Chief Sponsor: Robert M. Spendlove

Senate Sponsor: Lincoln Fillmore


8     General Description:
9          This bill amends the addition to income provisions of the corporate income tax code.
10     Highlighted Provisions:
11          This bill:
12          ▸     amends an addition to income provision to provide the circumstances under which a
13     corporation may not deduct a royalty or other expense paid to an entity related by
14     common ownership for the use of an intangible asset.
15     Money Appropriated in this Bill:
16          None
17     Other Special Clauses:
18          This bill provides retrospective operation.
19     Utah Code Sections Affected:
20     AMENDS:
21          59-7-105, as last amended by Laws of Utah 2019, Chapter 466

23     Be it enacted by the Legislature of the state of Utah:
24          Section 1. Section 59-7-105 is amended to read:
25          59-7-105. Additions to unadjusted income.
26          In computing adjusted income the following amounts shall be added to unadjusted
27     income:

28          (1) interest from bonds, notes, and other evidences of indebtedness issued by any state
29     of the United States, including any agency and instrumentality of a state of the United States;
30          (2) the amount of any deduction taken on a corporation's federal return for taxes paid
31     by a corporation:
32          (a) to Utah for taxes imposed by this chapter; and
33          (b) to another state of the United States, a foreign country, a United States possession,
34     or the Commonwealth of Puerto Rico for taxes imposed for the privilege of doing business, or
35     exercising its corporate franchise, including income, franchise, corporate stock and business
36     and occupation taxes;
37          (3) the safe harbor lease adjustment required under Subsections 59-7-111(1)(a) and
38     (2)(a);
39          (4) capital losses that have been deducted on a Utah corporate return in previous years;
40          (5) any deduction on the federal return that has been previously deducted on the Utah
41     return;
42          (6) charitable contributions, to the extent deducted on the federal return when
43     determining federal taxable income;
44          (7) the amount of gain or loss determined under Section 59-7-114 relating to a target
45     corporation under Section 338, Internal Revenue Code, unless such gain or loss has already
46     been included in the unadjusted income of the target corporation;
47          (8) the amount of gain or loss determined under Section 59-7-115 relating to
48     corporations treated for federal purposes as having disposed of its assets under Section 336(e),
49     Internal Revenue Code, unless such gain or loss has already been included in the unadjusted
50     income of the target corporation;
51          (9) adjustments to gains, losses, depreciation expense, amortization expense, and
52     similar items due to a difference between basis for federal purposes and basis as computed
53     under Section 59-7-107;
54          (10) the amount withdrawn under Title 53B, Chapter 8a, Utah Educational Savings
55     Plan, from the account of a corporation that is an account owner as defined in Section
56     53B-8a-102, for the taxable year for which the amount is withdrawn, if that amount withdrawn
57     from the account of the corporation that is the account owner:
58          (a) is not expended for:

59          (i) higher education costs as defined in Section 53B-8a-102.5; or
60          (ii) a payment or distribution that qualifies as an exception to the additional tax for
61     distributions not used for educational expenses provided in Sections 529(c) and 530(d),
62     Internal Revenue Code; and
63          (b) is subtracted by the corporation:
64          (i) that is the account owner; and
65          (ii) in accordance with Subsection 59-7-106(1)(r);
66          (11) the amount of the deduction for dividends paid, as defined in Section 561, Internal
67     Revenue Code, that is allowed under Section 857(b)(2)(B), Internal Revenue Code, in
68     computing the taxable income of a captive real estate investment trust, if that captive real estate
69     investment trust is subject to federal income taxation; and
70          (12) any deduction on a return filed under this chapter for a royalty or other expense
71     [paid to a captive insurance company] that a corporation pays to an entity related by common
72     ownership for the use of an intangible asset where the intangible asset is owned by the [captive
73     insurance company and used, in exchange for a royalty or other fee, by an entity related by
74     common ownership to the captive insurance company.] entity related by common ownership
75     unless the corporation can demonstrate to the satisfaction of the commission or a court on
76     judicial review in accordance with Section 59-1-602 or Title 63G, Chapter 4, Part 4, Judicial
77     Review, that for the same taxable year, the entity related by common ownership is subject to
78     income taxes on the royalty or other expense:
79          (a) under this chapter;
80          (b) under the laws of another state; or
81          (c) by a foreign government that has in force an income tax treaty with the United
82     States.
83          Section 2. Retrospective operation.
84          This bill has retrospective operation for a taxable year beginning on or after January 1,
85     2020.