1     
529 SAVINGS PLAN AMENDMENTS

2     
2018 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Wayne A. Harper

5     
House Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill amends provisions relating to 529 savings plans.
10     Highlighted Provisions:
11          This bill:
12          ▸     permits the Utah Educational Savings Plan to use another related name for business;
13          ▸     modifies the eligibility criteria for a beneficiary of the Student Prosperity Savings
14     Program;
15          ▸     provides a limitation on the amount a corporation may subtract from unadjusted
16     gross income or an individual taxpayer may claim as a tax credit for contributions to
17     certain 529 savings plans when the account beneficiary is 16 years of age or
18     younger; and
19          ▸     makes technical and conforming changes.
20     Money Appropriated in this Bill:
21          None
22     Other Special Clauses:
23          This bill provides a special effective date.
24          This bill provides retrospective operation.
25     Utah Code Sections Affected:
26     AMENDS:
27          53B-8a-103, as last amended by Laws of Utah 2011, Chapters 46 and 342
28          53B-8a-106, as last amended by Laws of Utah 2015, Chapter 94
29          53B-8a-201, as enacted by Laws of Utah 2017, Chapter 389 and last amended by
30     Coordination Clause, Laws of Utah 2017, Chapter 382
31          59-7-105, as last amended by Laws of Utah 2017, Chapter 389
32          59-7-106, as last amended by Laws of Utah 2017, Chapter 389
33          59-10-114, as last amended by Laws of Utah 2017, Chapter 389
34          59-10-202, as last amended by Laws of Utah 2017, Chapter 389
35          59-10-1017, as last amended by Laws of Utah 2017, Chapter 389
36     

37     Be it enacted by the Legislature of the state of Utah:
38          Section 1. Section 53B-8a-103 is amended to read:
39          53B-8a-103. Creation of Utah Educational Savings Plan -- Powers and duties of
40     plan -- Certain exemptions.
41          (1) There is created the Utah Educational Savings Plan, which may also be known and
42     [function as] do business as:
43          (a) the Utah Educational Savings Plan Trust[.]; or
44          (b) another related name.
45          (2) The plan:
46          (a) is a non-profit, self-supporting agency that administers a public trust;
47          (b) shall administer the various programs, funds, trusts, plans, functions, duties, and
48     obligations assigned to the plan:
49          (i) consistent with sound fiduciary principles; and
50          (ii) subject to review of the board; and
51          (c) shall be known as and managed as a qualified tuition program in compliance with
52     Section 529, Internal Revenue Code, that is sponsored by the state.
53          (3) The plan may:
54          (a) make and enter into contracts necessary for the administration of the plan payable
55     from plan money, including:
56          (i) contracts for goods and services; and
57          (ii) contracts to engage personnel, with demonstrated ability or expertise, including
58     consultants, actuaries, managers, counsel, and auditors for the purpose of rendering
59     professional, managerial, and technical assistance and advice;
60          (b) adopt a corporate seal and change and amend [it from time to time] the corporate
61     seal;
62          (c) invest money within the program, administrative, and endowment funds in
63     accordance with the provisions under Section 53B-8a-107;
64          (d) enter into agreements with account owners, any institution of higher education, any
65     federal or state agency, or other entity as required to implement this chapter;
66          (e) solicit and accept any grants, gifts, legislative appropriations, and other money from
67     the state, any unit of federal, state, or local government, or any other person, firm, partnership,
68     or corporation for deposit to the administrative fund, endowment fund, or the program fund;
69          (f) make provision for the payment of costs of administration and operation of the plan;
70          (g) carry out studies and projections [in order] to advise account owners regarding:
71          (i) present and estimated future higher education costs; and
72          (ii) levels of financial participation in the plan required [in order] to enable account
73     owners to achieve their educational funding objective;
74          (h) participate in federal, state, local governmental, or private programs;
75          (i) create public and private partnerships, including investment or management
76     relationships with other 529 plans or entities;
77          (j) promulgate, impose, and collect administrative fees and charges in connection with
78     transactions of the plan, and provide for reasonable service charges;
79          (k) procure insurance:
80          (i) against any loss in connection with the property, assets, or activities of the plan; and
81          (ii) indemnifying any member of the board from personal loss or accountability arising
82     from liability resulting from a member's action or inaction as a member of the plan's board;
83          (l) administer outreach efforts to:
84          (i) market and publicize the plan and [its] the plan's products to existing and
85     prospective account owners; and
86          (ii) encourage economically challenged populations to save for post-secondary
87     education;
88          (m) adopt, trademark, and copyright names and materials for use in marketing and
89     publicizing the plan and [its] the plan's products;
90          (n) administer the funds of the plan;
91          (o) sue and be sued in [its] the plan's own name;
92          (p) own institutional accounts in the plan to establish and administer:
93          (i) scholarship programs; or
94          (ii) other college savings incentive programs, including programs designed to enhance
95     the savings of low income account owners investing in the plan; and
96          (q) have and exercise any other powers or duties that are necessary or appropriate to
97     carry out and effectuate the purposes of this chapter.
98          (4) (a) Except as provided in Subsection (4)(b), the plan is exempt from the provisions
99     of Title 63G, Chapter 2, Government Records Access and Management Act.
100          (b) (i) The annual audited financial statements of the plan described in Section
101     53B-8a-111 are public records.
102          (ii) Financial information that is provided by the plan to the Division of Finance and
103     posted on the Utah Public Finance Website in accordance with Section 63A-3-402 is a public
104     record.
105          Section 2. Section 53B-8a-106 is amended to read:
106          53B-8a-106. Account agreements.
107          The plan may enter into [account agreements with account owners on behalf of
108     beneficiaries] an account agreement with an account owner on behalf of one or more
109     beneficiaries under the following terms and agreements:
110          (1) (a) An account agreement may require an account owner to agree to invest a
111     specific amount of money in the plan for a specific period of time for the benefit of a specific
112     beneficiary, not to exceed an amount determined by the executive director.
113          (b) Account agreements may be amended to provide for adjusted levels of payments
114     based upon changed circumstances or changes in educational plans.
115          (c) An account owner may make additional optional payments as long as the total
116     payments for a specific beneficiary do not exceed the total estimated higher education costs as
117     determined by the executive director.
118          [(d) Subject to Subsections (1)(f) and (g)]
119          (2) (a) Subject to other provisions of this Subsection (2), the maximum amount of a
120     qualified investment that a corporation that is an account owner may subtract from unadjusted
121     income for a taxable year in accordance with Title 59, Chapter 7, Corporate Franchise and
122     Income Taxes, is [$1,710] $1,960 for each individual beneficiary [for the taxable year
123     beginning on or after January 1, 2010, but beginning on or before December 31, 2010].
124          [(e) Subject to Subsections (1)(f) and (g)]
125          (b) Subject to other provisions of this Subsection (2), the maximum amount of a
126     qualified investment that [may be used] an account owner may use as the basis for claiming a
127     tax credit in accordance with Section 59-10-1017[,] is $1,960 for each individual beneficiary if
128     the account owner is:
129          [(i) subject to Subsection (1)(e)(iv), for a resident or nonresident estate or trust that is
130     an account owner, $1,710 for each individual beneficiary for the taxable year beginning on or
131     after January 1, 2010, but beginning on or before December 31, 2010;]
132          (i) a resident or nonresident estate or trust, other than a grantor trust;
133          [(ii) subject to Subsection (1)(e)(iv), for a resident or nonresident individual that is an
134     account owner, other than a husband and wife who are account owners and]
135          (ii) a resident or nonresident individual, other than married account owners who file a
136     single return jointly under Title 59, Chapter 10, Individual Income Tax Act[, $1,710 for each
137     individual beneficiary for the taxable year beginning on or after January 1, 2010, but beginning
138     on or before December 31, 2010]; or
139          (iii) a grantor trust and the owner of the grantor trust has a single filing status or a head
140     of household filing status as defined in Section 59-10-1018.
141          (c) Subject to other provisions of this Subsection (2), the maximum amount of a
142     qualified investment that an account owner may use as the basis for claiming a tax credit in
143     accordance with Section 59-10-1017 is $3,920 for each individual beneficiary if:
144          [(iii) subject to Subsection (1)(e)(iv), for a husband and wife who are account owners
145     and file]
146          (i) the account owner is married and files a single return jointly under Title 59, Chapter
147     10, Individual Income Tax Act, [$3,420 for each individual beneficiary:] regardless of whether
148     the plan has entered into a separate agreement with one spouse or a single account agreement
149     with both spouses jointly; or
150          [(A) for the taxable year beginning on or after January 1, 2010, but beginning on or
151     before December 31, 2010; and]
152          [(B) regardless of whether the plan has entered into:]
153          [(I) a separate account agreement with each spouse; or]
154          [(II) a single account agreement with both spouses jointly; or]
155          [(iv) for a grantor trust:]
156          [(A) if the owner of the grantor trust has a single filing status or head of household
157     filing status as defined in Section 59-10-1018, the amount described in Subsection (1)(e)(ii);
158     or]
159          [(B)] (ii) [if] the account owner is a grantor trust and the owner of the grantor trust has
160     a joint filing status as defined in Section 59-10-1018[, the amount described in Subsection
161     (1)(e)(iii)].
162          (d) (i) The amounts described in Subsections (2)(a) through (c) are for a taxable year
163     beginning on or after January 1, 2018, but beginning on or before December 31, 2018.
164          [(f) (i)] (ii) For [taxable years] a taxable year beginning on or after January 1, [2011]
165     2019, the executive director shall annually increase the maximum amount of a qualified
166     investment described in Subsections [(1)(d) and (1)(e)(i) and (ii),] (2)(a) and (b) by a
167     percentage equal to the increase in the consumer price index for the preceding calendar year.
168          [(ii)] (iii) After making an increase required by Subsection [(1)(f)(i)] (2)(d)(ii), the
169     executive director shall:
170          (A) round the maximum amount of the qualified [investments] investment described in
171     Subsections [(1)(d) and (1)(e)(i) and (ii)] (2)(a) and (b) increased under Subsection [(1)(f)(i)]
172     (2)(d)(ii) to the nearest 10 dollar increment; and
173          (B) increase the maximum amount of the qualified investment described in Subsection
174     [(1)(e)(iii)] (2)(c) so that the maximum amount of the qualified investment described in
175     Subsection [(1)(e)(iii) is equal to the product of:(I)] (2)(c) is double the maximum amount of
176     the qualified investment described in Subsection [(1)(e)(ii) as rounded under Subsection
177     (1)(f)(ii)(A); and(II) two] (2)(d)(iii)(A).
178          [(iii)] (iv) For purposes of [Subsections (1)(f)(i) and (ii)] this Subsection (2)(d), the
179     executive director shall calculate the consumer price index as provided in Sections 1(f)(4) and
180     1(f)(5), Internal Revenue Code.
181          [(g)] (v) For [taxable years] a taxable year beginning on or after January 1, [2011]
182     2019, the executive director shall keep the previous year's maximum amount of a qualified
183     investment described in Subsections [(1)(d) and (1)(e)(i) and (ii)] (2)(a) and (b) if the consumer
184     price index for the preceding calendar year decreases.
185          [(2) (a) Beneficiaries designated in account agreements must be designated after]
186          (e) An account owner shall designate a beneficiary in an account agreement after the
187     beneficiary's birth and before age 19 [for an account owner] to:
188          (i) subtract a qualified investment from income under Title 59, Chapter 7, Corporate
189     Franchise and Income Taxes; or
190          (ii) use a qualified investment as the basis for claiming a tax credit in accordance with
191     Section 59-10-1017.
192          [(b)] (f) [Account owners] An account owner may designate a beneficiary age 19 or
193     older, but [investments] an investment for that beneficiary [are] is not eligible to be:
194          (i) subtracted from income under Title 59, Chapter 7, Corporate Franchise and Income
195     Taxes; or
196          (ii) used as the basis for claiming a tax credit in accordance with Section 59-10-1017.
197          (3) Each account agreement shall state clearly that there are no guarantees regarding
198     money in the plan as to the return of principal and that losses could occur.
199          (4) Each account agreement shall provide that:
200          (a) a contributor to, or designated beneficiary under, an account agreement may not
201     direct the investment of any contributions or earnings on contributions;
202          (b) any part of the money in any account may not be used as security for a loan; and
203          (c) an account owner may not borrow from the plan.
204          (5) The execution of an account agreement by the plan may not guarantee in any way
205     that higher education costs will be equal to projections and estimates provided by the plan or
206     that the beneficiary named in any account agreement will:
207          (a) be admitted to an institution of higher education;
208          (b) if admitted, be determined a resident for tuition purposes by the institution of
209     higher education;
210          (c) be allowed to continue attendance at the institution of higher education following
211     admission; or
212          (d) graduate from the institution of higher education.
213          (6) A beneficiary may be changed as permitted by the rules and regulations of the
214     board upon written request of the account owner prior to the date of admission of any
215     beneficiary under an account agreement by an institution of higher education so long as the
216     substitute beneficiary is eligible for participation.
217          (7) An account agreement may be freely amended throughout the term of the account
218     agreement in order to enable an account owner to increase or decrease the level of
219     participation, change the designation of beneficiaries, and carry out similar matters as
220     authorized by rule.
221          (8) Each account agreement shall provide that:
222          (a) the account agreement may be canceled upon the terms and conditions, and upon
223     payment of the fees and costs set forth and contained in the board's rules and regulations; and
224          (b) the executive director may amend the agreement unilaterally and retroactively, if
225     necessary, to maintain the plan as a qualified tuition program under Section 529, Internal
226     Revenue Code.
227          Section 3. Section 53B-8a-201 is amended to read:
228          53B-8a-201. Definitions.
229          As used in this part:
230          (1) "529 savings account" means a tax-advantaged method of saving for higher
231     education costs on behalf of a particular individual that:
232          (a) meets the requirements of Section 529, Internal Revenue Code; and
233          (b) is managed by the plan.
234          (2) "Child" means an individual less than 20 years of age.
235          (3) "Community partner" means a nonprofit organization that provide services to a
236     child who is economically disadvantaged or a family member, legal guardian, or legal
237     custodian of a child who is economically disadvantaged.
238          (4) "Donation" means a gift, grant, donation, or any other conveyance of money by a
239     person other than the Legislature that is not made directly for the benefit or on behalf of a
240     particular individual.
241          (5) "Economically disadvantaged" means that a child is:
242          (a) experiencing intergenerational poverty;
243          (b) a member or foster child of a family with an annual income at or below 185% of
244     the federal poverty level; [or]
245          (c) living with a legal custodian or legal guardian with an annual family income at or
246     below 185% of the federal poverty level[.]; or
247          (d) living with a legal custodian or legal guardian who can attest that the child or the
248     child's household is receiving services benefitting low-income households or individuals.
249          (6) "Eligible individual" means an individual who:
250          (a) is at least 15 years of age and under 20 years of age;
251          (b) is a student in grade 10, grade 11, or grade 12 in Utah;
252          (c) is economically disadvantaged; and
253          (d) receives, or has a family member, a foster family member, or a legal custodian or
254     legal guardian who receives, services from a community partner.
255          (7) "Federal poverty level" means the poverty level as defined by the most recently
256     revised poverty income guidelines published by the United States Department of Health and
257     Human Services in the Federal Register.
258          (8) "Higher education costs" means the same as that term is defined in Section
259     53B-8a-102.5, except that the expenses must be incurred at:
260          (a) a credit-granting institution of higher education within the state system of higher
261     education;
262          (b) a private, nonprofit college or university in the state that is accredited by the
263     Northwestern Association of Schools and Colleges; or
264          (c) a technical college.
265          (9) "Intergenerational poverty" means the same as that term is defined in Section
266     35A-9-102.
267          (10) "Program" means the Student Prosperity Savings Program created in Section
268     53B-8a-202.
269          Section 4. Section 59-7-105 is amended to read:
270          59-7-105. Additions to unadjusted income.
271          In computing adjusted income the following amounts shall be added to unadjusted
272     income:
273          (1) interest from bonds, notes, and other evidences of indebtedness issued by any state
274     of the United States, including any agency and instrumentality of a state of the United States;
275          (2) the amount of any deduction taken on a corporation's federal return for taxes paid
276     by a corporation:
277          (a) to Utah for taxes imposed by this chapter; and
278          (b) to another state of the United States, a foreign country, a United States possession,
279     or the Commonwealth of Puerto Rico for taxes imposed for the privilege of doing business, or
280     exercising its corporate franchise, including income, franchise, corporate stock and business
281     and occupation taxes;
282          (3) the safe harbor lease adjustment required under Subsections 59-7-111(1)(a) and
283     (2)(a);
284          (4) capital losses that have been deducted on a Utah corporate return in previous years;
285          (5) any deduction on the federal return that has been previously deducted on the Utah
286     return;
287          (6) charitable contributions, to the extent deducted on the federal return when
288     determining federal taxable income;
289          (7) the amount of gain or loss determined under Section 59-7-114 relating to a target
290     corporation under Section 338, Internal Revenue Code, unless such gain or loss has already
291     been included in the unadjusted income of the target corporation;
292          (8) the amount of gain or loss determined under Section 59-7-115 relating to
293     corporations treated for federal purposes as having disposed of its assets under Section 336(e),
294     Internal Revenue Code, unless such gain or loss has already been included in the unadjusted
295     income of the target corporation;
296          (9) adjustments to gains, losses, depreciation expense, amortization expense, and
297     similar items due to a difference between basis for federal purposes and basis as computed
298     under Section 59-7-107;
299          (10) the amount withdrawn under Title 53B, Chapter 8a, Part 1, Utah Educational
300     Savings Plan, from the account of a corporation that is an account owner as defined in Section
301     53B-8a-102, for the taxable year for which the amount is withdrawn, if that amount withdrawn
302     from the account of the corporation that is the account owner:
303          (a) is not expended for:
304          (i) higher education costs as defined in Section 53B-8a-102.5; or
305          (ii) a payment or distribution that qualifies as an exception to the additional tax for
306     distributions not used for educational expenses provided in Sections 529(c) and 530(d),
307     Internal Revenue Code, other than expenses for tuition in connection with enrollment or
308     attendance at an elementary or secondary public, private, or religious school; and
309          (b) is subtracted by the corporation:
310          (i) that is the account owner; and
311          (ii) in accordance with Subsection 59-7-106 (1)(r); and
312          (11) the amount of the deduction for dividends paid, as defined in Section 561, Internal
313     Revenue Code, that is allowed under Section 857(b)(2)(B), Internal Revenue Code, in
314     computing the taxable income of a captive real estate investment trust, if that captive real estate
315     investment trust is subject to federal income taxation.
316          Section 5. Section 59-7-106 is amended to read:
317          59-7-106. Subtractions from unadjusted income.
318          (1) In computing adjusted income, the following amounts shall be subtracted from
319     unadjusted income:
320          (a) the foreign dividend gross-up included in gross income for federal income tax
321     purposes under Section 78, Internal Revenue Code;
322          (b) subject to Subsection (2), the net capital loss, as defined for federal purposes, if the
323     taxpayer elects to deduct the net capital loss on the return filed under this chapter for the
324     taxable year for which the net capital loss is incurred;
325          (c) the decrease in salary expense deduction for federal income tax purposes due to
326     claiming the federal work opportunity credit under Section 51, Internal Revenue Code;
327          (d) the decrease in qualified research and basic research expense deduction for federal
328     income tax purposes due to claiming the federal credit for increasing research activities under
329     Section 41, Internal Revenue Code;
330          (e) the decrease in qualified clinical testing expense deduction for federal income tax
331     purposes due to claiming the federal credit for clinical testing expenses for certain drugs for
332     rare diseases or conditions under Section 45C, Internal Revenue Code;
333          (f) any decrease in any expense deduction for federal income tax purposes due to
334     claiming any other federal credit;
335          (g) the safe harbor lease adjustment required under Subsections 59-7-111(1)(b) and
336     (2)(b);
337          (h) any income on the federal corporation income tax return that has been previously
338     taxed by Utah;
339          (i) an amount included in federal taxable income that is due to a refund of a tax,
340     including a franchise tax, an income tax, a corporate stock and business tax, or an occupation
341     tax:
342          (i) if that tax is imposed for the privilege of:
343          (A) doing business; or
344          (B) exercising a corporate franchise;
345          (ii) if that tax is paid by the corporation to:
346          (A) Utah;
347          (B) another state of the United States;
348          (C) a foreign country;
349          (D) a United States possession; or
350          (E) the Commonwealth of Puerto Rico; and
351          (iii) to the extent that tax was added to unadjusted income under Section 59-7-105;
352          (j) a charitable contribution, to the extent the charitable contribution is allowed as a
353     subtraction under Section 59-7-109;
354          (k) subject to Subsection (3), 50% of a dividend considered to be received or received
355     from a subsidiary that:
356          (i) is a member of the unitary group;
357          (ii) is organized or incorporated outside of the United States; and
358          (iii) is not included in a combined report under Section 59-7-402 or 59-7-403;
359          (l) subject to Subsection (4) and Section 59-7-401, 50% of the adjusted income of a
360     foreign operating company;
361          (m) the amount of gain or loss that is included in unadjusted income but not recognized
362     for federal purposes on stock sold or exchanged by a member of a selling consolidated group as
363     defined in Section 338, Internal Revenue Code, if an election has been made in accordance
364     with Section 338(h)(10), Internal Revenue Code;
365          (n) the amount of gain or loss that is included in unadjusted income but not recognized
366     for federal purposes on stock sold, exchanged, or distributed by a corporation in accordance
367     with Section 336(e), Internal Revenue Code, if an election under Section 336(e), Internal
368     Revenue Code, has been made for federal purposes;
369          (o) subject to Subsection (5), an adjustment to the following due to a difference
370     between basis for federal purposes and basis as computed under Section 59-7-107:
371          (i) an amortization expense;
372          (ii) a depreciation expense;
373          (iii) a gain;
374          (iv) a loss; or
375          (v) an item similar to Subsections (1)(o)(i) through (iv);
376          (p) an interest expense that is not deducted on a federal corporation income tax return
377     under Section 265(b) or 291(e), Internal Revenue Code;
378          (q) 100% of dividends received from a subsidiary that is an insurance company if that
379     subsidiary that is an insurance company is:
380          (i) exempt from this chapter under Subsection 59-7-102(1)(c); and
381          (ii) under common ownership;
382          (r) [subject to Subsection 59-7-105(10),] for a corporation that is an account owner as
383     defined in Section 53B-8a-102, the amount of a qualified investment as defined in Section
384     53B-8a-102.5:
385          (i) that the corporation or a person other than the corporation makes into an account
386     owned by the corporation during the taxable year;
387          (ii) to the extent that neither the corporation nor the person other than the corporation
388     described in Subsection (1)(r)(i) deducts the qualified investment on a federal income tax
389     return; and
390          (iii) to the extent the qualified investment does not exceed the maximum amount of the
391     qualified investment that may be subtracted from unadjusted income for a taxable year in
392     accordance with Subsection 53B-8a-106[(1)](2);
393          (s) for a corporation that makes a donation, as that term is defined in Section
394     53B-8a-201, to the Student Prosperity Savings Program created in Section 53B-8a-202, the
395     amount of the donation to the extent that the corporation did not deduct the donation on a
396     federal income tax return;
397          (t) for purposes of income included in a combined report under Part 4, Combined
398     Reporting, the entire amount of the dividends a member of a unitary group receives or is
399     considered to receive from a captive real estate investment trust; and
400          (u) the increase in income for federal income tax purposes due to claiming a:
401          (i) qualified tax credit bond credit under Section 54A, Internal Revenue Code; or
402          (ii) qualified zone academy bond under Section 1397E, Internal Revenue Code.
403          (2) For purposes of Subsection (1)(b):
404          (a) the subtraction shall be made by claiming the subtraction on a return filed:
405          (i) under this chapter for the taxable year for which the net capital loss is incurred; and
406          (ii) by the due date of the return, including extensions; and
407          (b) a net capital loss for a taxable year shall be:
408          (i) subtracted for the taxable year for which the net capital loss is incurred; or
409          (ii) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue
410     Code.
411          (3) (a) For purposes of calculating the subtraction provided for in Subsection (1)(k), a
412     taxpayer shall first subtract from a dividend considered to be received or received an expense
413     directly attributable to that dividend.
414          (b) For purposes of Subsection (3)(a), the amount of an interest expense that is
415     considered to be directly attributable to a dividend is calculated by multiplying the interest
416     expense by a fraction:
417          (i) the numerator of which is the taxpayer's average investment in the dividend paying
418     subsidiaries; and
419          (ii) the denominator of which is the taxpayer's average total investment in assets.
420          (c) (i) For purposes of calculating the subtraction allowed by Subsection (1)(k), in
421     determining income apportionable to this state, a portion of the factors of a foreign subsidiary
422     that has dividends that are partially subtracted under Subsection (1)(k) shall be included in the
423     combined report factors as provided in this Subsection (3)(c).
424          (ii) For purposes of Subsection (3)(c)(i), the portion of the factors of a foreign
425     subsidiary that has dividends that are partially subtracted under Subsection (1)(k) that shall be
426     included in the combined report factors is calculated by multiplying each factor of the foreign
427     subsidiary by a fraction:
428          (A) not to exceed 100%; and
429          (B) (I) the numerator of which is the amount of the dividend paid by the foreign
430     subsidiary that is included in adjusted income; and
431          (II) the denominator of which is the current year earnings and profits of the foreign
432     subsidiary as determined under the Internal Revenue Code.
433          (4) (a) For purposes of Subsection (1)(l), a taxpayer may not make a subtraction under
434     Subsection (1)(l):
435          (i) if the taxpayer elects to file a worldwide combined report as provided in Section
436     59-7-403; or
437          (ii) for the following:
438          (A) income generated from intangible property; or
439          (B) a capital gain, dividend, interest, rent, royalty, or other similar item that is
440     generated from an asset held for investment and not from a regular business trading activity.
441          (b) In calculating the subtraction provided for in Subsection (1)(l), a foreign operating
442     company:
443          (i) may not subtract an amount provided for in Subsection (1)(k) or (l); and
444          (ii) prior to determining the subtraction under Subsection (1)(l), shall eliminate a
445     transaction that occurs between members of a unitary group.
446          (c) For purposes of the subtraction provided for in Subsection (1)(l), in determining
447     income apportionable to this state, the factors for a foreign operating company shall be
448     included in the combined report factors in the same percentages as the foreign operating
449     company's adjusted income is included in the combined adjusted income.
450          (d) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
451     commission may by rule define what constitutes:
452          (i) income generated from intangible property; or
453          (ii) a capital gain, dividend, interest, rent, royalty, or other similar item that is
454     generated from an asset held for investment and not from a regular business trading activity.
455          (5) (a) For purposes of the subtraction provided for in Subsection (1)(o), the amount of
456     a reduction in basis shall be allowed as an expense for the taxable year in which a federal tax
457     credit is claimed if:
458          (i) there is a reduction in federal basis for a federal tax credit; and
459          (ii) there is no corresponding tax credit allowed in this state.
460          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
461     commission may by rule define what constitutes an item similar to Subsections (1)(o)(i)
462     through (iv).
463          Section 6. Section 59-10-114 is amended to read:
464          59-10-114. Additions to and subtractions from adjusted gross income of an
465     individual.
466          (1) There shall be added to adjusted gross income of a resident or nonresident
467     individual:
468          (a) a lump sum distribution that the taxpayer does not include in adjusted gross income
469     on the taxpayer's federal individual income tax return for the taxable year;
470          (b) the amount of a child's income calculated under Subsection (4) that:
471          (i) a parent elects to report on the parent's federal individual income tax return for the
472     taxable year; and
473          (ii) the parent does not include in adjusted gross income on the parent's federal
474     individual income tax return for the taxable year;
475          (c) (i) a withdrawal from a medical care savings account and any penalty imposed for
476     the taxable year if:
477          (A) the resident or nonresident individual does not deduct the amounts on the resident
478     or nonresident individual's federal individual income tax return under Section 220, Internal
479     Revenue Code;
480          (B) the withdrawal is subject to Subsections 31A-32a-105(1) and (2); and
481          (C) the withdrawal is subtracted on, or used as the basis for claiming a tax credit on, a
482     return the resident or nonresident individual files under this chapter;
483          (ii) a disbursement required to be added to adjusted gross income in accordance with
484     Subsection 31A-32a-105(3); or
485          (iii) an amount required to be added to adjusted gross income in accordance with
486     Subsection 31A-32a-105(5)(c);
487          (d) the amount withdrawn under Title 53B, Chapter 8a, Utah Educational Savings Plan,
488     from the account of a resident or nonresident individual who is an account owner as defined in
489     Section 53B-8a-102, for the taxable year for which the amount is withdrawn, if that amount
490     withdrawn from the account of the resident or nonresident individual who is the account
491     owner:
492          (i) is not expended for:
493          (A) higher education costs as defined in Section 53B-8a-102.5; or
494          (B) a payment or distribution that qualifies as an exception to the additional tax for
495     distributions not used for educational expenses provided in Sections 529(c) and 530(d),
496     Internal Revenue Code, other than expenses for tuition in connection with enrollment or
497     attendance at an elementary or secondary public, private, or religious school; and
498          [(ii) is:]
499          [(A) subtracted by the resident or nonresident individual:]
500          [(I) who is the account owner; and]
501          [(II) on the resident or nonresident individual's return filed under this chapter for a
502     taxable year beginning on or before December 31, 2007; or]
503          [(B)] (ii) is used as the basis for the resident or nonresident individual who is the
504     account owner to claim a tax credit under Section 59-10-1017;
505          (e) except as provided in Subsection (5), for bonds, notes, and other evidences of
506     indebtedness acquired on or after January 1, 2003, the interest from bonds, notes, and other
507     evidences of indebtedness issued by one or more of the following entities:
508          (i) a state other than this state;
509          (ii) the District of Columbia;
510          (iii) a political subdivision of a state other than this state; or
511          (iv) an agency or instrumentality of an entity described in Subsections (1)(e)(i) through
512     (iii);
513          (f) subject to Subsection (2)(c), any distribution received by a resident beneficiary of a
514     resident trust of income that was taxed at the trust level for federal tax purposes, but was
515     subtracted from state taxable income of the trust pursuant to Subsection 59-10-202(2)(b);
516          (g) any distribution received by a resident beneficiary of a nonresident trust of
517     undistributed distributable net income realized by the trust on or after January 1, 2004, if that
518     undistributed distributable net income was taxed at the trust level for federal tax purposes, but
519     was not taxed at the trust level by any state, with undistributed distributable net income
520     considered to be distributed from the most recently accumulated undistributed distributable net
521     income; and
522          (h) any adoption expense:
523          (i) for which a resident or nonresident individual receives reimbursement from another
524     person; and
525          (ii) to the extent to which the resident or nonresident individual subtracts that adoption
526     expense[: (A) on a return filed under this chapter for a taxable year beginning on or before
527     December 31, 2007; or (B)] from federal taxable income on a federal individual income tax
528     return.
529          (2) There shall be subtracted from adjusted gross income of a resident or nonresident
530     individual:
531          (a) the difference between:
532          (i) the interest or a dividend on an obligation or security of the United States or an
533     authority, commission, instrumentality, or possession of the United States, to the extent that
534     interest or dividend is:
535          (A) included in adjusted gross income for federal income tax purposes for the taxable
536     year; and
537          (B) exempt from state income taxes under the laws of the United States; and
538          (ii) any interest on indebtedness incurred or continued to purchase or carry the
539     obligation or security described in Subsection (2)(a)(i);
540          (b) [for taxable years beginning on or after January 1, 2000,] if the conditions of
541     Subsection (3)(a) are met, the amount of income derived by a Ute tribal member:
542          (i) during a time period that the Ute tribal member resides on homesteaded land
543     diminished from the Uintah and Ouray Reservation; and
544          (ii) from a source within the Uintah and Ouray Reservation;
545          (c) an amount received by a resident or nonresident individual or distribution received
546     by a resident or nonresident beneficiary of a resident trust:
547          (i) if that amount or distribution constitutes a refund of taxes imposed by:
548          (A) a state; or
549          (B) the District of Columbia; and
550          (ii) to the extent that amount or distribution is included in adjusted gross income for
551     that taxable year on the federal individual income tax return of the resident or nonresident
552     individual or resident or nonresident beneficiary of a resident trust;
553          (d) the amount of a railroad retirement benefit:
554          (i) paid:
555          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
556     seq.;
557          (B) to a resident or nonresident individual; and
558          (C) for the taxable year; and
559          (ii) to the extent that railroad retirement benefit is included in adjusted gross income on
560     that resident or nonresident individual's federal individual income tax return for that taxable
561     year; and
562          (e) an amount:
563          (i) received by an enrolled member of an American Indian tribe; and
564          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
565     part on that amount in accordance with:
566          (A) federal law;
567          (B) a treaty; or
568          (C) a final decision issued by a court of competent jurisdiction.
569          (3) (a) A subtraction for an amount described in Subsection (2)(b) is allowed only if:
570          (i) the taxpayer is a Ute tribal member; and
571          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
572     requirements of this Subsection (3).
573          (b) The agreement described in Subsection (3)(a):
574          (i) may not:
575          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
576          (B) provide a subtraction under this section greater than or different from the
577     subtraction described in Subsection (2)(b); or
578          (C) affect the power of the state to establish rates of taxation; and
579          (ii) shall:
580          (A) provide for the implementation of the subtraction described in Subsection (2)(b);
581          (B) be in writing;
582          (C) be signed by:
583          (I) the governor; and
584          (II) the chair of the Business Committee of the Ute tribe;
585          (D) be conditioned on obtaining any approval required by federal law; and
586          (E) state the effective date of the agreement.
587          (c) (i) The governor shall report to the commission by no later than February 1 of each
588     year regarding whether or not an agreement meeting the requirements of this Subsection (3) is
589     in effect.
590          (ii) If an agreement meeting the requirements of this Subsection (3) is terminated, the
591     subtraction permitted under Subsection (2)(b) is not allowed for taxable years beginning on or
592     after the January 1 following the termination of the agreement.
593          (d) For purposes of Subsection (2)(b) and in accordance with Title 63G, Chapter 3,
594     Utah Administrative Rulemaking Act, the commission may make rules:
595          (i) for determining whether income is derived from a source within the Uintah and
596     Ouray Reservation; and
597          (ii) that are substantially similar to how adjusted gross income derived from Utah
598     sources is determined under Section 59-10-117.
599          (4) (a) For purposes of this Subsection (4), "Form 8814" means:
600          (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
601     Interest and Dividends; or
602          (ii) (A) a form designated by the commission in accordance with Subsection
603     (4)(a)(ii)(B) as being substantially similar to 2000 Form 8814 if for purposes of federal
604     individual income taxes the information contained on 2000 Form 8814 is reported on a form
605     other than Form 8814; and
606          (B) for purposes of Subsection (4)(a)(ii)(A) and in accordance with Title 63G, Chapter
607     3, Utah Administrative Rulemaking Act, the commission may make rules designating a form as
608     being substantially similar to 2000 Form 8814 if for purposes of federal individual income
609     taxes the information contained on 2000 Form 8814 is reported on a form other than Form
610     8814.
611          (b) The amount of a child's income added to adjusted gross income under Subsection
612     (1)(b) is equal to the difference between:
613          (i) the lesser of:
614          (A) the base amount specified on Form 8814; and
615          (B) the sum of the following reported on Form 8814:
616          (I) the child's taxable interest;
617          (II) the child's ordinary dividends; and
618          (III) the child's capital gain distributions; and
619          (ii) the amount not taxed that is specified on Form 8814.
620          (5) Notwithstanding Subsection (1)(e), interest from bonds, notes, and other evidences
621     of indebtedness issued by an entity described in Subsections (1)(e)(i) through (iv) may not be
622     added to adjusted gross income of a resident or nonresident individual if, as annually
623     determined by the commission:
624          (a) for an entity described in Subsection (1)(e)(i) or (ii), the entity and all of the
625     political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
626     income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
627          (b) for an entity described in Subsection (1)(e)(iii) or (iv), the following do not impose
628     a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
629     this state:
630          (i) the entity; or
631          (ii) (A) the state in which the entity is located; or
632          (B) the District of Columbia, if the entity is located within the District of Columbia.
633          Section 7. Section 59-10-202 is amended to read:
634          59-10-202. Additions to and subtractions from unadjusted income of a resident or
635     nonresident estate or trust.
636          (1) There shall be added to unadjusted income of a resident or nonresident estate or
637     trust:
638          (a) a lump sum distribution allowable as a deduction under Section 402(d)(3), Internal
639     Revenue Code, to the extent deductible under Section 62(a)(8), Internal Revenue Code, in
640     determining adjusted gross income;
641          (b) except as provided in Subsection (3), for bonds, notes, and other evidences of
642     indebtedness acquired on or after January 1, 2003, the interest from bonds, notes, and other
643     evidences of indebtedness issued by one or more of the following entities:
644          (i) a state other than this state;
645          (ii) the District of Columbia;
646          (iii) a political subdivision of a state other than this state; or
647          (iv) an agency or instrumentality of an entity described in Subsections (1)(b)(i) through
648     (iii);
649          (c) any portion of federal taxable income for a taxable year if that federal taxable
650     income is derived from stock:
651          (i) in an S corporation; and
652          (ii) that is held by an electing small business trust;
653          (d) the amount withdrawn under Title 53B, Chapter 8a, Utah Educational Savings Plan,
654     from the account of a resident or nonresident estate or trust that is an account owner as defined
655     in Section 53B-8a-102, for the taxable year for which the amount is withdrawn, if that amount
656     withdrawn from the account of the resident or nonresident estate or trust that is the account
657     owner:
658          (i) is not expended for:
659          (A) higher education costs as defined in Section 53B-8a-102.5; or
660          (B) a payment or distribution that qualifies as an exception to the additional tax for
661     distributions not used for educational expenses provided in Sections 529(c) and 530(d),
662     Internal Revenue Code, other than expenses for tuition in connection with enrollment or
663     attendance at an elementary or secondary public, private, or religious school; and
664          [(ii) is:]
665          [(A) subtracted by the resident or nonresident estate or trust:]
666          [(I) that is the account owner; and]
667          [(II) on the resident or nonresident estate's or trust's return filed under this chapter for a
668     taxable year beginning on or before December 31, 2007; or]
669          [(B)] (ii) is used as the basis for the resident or nonresident estate or trust that is the
670     account owner to claim a tax credit under Section 59-10-1017; and
671          (e) any fiduciary adjustments required by Section 59-10-210.
672          (2) There shall be subtracted from unadjusted income of a resident or nonresident
673     estate or trust:
674          (a) the interest or a dividend on obligations or securities of the United States and its
675     possessions or of any authority, commission, or instrumentality of the United States, to the
676     extent that interest or dividend is included in gross income for federal income tax purposes for
677     the taxable year but exempt from state income taxes under the laws of the United States, but
678     the amount subtracted under this Subsection (2) shall be reduced by any interest on
679     indebtedness incurred or continued to purchase or carry the obligations or securities described
680     in this Subsection (2), and by any expenses incurred in the production of interest or dividend
681     income described in this Subsection (2) to the extent that such expenses, including amortizable
682     bond premiums, are deductible in determining federal taxable income;
683          (b) income of an irrevocable resident trust if:
684          (i) the income would not be treated as state taxable income derived from Utah sources
685     under Section 59-10-204 if received by a nonresident trust;
686          (ii) the trust first became a resident trust on or after January 1, 2004;
687          (iii) no assets of the trust were held, at any time after January 1, 2003, in another
688     resident irrevocable trust created by the same settlor or the spouse of the same settlor;
689          (iv) the trustee of the trust is a trust company as defined in Subsection 7-5-1(1)(d);
690          (v) the amount subtracted under this Subsection (2)(b) is reduced to the extent the
691     settlor or any other person is treated as an owner of any portion of the trust under Subtitle A,
692     Subchapter J, Subpart E of the Internal Revenue Code; and
693          (vi) the amount subtracted under this Subsection (2)(b) is reduced by any interest on
694     indebtedness incurred or continued to purchase or carry the assets generating the income
695     described in this Subsection (2)(b), and by any expenses incurred in the production of income
696     described in this Subsection (2)(b), to the extent that those expenses, including amortizable
697     bond premiums, are deductible in determining federal taxable income;
698          (c) if the conditions of Subsection (4)(a) are met, the amount of income of a resident or
699     nonresident estate or trust derived from a deceased Ute tribal member:
700          (i) during a time period that the Ute tribal member resided on homesteaded land
701     diminished from the Uintah and Ouray Reservation; and
702          (ii) from a source within the Uintah and Ouray Reservation;
703          (d) any amount:
704          (i) received by a resident or nonresident estate or trust;
705          (ii) that constitutes a refund of taxes imposed by:
706          (A) a state; or
707          (B) the District of Columbia; and
708          (iii) to the extent that amount is included in total income on that resident or nonresident
709     estate's or trust's federal tax return for estates and trusts for that taxable year;
710          (e) the amount of a railroad retirement benefit:
711          (i) paid:
712          (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
713     seq.;
714          (B) to a resident or nonresident estate or trust derived from a deceased resident or
715     nonresident individual; and
716          (C) for the taxable year; and
717          (ii) to the extent that railroad retirement benefit is included in total income on that
718     resident or nonresident estate's or trust's federal tax return for estates and trusts;
719          (f) an amount:
720          (i) received by a resident or nonresident estate or trust if that amount is derived from a
721     deceased enrolled member of an American Indian tribe; and
722          (ii) to the extent that the state is not authorized or permitted to impose a tax under this
723     part on that amount in accordance with:
724          (A) federal law;
725          (B) a treaty; or
726          (C) a final decision issued by a court of competent jurisdiction;
727          (g) the amount that a qualified nongrantor charitable lead trust deducts under Section
728     642(c), Internal Revenue Code, as a charitable contribution deduction, as allowed on the
729     qualified nongrantor charitable lead trust's federal income tax return for estates and trusts for
730     the taxable year; and
731          (h) any fiduciary adjustments required by Section 59-10-210.
732          (3) Notwithstanding Subsection (1)(b), interest from bonds, notes, and other evidences
733     of indebtedness issued by an entity described in Subsections (1)(b)(i) through (iv) may not be
734     added to unadjusted income of a resident or nonresident estate or trust if, as annually
735     determined by the commission:
736          (a) for an entity described in Subsection (1)(b)(i) or (ii), the entity and all of the
737     political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
738     income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
739          (b) for an entity described in Subsection (1)(b)(iii) or (iv), the following do not impose
740     a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
741     this state:
742          (i) the entity; or
743          (ii) (A) the state in which the entity is located; or
744          (B) the District of Columbia, if the entity is located within the District of Columbia.
745          (4) (a) A subtraction for an amount described in Subsection (2)(c) is allowed only if:
746          (i) the income is derived from a deceased Ute tribal member; and
747          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
748     requirements of this Subsection (4).
749          (b) The agreement described in Subsection (4)(a):
750          (i) may not:
751          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
752          (B) provide a subtraction under this section greater than or different from the
753     subtraction described in Subsection (2)(c); or
754          (C) affect the power of the state to establish rates of taxation; and
755          (ii) shall:
756          (A) provide for the implementation of the subtraction described in Subsection (2)(c);
757          (B) be in writing;
758          (C) be signed by[:] the governor and the chair of the Business Committee of the Ute
759     tribe;
760          [(I) the governor; and]
761          [(II) the chair of the Business Committee of the Ute tribe;]
762          (D) be conditioned on obtaining any approval required by federal law; and
763          (E) state the effective date of the agreement.
764          (c) (i) The governor shall report to the commission by no later than February 1 of each
765     year regarding whether or not an agreement meeting the requirements of this Subsection (4) is
766     in effect.
767          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
768     subtraction permitted under Subsection (2)(c) is not allowed for taxable years beginning on or
769     after the January 1 following the termination of the agreement.
770          (d) For purposes of Subsection (2)(c) and in accordance with Title 63G, Chapter 3,
771     Utah Administrative Rulemaking Act, the commission may make rules:
772          (i) for determining whether income is derived from a source within the Uintah and
773     Ouray Reservation; and
774          (ii) that are substantially similar to how adjusted gross income derived from Utah
775     sources is determined under Section 59-10-117.
776          Section 8. Section 59-10-1017 is amended to read:
777          59-10-1017. Utah Educational Savings Plan tax credit.
778          (1) As used in this section:
779          (a) "Account owner" means the same as that term is defined in Section 53B-8a-102.
780          (b) "Grantor trust" means the same as that term is defined in Section 53B-8a-102.5.
781          (c) "Higher education costs" means the same as that term is defined in Section
782     53B-8a-102.5.
783          (d) "Maximum amount of a qualified investment for the taxable year" means, for a
784     taxable year, the product of 5% and:
785          (i) subject to Subsection (1)(d)(iii), for a claimant, estate, or trust that is an account
786     owner, if that claimant, estate, or trust is other than [husband and wife] married account owners
787     who file a single return jointly, the maximum amount of a qualified investment[:] described in
788     Subsection 53B-8a-106(2)(b);
789          [(A) listed in Subsection 53B-8a-106(1)(e)(ii); and]
790          [(B) increased or kept for that taxable year in accordance with Subsections
791     53B-8a-106(1)(f) and (g);]
792          (ii) subject to Subsection (1)(d)(iii), for claimants who are [husband and wife] married
793     account owners who file a single return jointly, the maximum amount of a qualified
794     investment[:] described in Subsection 53B-8a-106(2)(c); or
795          [(A) listed in Subsection 53B-8a-106(1)(e)(iii); and]
796          [(B) increased or kept for that taxable year in accordance with Subsections
797     53B-8a-106(1)(f) and (g); or]
798          (iii) for a grantor trust:
799          (A) if the owner of the grantor trust has a single filing status or a head of household
800     filing status as defined in Section 59-10-1018, the amount described in Subsection (1)(d)(i); or
801          (B) if the owner of the grantor trust has a joint filing status as defined in Section
802     59-10-1018, the amount described in Subsection (1)(d)(ii).
803          (e) "Owner of the grantor trust" means the same as that term is defined in Section
804     53B-8a-102.5.
805          (f) "Qualified investment" means the same as that term is defined in Section
806     53B-8a-102.5.
807          (2) Except as provided in Section 59-10-1002.2 and subject to the other provisions of
808     this section, a claimant, estate, or trust that is an account owner may claim a nonrefundable tax
809     credit equal to the product of:
810          (a) the amount of a qualified investment made:
811          (i) during the taxable year; and
812          (ii) into an account owned by the claimant, estate, or trust; and
813          (b) 5%.
814          (3) A claimant, estate, or trust, or a person other than the claimant, estate, or trust, may
815     make a qualified investment described in Subsection (2).
816          (4) A claimant, estate, or trust that is an account owner may not claim a tax credit
817     under this section with respect to any portion of a qualified investment described in Subsection
818     (2) that a claimant, estate, trust, or person described in Subsection (3) deducts on a federal
819     income tax return.
820          (5) A tax credit under this section may not exceed the maximum amount of a qualified
821     investment for the taxable year.
822          (6) A claimant, estate, or trust that is an account owner may not carry forward or carry
823     back the tax credit under this section.
824          (7) A claimant, estate, or trust may claim a tax credit under this section in addition to
825     the tax credit described in Section 59-10-1017.1.
826          Section 9. Retrospective operation and effective date.
827          (1) Except as provided in Subsections (2) and (3), this bill has retrospective operation
828     for a taxable year beginning on or after January 1, 2018.
829          (2) The amendments to Sections 53B-8a-103 and 53B-8a-106 have retrospective
830     operation to January 1, 2018.
831          (3) The amendments to Section 53B-8a-201 take effect on May 8, 2018.




Legislative Review Note
Office of Legislative Research and General Counsel