a) If a taxpayer that is allowed a refund under this chapter dies, the commission
138     may make payment to the personal representative of the taxpayer's estate.
139          (b) If there is no personal representative of the taxpayer's estate, the commission may
140     make payment [may be made] to those persons [who] that establish entitlement to inherit the
141     property of the decedent in the proportions established in Title 75, Utah Uniform Probate Code.
142          (16) If an overpayment relates to a change in net income described in Subsection
143     59-10-536(2)(a), a credit may be allowed or a refund paid any time before the expiration of the
144     period within which a deficiency may be assessed.
145          (17) An overpayment of a tax imposed by this chapter shall accrue interest at the rate
146     and in the manner prescribed in Section 59-1-402.
147          (18) A pass-through entity may claim a refund of qualifying excess withholding in
148     accordance with Section 59-10-1403.3 in lieu of a pass-though entity taxpayer claiming a tax
149     credit under Section 59-7-614.4 or Section 59-10-1103.
150          Section 2. Section 59-10-1403 is amended to read:
151          59-10-1403. Income tax treatment of a pass-through entity -- Returns --

152     Classification same as under Internal Revenue Code.
153          (1) Subject to Subsection (3), a pass-through entity is not subject to a tax imposed by
154     this chapter.
155          (2) [The] Except as provided in Section 59-10-1403.3, the income, gain, loss,
156     deduction, or credit of a pass-through entity shall be passed through to one or more
157     pass-through entity taxpayers as provided in this part.
158          (3) A pass-through entity is subject to the return filing requirements of Sections
159     59-10-507 and 59-10-514.
160          (4) [A] For purposes of taxation under this title, a pass-through entity that transacts
161     business in the state shall be classified [for purposes of taxation under this title] in the same
162     manner as the pass-through entity is classified for federal income tax purposes.
163          Section 3. Section 59-10-1403.3 is enacted to read:
164          59-10-1403.3. Refund of amounts paid or withheld for a pass-through entity.
165          (1) As used in this section:
166          (a) "Committee" means the Revenue and Taxation Interim Committee.
167          (b) "Qualifying excess withholding" means an amount that:
168          (i) is paid or withheld:
169          (A) by a pass-through entity that has a different taxable year than the pass-through
170     entity that requests a refund under this section; and
171          (B) on behalf of the pass-through entity that requests the refund, if the pass-through
172     entity that requests the refund also is a pass-through entity taxpayer; and
173          (ii) is equal to the difference between:
174          (A) the amount paid or withheld for the taxable year on behalf of the pass-through
175     entity that requests the refund; and
176          (B) the product of 5% and the income, described in Subsection 59-10-1403.2(1)(a)(i),
177     of the pass-through entity that requests the refund.
178          (2) For a taxable year ending on or after July 1, 2017, a pass-through entity may claim
179     a refund of qualifying excess withholding, if the amount of the qualifying excess withholding is
180     equal to or greater than $250,000.
181          (3) A pass-through entity that requests a refund of qualifying excess withholding under
182     this section shall:

183          (a) apply to the commission for a refund on or, subject to Subsection (4), after the day
184     on which the pass-through entity files the pass-through entity's income tax return; and
185          (b) provide any information that the commission may require to determine that the
186     pass-through entity is eligible to receive the refund.
187          (4) A pass-through entity shall claim a refund of qualifying excess withholding under
188     this section within 30 days after the earlier of the day on which:
189          (a) the pass-through entity files an income tax return; or
190          (b) the pass-through entity's income tax return is due, including any extension of due
191     date authorized in statute.
192          (5) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
193     commission may make rules establishing the information that a pass-through entity shall
194     provide to the commission to obtain a refund of qualifying excess withholding under this
195     section.
196          (6) (a) On or before November 30, 2018, the committee shall review the $250,000
197     threshold described in Subsection (2) for the purpose of assessing whether the threshold
198     amount should be maintained, increased, or decreased.
199          (b) To assist the committee in conducting the review described in Subsection (6)(a),
200     the commission shall provide the committee with:
201          (i) the total number of refund requests made under this section;
202          (ii) the total costs of any refunds issued under this section;
203          (iii) the costs of any audits conducted on refund requests made under this section; and
204          (iv) an estimation of:
205          (A) the number of refund requests the commission expects to receive if the Legislature
206     increases the threshold;
207          (B) the number of refund requests the commission expects to receive if the Legislature
208     decreases the threshold; and
209          (C) the costs of any audits the commission would conduct if the Legislature increases
210     or decreases the threshold.

Legislative Review Note
Office of Legislative Research and General Counsel