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7 LONG TITLE
8 General Description:
9 This bill modifies income tax provisions to provide that certain amounts received in
10 response to COVID-19 are not subject to state income tax.
11 Highlighted Provisions:
12 This bill:
13 ▸ provides that certain amounts received from a forgiven loan under the Paycheck
14 Protection Program or similar program are exempt from state corporate franchise
15 and income tax by:
16 • modifying the definition of "unadjusted income"; and
17 • creating a subtraction from unadjusted income;
18 ▸ provides that a grant or a forgiven loan provided by the state, a county within the
19 state, or a municipality within the state in response to COVID-19 using certain
20 federal funds is exempt from state corporate franchise and income tax by creating a
21 subtraction from unadjusted income;
22 ▸ provides that certain amounts received from a forgiven loan under the Paycheck
23 Protection Program or similar program and an amount received as an individual
24 recovery rebate are exempt from state individual income tax by:
25 • modifying the definition of "adjusted gross income"; and
26 • creating a subtraction from adjusted gross income;
27 ▸ provides that a grant or a forgiven loan provided by the state, a county within the
28 state, or a municipality within the state in response to COVID-19 using certain
29 federal funds is exempt from state individual income tax by creating a subtraction from
30 adjusted gross income; and
31 ▸ makes technical changes.
32 Money Appropriated in this Bill:
33 None
34 Other Special Clauses:
35 This bill provides a special effective date.
36 This bill provides retrospective operation.
37 Utah Code Sections Affected:
38 AMENDS:
39 59-7-101, as last amended by Laws of Utah 2019, Chapters 11, 418, and 466
40 59-7-106, as last amended by Laws of Utah 2020, Fifth Special Session, Chapter 12
41 59-7-402, as last amended by Laws of Utah 2019, Chapters 418 and 466
42 59-10-103, as last amended by Laws of Utah 2019, Chapter 323
43 59-10-114, as last amended by Laws of Utah 2020, Fifth Special Session, Chapter 12
44
45 Be it enacted by the Legislature of the state of Utah:
46 Section 1. Section 59-7-101 is amended to read:
47 59-7-101. Definitions.
48 As used in this chapter:
49 (1) "Adjusted income" means unadjusted income as modified by Sections 59-7-105
50 and 59-7-106.
51 (2) (a) "Affiliated group" means one or more chains of corporations that are connected
52 through stock ownership with a common parent corporation that meet the following
53 requirements:
54 (i) at least 80% of the stock of each of the corporations in the group, excluding the
55 common parent corporation, is owned by one or more of the other corporations in the group;
56 and
57 (ii) the common parent directly owns at least 80% of the stock of at least one of the
58 corporations in the group.
59 (b) "Affiliated group" does not include corporations that are qualified to do business
60 but are not otherwise doing business in this state.
61 (c) For purposes of this Subsection (2), "stock" does not include nonvoting stock which
62 is limited and preferred as to dividends.
63 (3) "Apportionable income" means adjusted income less nonbusiness income net of
64 related expenses, to the extent included in adjusted income.
65 (4) "Apportioned income" means apportionable income multiplied by the
66 apportionment fraction as determined in Section 59-7-311.
67 (5) "Business income" means the same as that term is defined in Section 59-7-302.
68 (6) "Captive insurance company" means the same as that term is defined in Section
69 31A-1-301.
70 (7) (a) "Captive real estate investment trust" means a real estate investment trust if:
71 (i) the shares or beneficial interests of the real estate investment trust are not regularly
72 traded on an established securities market; and
73 (ii) more than 50% of the voting power or value of the shares or beneficial interests of
74 the real estate investment trust are directly, indirectly, or constructively:
75 (A) owned by a controlling entity of the real estate investment trust; or
76 (B) controlled by a controlling entity of the real estate investment trust.
77 (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
78 commission may make rules defining "established securities market."
79 (8) (a) "Common ownership" means the direct or indirect control or ownership of more
80 than 50% of the outstanding voting stock of:
81 (i) a parent-subsidiary controlled group as defined in Section 1563, Internal Revenue
82 Code, except that 50% shall be substituted for 80%;
83 (ii) a brother-sister controlled group as defined in Section 1563, Internal Revenue
84 Code; or
85 (iii) three or more corporations each of which is a member of a group of corporations
86 described in Subsection (2)(a)(i) or (ii), and one of which is:
87 (A) a common parent corporation included in a group of corporations described in
88 Subsection (2)(a)(i); and
89 (B) included in a group of corporations described in Subsection (2)(a)(ii).
90 (b) Ownership of outstanding voting stock shall be determined by Section 1563,
91 Internal Revenue Code.
92 (9) (a) "Controlling entity of a captive real estate investment trust" means an entity
93 that:
94 (i) is treated as an association taxable as a corporation under the Internal Revenue
95 Code;
96 (ii) is not exempt from federal income taxation under Section 501(a), Internal Revenue
97 Code; and
98 (iii) directly, indirectly, or constructively holds more than 50% of:
99 (A) the voting power of a captive real estate investment trust; or
100 (B) the value of the shares or beneficial interests of a captive real estate investment
101 trust.
102 (b) "Controlling entity of a captive real estate investment trust" does not include:
103 (i) a real estate investment trust, except for a captive real estate investment trust;
104 (ii) a qualified real estate investment subsidiary described in Section 856(i), Internal
105 Revenue Code, except for a qualified real estate investment trust subsidiary of a captive real
106 estate investment trust; or
107 (iii) a foreign real estate investment trust.
108 (c) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
109 commission may make rules defining "established securities market."
110 (10) "Corporate return" or "return" includes a combined report.
111 (11) "Corporation" includes:
112 (a) entities defined as corporations under Sections 7701(a) and 7704, Internal Revenue
113 Code; and
114 (b) other organizations that are taxed as corporations for federal income tax purposes
115 under the Internal Revenue Code.
116 (12) "COVID-19" means:
117 (a) the severe acute respiratory syndrome coronavirus 2; or
118 (b) the disease caused by severe acute respiratory syndrome coronavirus 2.
119 [
120 property, made by a corporation to its shareholders out of its earnings or profits accumulated
121 after December 31, 1930.
122 [
123 domestic corporation or by a foreign corporation qualified to do or doing business in this state.
124 (b) Except as provided in Subsection [
125 business" includes:
126 (i) the right to do business through incorporation or qualification;
127 (ii) owning, renting, or leasing of real or personal property within this state;
128 (iii) the participation in joint ventures, working and operating agreements, the
129 performance of which takes place in this state;
130 (iv) selling or performing a service in this state; and
131 (v) earning income from the use of intangible property in this state.
132 (c) "Doing business" does not include the business activity of a corporation if the
133 corporation's only business activity within the state is the solicitation of orders for sales of
134 tangible personal property that are protected under 15 U.S.C. Secs. 381 through 384.
135 [
136 organized under the laws of this state.
137 [
138 a corporation if the corporation's only business activity within the state is the solicitation of
139 orders for sales of tangible personal property that are protected under 15 U.S.C. Secs. 381
140 through 384.
141 [
142 organization that is:
143 (i) (A) an association, corporation, or other organization of farmers or fruit growers; or
144 (B) an association, corporation, or other organization that is similar to an association,
145 corporation, or organization described in Subsection [
146 (ii) organized and operated on a cooperative basis to:
147 (A) (I) market the products of members of the cooperative or the products of other
148 producers; and
149 (II) return to the members of the cooperative or other producers the proceeds of sales
150 less necessary marketing expenses on the basis of the quantity of the products of a member or
151 producer or the value of the products of a member or producer; or
152 (B) (I) purchase supplies and equipment for the use of members of the cooperative or
153 other persons; and
154 (II) turn over the supplies and equipment described in Subsection [
155 (17)(a)(ii)(B)(I) at actual costs plus necessary expenses to the members of the cooperative or
156 other persons.
157 (b) (i) Subject to Subsection [
158 (17), the commission by rule, made in accordance with Title 63G, Chapter 3, Utah
159 Administrative Rulemaking Act, shall define:
160 (A) the terms "member" and "producer"; and
161 (B) what constitutes an association, corporation, or other organization that is similar to
162 an association, corporation, or organization described in Subsection [
163 (ii) The rules made under this Subsection [
164 filing requirements under federal law for a farmers' cooperative.
165 [
166 organized under the laws of this state.
167 [
168 (i) is incorporated in the United States;
169 (ii) conducts at least 80% of the corporation's business activity, as determined under
170 Section 59-7-401, outside the United States; and
171 (iii) as calculated in accordance with Part 3, Allocation and Apportionment of Income -
172 Utah UDITPA Provisions, has:
173 (A) at least $1,000,000 of payroll located outside the United States; and
174 (B) at least $2,000,000 of property located outside the United States.
175 (b) "Foreign operating company" does not include a corporation that qualifies for the
176 Puerto Rico and possession tax credit as provided in Section 936, Internal Revenue Code.
177 [
178 (i) a business entity organized outside the laws of the United States if:
179 (A) at least 75% of the business entity's total asset value at the close of the business
180 entity's taxable year is represented by:
181 (I) real estate assets, as defined in Section 856(c)(5)(B), Internal Revenue Code;
182 (II) cash or cash equivalents; or
183 (III) one or more securities issued or guaranteed by the United States;
184 (B) the business entity is:
185 (I) not subject to income taxation:
186 (Aa) on amounts distributed to the business entity's beneficial owners; and
187 (Bb) in the jurisdiction in which the business entity is organized; or
188 (II) exempt from income taxation on an entity level in the jurisdiction in which the
189 business entity is organized;
190 (C) the business entity distributes at least 85% of the business entity's taxable income,
191 as computed in the jurisdiction in which the business entity is organized, to the holders of the
192 business entity's:
193 (I) shares or beneficial interests; and
194 (II) on an annual basis;
195 (D) (I) not more than 10% of the following is held directly, indirectly, or constructively
196 by a single person:
197 (Aa) the voting power of the business entity; or
198 (Bb) the value of the shares or beneficial interests of the business entity; or
199 (II) the shares of the business entity are regularly traded on an established securities
200 market; and
201 (E) the business entity is organized in a country that has a tax treaty with the United
202 States; or
203 (ii) a listed Australian property trust.
204 (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
205 commission may make rules defining:
206 (i) "cash or cash equivalents";
207 (ii) "established securities market"; or
208 (iii) "listed Australian property trust."
209 [
210 [
211 effective during the year in which Utah taxable income is determined.
212 [
213 59-7-302.
214 [
215 Section 856, Internal Revenue Code.
216 [
217 (a) expenses directly attributable to nonbusiness income; and
218 (b) the portion of interest or other expense indirectly attributable to both nonbusiness
219 and business income that bears the same ratio to the aggregate amount of such interest or other
220 expense, determined without regard to this Subsection [
221 asset producing the nonbusiness income bears to the average amount of all assets of the
222 taxpayer within the taxable year.
223 [
224 Revenue Code.
225 [
226 Section 168, Internal Revenue Code.
227 [
228 Columbia.
229 [
230 such calendar year upon the basis of which the adjusted income is computed.
231 (b) In the case of a return made for a fractional part of a year under this chapter or
232 under rules prescribed by the commission, "taxable year" includes the period for which such
233 return is made.
234 [
235 chapter.
236 [
237 States equal to or greater than 20% of the corporation's total business activity as determined
238 under Section 59-7-401.
239 [
240 separate return basis before intercompany eliminations as determined by the Internal Revenue
241 Code, before the net operating loss deduction and special deductions for dividends received.
242 (b) "Unadjusted income" includes deferred foreign income described in Section 965(a),
243 Internal Revenue Code.
244 (c) "Unadjusted income" does not include income received from:
245 (i) a loan forgiven in accordance with 15 U.S.C. Sec. 636(a)(36), to the extent that a
246 deduction for the expenditures paid with the loan is disallowed; or
247 (ii) a similar paycheck protection loan that is:
248 (A) authorized by the federal government;
249 (B) provided in response to COVID-19;
250 (C) forgiven if the borrower meets the expenditure requirements; and
251 (D) exempt from federal income tax, to the extent that a deduction for the expenditures
252 paid with the loan is disallowed.
253 [
254 (i) are related through common ownership; and
255 (ii) by a preponderance of the evidence as determined by a court of competent
256 jurisdiction or the commission, are economically interdependent with one another as
257 demonstrated by the following factors:
258 (A) centralized management;
259 (B) functional integration; and
260 (C) economies of scale.
261 (b) "Unitary group" includes a captive real estate investment trust.
262 (c) "Unitary group" does not include an S corporation.
263 [
264 [
265 loss deduction, if determined to be less than zero.
266 [
267 taxable years that a taxpayer may carry forward to the current taxable year in accordance with
268 Section 59-7-110.
269 [
270 deduction less Utah net loss deduction.
271 (b) "Utah taxable income" includes income from tangible or intangible property located
272 or having situs in this state, regardless of whether carried on in intrastate, interstate, or foreign
273 commerce.
274 [
275 plus nonbusiness income allocable to Utah net of related expenses.
276 [
277 and activities of:
278 (i) all members of a unitary group that are:
279 (A) corporations organized or incorporated in the United States, including those
280 corporations qualifying for the Puerto Rico and Possession Tax Credit as provided in Section
281 936, Internal Revenue Code, in accordance with Subsection [
282 (B) corporations organized or incorporated outside of the United States meeting the
283 threshold level of business activity; and
284 (ii) an affiliated group electing to file a water's edge combined report under Subsection
285 59-7-402(2).
286 (b) There is a rebuttable presumption that a corporation which qualifies for the Puerto
287 Rico and possession tax credit provided in Section 936, Internal Revenue Code, is part of a
288 unitary group.
289 [
290 activities of all members of a unitary group irrespective of the country in which the
291 corporations are incorporated or conduct business activity.
292 Section 2. Section 59-7-106 is amended to read:
293 59-7-106. Subtractions from unadjusted income.
294 (1) In computing adjusted income, the following amounts shall be subtracted from
295 unadjusted income:
296 (a) the foreign dividend gross-up included in gross income for federal income tax
297 purposes under Section 78, Internal Revenue Code;
298 (b) subject to Subsection (2), the net capital loss, as defined for federal purposes, if the
299 taxpayer elects to deduct the net capital loss on the return filed under this chapter for the
300 taxable year for which the net capital loss is incurred;
301 (c) the decrease in salary expense deduction for federal income tax purposes due to
302 claiming the federal work opportunity credit under Section 51, Internal Revenue Code;
303 (d) the decrease in qualified research and basic research expense deduction for federal
304 income tax purposes due to claiming the federal credit for increasing research activities under
305 Section 41, Internal Revenue Code;
306 (e) the decrease in qualified clinical testing expense deduction for federal income tax
307 purposes due to claiming the federal credit for clinical testing expenses for certain drugs for
308 rare diseases or conditions under Section 45C, Internal Revenue Code;
309 (f) any decrease in any expense deduction for federal income tax purposes due to
310 claiming any other federal credit;
311 (g) the safe harbor lease adjustment required under Subsections 59-7-111(1)(b) and
312 (2)(b);
313 (h) any income on the federal corporation income tax return that has been previously
314 taxed by Utah;
315 (i) an amount included in federal taxable income that is due to a refund of a tax,
316 including a franchise tax, an income tax, a corporate stock and business tax, or an occupation
317 tax:
318 (i) if that tax is imposed for the privilege of:
319 (A) doing business; or
320 (B) exercising a corporate franchise;
321 (ii) if that tax is paid by the corporation to:
322 (A) Utah;
323 (B) another state of the United States;
324 (C) a foreign country;
325 (D) a United States possession; or
326 (E) the Commonwealth of Puerto Rico; and
327 (iii) to the extent that tax was added to unadjusted income under Section 59-7-105;
328 (j) a charitable contribution, to the extent the charitable contribution is allowed as a
329 subtraction under Section 59-7-109;
330 (k) subject to Subsection (3), 50% of a dividend considered to be received or received
331 from a subsidiary that:
332 (i) is a member of the unitary group;
333 (ii) is organized or incorporated outside of the United States; and
334 (iii) is not included in a combined report under Section 59-7-402 or 59-7-403;
335 (l) subject to Subsection (4) and Section 59-7-401, 50% of the adjusted income of a
336 foreign operating company;
337 (m) the amount of gain or loss that is included in unadjusted income but not recognized
338 for federal purposes on stock sold or exchanged by a member of a selling consolidated group as
339 defined in Section 338, Internal Revenue Code, if an election has been made in accordance
340 with Section 338(h)(10), Internal Revenue Code;
341 (n) the amount of gain or loss that is included in unadjusted income but not recognized
342 for federal purposes on stock sold, exchanged, or distributed by a corporation in accordance
343 with Section 336(e), Internal Revenue Code, if an election under Section 336(e), Internal
344 Revenue Code, has been made for federal purposes;
345 (o) subject to Subsection (5), an adjustment to the following due to a difference
346 between basis for federal purposes and basis as computed under Section 59-7-107:
347 (i) an amortization expense;
348 (ii) a depreciation expense;
349 (iii) a gain;
350 (iv) a loss; or
351 (v) an item similar to Subsections (1)(o)(i) through (iv);
352 (p) an interest expense that is not deducted on a federal corporation income tax return
353 under Section 265(b) or 291(e), Internal Revenue Code;
354 (q) 100% of dividends received from a subsidiary that is an insurance company if that
355 subsidiary that is an insurance company is:
356 (i) exempt from this chapter under Subsection 59-7-102(1)(c); and
357 (ii) under common ownership;
358 (r) subject to Subsection 59-7-105(10), for a corporation that is an account owner as
359 defined in Section 53B-8a-102, the amount of a qualified investment as defined in Section
360 53B-8a-102.5:
361 (i) that the corporation or a person other than the corporation makes into an account
362 owned by the corporation during the taxable year;
363 (ii) to the extent that neither the corporation nor the person other than the corporation
364 described in Subsection (1)(r)(i) deducts the qualified investment on a federal income tax
365 return; and
366 (iii) to the extent the qualified investment does not exceed the maximum amount of the
367 qualified investment that may be subtracted from unadjusted income for a taxable year in
368 accordance with Subsection 53B-8a-106(1);
369 (s) for a corporation that makes a donation, as that term is defined in Section
370 53B-8a-201, to the Student Prosperity Savings Program created in Section 53B-8a-202, the
371 amount of the donation to the extent that the corporation did not deduct the donation on a
372 federal income tax return;
373 (t) for purposes of income included in a combined report under Part 4, Combined
374 Reporting, the entire amount of the dividends a member of a unitary group receives or is
375 considered to receive from a captive real estate investment trust;
376 (u) the increase in income for federal income tax purposes due to claiming a:
377 (i) qualified tax credit bond credit under Section 54A, Internal Revenue Code; or
378 (ii) qualified zone academy bond under Section 1397E, Internal Revenue Code;
379 (v) for a taxable year beginning on or after January 1, 2019, but beginning on or before
380 December 31, 2019, only:
381 (i) the amount of any FDIC premium paid or incurred by the taxpayer that is
382 disallowed as a deduction for federal income tax purposes under Section 162(r), Internal
383 Revenue Code, on the taxpayer's 2018 federal income tax return; plus
384 (ii) the amount of any FDIC premium paid or incurred by the taxpayer that is
385 disallowed as a deduction for federal income tax purposes under Section 162(r), Internal
386 Revenue Code, for the taxable year;
387 (w) for a taxable year beginning on or after January 1, 2020, the amount of any FDIC
388 premium paid or incurred by the taxpayer that is disallowed as a deduction for federal income
389 tax purposes under Section 162(r), Internal Revenue Code, for the taxable year; and
390 (x) for a taxable year beginning on or after January 1, 2020, but beginning on or before
391 December 31, 2020, the amount of:
392 (i) a paycheck protection loan similar to a loan forgiven in accordance with 15 U.S.C.
393 Sec. 636(a)(36) that is:
394 (A) authorized by the federal government;
395 (B) provided in response to COVID-19;
396 (C) forgiven if the borrower meets the expenditure requirements; and
397 (D) subject to federal income tax, to the extent that a deduction for the expenditures
398 paid with the loan is disallowed; and
399 (ii) any grant funds [
400
401
402
403 (A) the taxpayer receives from the state, a county within the state, or a municipality
404 within the state in response to COVID-19;
405 (B) are funded using federal revenue received by the state, the county, or the
406 municipality to respond to COVID-19; and
407 (C) are included in unadjusted income.
408 (2) For purposes of Subsection (1)(b):
409 (a) the subtraction shall be made by claiming the subtraction on a return filed:
410 (i) under this chapter for the taxable year for which the net capital loss is incurred; and
411 (ii) by the due date of the return, including extensions; and
412 (b) a net capital loss for a taxable year shall be:
413 (i) subtracted for the taxable year for which the net capital loss is incurred; or
414 (ii) carried forward as provided in Sections 1212(a)(1)(B) and (C), Internal Revenue
415 Code.
416 (3) (a) For purposes of calculating the subtraction provided for in Subsection (1)(k), a
417 taxpayer shall first subtract from a dividend considered to be received or received an expense
418 directly attributable to that dividend.
419 (b) For purposes of Subsection (3)(a), the amount of an interest expense that is
420 considered to be directly attributable to a dividend is calculated by multiplying the interest
421 expense by a fraction:
422 (i) the numerator of which is the taxpayer's average investment in the dividend paying
423 subsidiaries; and
424 (ii) the denominator of which is the taxpayer's average total investment in assets.
425 (c) (i) For purposes of calculating the subtraction allowed by Subsection (1)(k), in
426 determining income apportionable to this state, a portion of the factors of a foreign subsidiary
427 that has dividends that are partially subtracted under Subsection (1)(k) shall be included in the
428 combined report factors as provided in this Subsection (3)(c).
429 (ii) For purposes of Subsection (3)(c)(i), the portion of the factors of a foreign
430 subsidiary that has dividends that are partially subtracted under Subsection (1)(k) that shall be
431 included in the combined report factors is calculated by multiplying each factor of the foreign
432 subsidiary by a fraction:
433 (A) not to exceed 100%; and
434 (B) (I) the numerator of which is the amount of the dividend paid by the foreign
435 subsidiary that is included in adjusted income; and
436 (II) the denominator of which is the current year earnings and profits of the foreign
437 subsidiary as determined under the Internal Revenue Code.
438 (4) (a) For purposes of Subsection (1)(l), a taxpayer may not make a subtraction under
439 Subsection (1)(l):
440 (i) if the taxpayer elects to file a worldwide combined report as provided in Section
441 59-7-403; or
442 (ii) for the following:
443 (A) income generated from intangible property; or
444 (B) a capital gain, dividend, interest, rent, royalty, or other similar item that is
445 generated from an asset held for investment and not from a regular business trading activity.
446 (b) In calculating the subtraction provided for in Subsection (1)(l), a foreign operating
447 company:
448 (i) may not subtract an amount provided for in Subsection (1)(k) or (l); and
449 (ii) prior to determining the subtraction under Subsection (1)(l), shall eliminate a
450 transaction that occurs between members of a unitary group.
451 (c) For purposes of the subtraction provided for in Subsection (1)(l), in determining
452 income apportionable to this state, the factors for a foreign operating company shall be
453 included in the combined report factors in the same percentages as the foreign operating
454 company's adjusted income is included in the combined adjusted income.
455 (d) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
456 commission may by rule define what constitutes:
457 (i) income generated from intangible property; or
458 (ii) a capital gain, dividend, interest, rent, royalty, or other similar item that is
459 generated from an asset held for investment and not from a regular business trading activity.
460 (5) (a) For purposes of the subtraction provided for in Subsection (1)(o), the amount of
461 a reduction in basis shall be allowed as an expense for the taxable year in which a federal tax
462 credit is claimed if:
463 (i) there is a reduction in federal basis for a federal tax credit; and
464 (ii) there is no corresponding tax credit allowed in this state.
465 (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
466 commission may by rule define what constitutes an item similar to Subsections (1)(o)(i)
467 through (iv).
468 Section 3. Section 59-7-402 is amended to read:
469 59-7-402. Water's edge combined report.
470 (1) Except as provided in Section 59-7-403, if any corporation listed in Subsection
471 59-7-101[
472 combined report.
473 (2) (a) A group of corporations that are not otherwise a unitary group may elect to file a
474 water's edge combined report if each member of the group is:
475 (i) doing business in Utah;
476 (ii) part of the same affiliated group; and
477 (iii) qualified, under Section 1501, Internal Revenue Code, to file a federal
478 consolidated return.
479 (b) Each corporation within the affiliated group that is doing business in Utah must
480 consent to filing a combined report. If an affiliated group elects to file a combined report, each
481 corporation within the affiliated group that is doing business in Utah must file a combined
482 report.
483 (c) Corporations that elect to file a water's edge combined report under this section may
484 not thereafter elect to file a separate return without the consent of the commission.
485 Section 4. Section 59-10-103 is amended to read:
486 59-10-103. Definitions.
487 (1) As used in this chapter:
488 (a) (i) "Adjusted gross income":
489 [
490 term is defined in Section 62, Internal Revenue Code; or
491 [
492 Internal Revenue Code.
493 (ii) "Adjusted gross income" does not include:
494 (A) income received from a loan forgiven in accordance with 15 U.S.C. Sec. 636(a)
495 (36), to the extent that a deduction for the expenditures paid with the loan is disallowed, or a
496 similar paycheck protection loan that is authorized by the federal government, provided in
497 response to COVID-19, forgiven if the borrower meets the expenditure requirements, and
498 exempt from federal income tax, to the extent that a deduction for the expenditures paid with
499 the loan is disallowed; or
500 (B) an amount that an individual receives in accordance with Section 6428, Internal
501 Revenue Code, or an amount that an individual receives that is authorized by the federal
502 government as a tax credit for the 2020 tax year, provided in response to COVID-19, paid in
503 advance of the filing of the individual's 2020 federal income tax return, and exempt from
504 federal income tax.
505 (b) "Corporation" includes:
506 (i) an association;
507 (ii) a joint stock company; and
508 (iii) an insurance company.
509 (c) "COVID-19" means:
510 (i) the severe acute respiratory syndrome coronavirus 2; or
511 (ii) the disease caused by severe acute respiratory syndrome coronavirus 2.
512 [
513 defined in Section 643, Internal Revenue Code.
514 [
515 59-10-401.
516 [
517 59-10-401.
518 [
519 (i) for a resident or nonresident individual, means taxable income as defined by Section
520 63, Internal Revenue Code; or
521 (ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
522 (b), Internal Revenue Code.
523 [
524 (i) a guardian;
525 (ii) a trustee;
526 (iii) an executor;
527 (iv) an administrator;
528 (v) a receiver;
529 (vi) a conservator; or
530 (vii) any person acting in any fiduciary capacity for any individual.
531 [
532 defined in 26 C.F.R. Sec. 1.170A-6(c)(2).
533 [
534 the homesteaded land that was held to have been diminished from the Uintah and Ouray
535 Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
536 [
537 [
538 terminate all or part of the trust without the consent of a person who has a substantial beneficial
539 interest in the trust and the interest would be adversely affected by the exercise of the settlor's
540 power to revoke or terminate all or part of the trust.
541 [
542 Pub. L. No. 108-189, Sec. 101.
543 [
544 state.
545 [
546 a resident estate or trust.
547 [
548 unincorporated organization:
549 (A) through or by means of which any business, financial operation, or venture is
550 carried on; and
551 (B) [
552 corporation.
553 [
554 [
555 [
556 (ii) "Partnership" does not include any organization not included under the definition of
557 "partnership" in Section 761, Internal Revenue Code.
558 (iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
559 organization described in Subsection (1)[
560 [
561 (i) that is irrevocable;
562 (ii) that has a trust term measured by:
563 (A) a fixed term of years; or
564 (B) the life of a person living on the day on which the trust is created;
565 (iii) under which:
566 (A) a portion of the value of the trust assets is distributed during the trust term:
567 (I) to an organization described in Section 170(c), Internal Revenue Code; and
568 (II) as a[
569 [
570 [
571 (B) assets remaining in the trust at the termination of the trust term are distributed to a
572 beneficiary:
573 (I) designated in the trust; and
574 (II) that is not an organization described in Section 170(c), Internal Revenue Code;
575 (iv) for which the trust is allowed a deduction under Section 642(c), Internal Revenue
576 Code; and
577 (v) under which the grantor of the trust is not treated as the owner of any portion of the
578 trust for federal income tax purposes.
579 [
580 any period of time during the taxable year, but only for the duration of the period during which
581 the individual is domiciled in this state.
582 [
583 is defined in Section 75-7-103.
584 [
585 L. No. 108-189, Sec. 101.
586 [
587 percentage equal to a nonresident estate's or trust's state taxable income for the taxable year
588 divided by the nonresident estate's or trust's total adjusted gross income for that taxable year
589 after making the adjustments required by:
590 (i) Section 59-10-202;
591 (ii) Section 59-10-207;
592 (iii) Section 59-10-209.1; or
593 (iv) Section 59-10-210.
594 [
595 equal to a nonresident individual's state taxable income for the taxable year divided by the
596 difference between:
597 (i) subject to Section 59-10-1405, the nonresident individual's total adjusted gross
598 income for that taxable year, after making the:
599 (A) additions and subtractions required by Section 59-10-114; and
600 (B) adjustments required by Section 59-10-115; and
601 (ii) if the nonresident individual described in Subsection (1)[
602 servicemember, the compensation the servicemember receives for military service if the
603 servicemember is serving in compliance with military orders.
604 [
605 taxable year, a fraction:
606 (i) the numerator of which is the sum of:
607 (A) subject to Section 59-10-1404.5, for the time period during the taxable year that the
608 part-year resident individual is a resident, the part-year resident individual's total adjusted gross
609 income for that time period, after making the:
610 (I) additions and subtractions required by Section 59-10-114; and
611 (II) adjustments required by Section 59-10-115; and
612 (B) for the time period during the taxable year that the part-year resident individual is a
613 nonresident, an amount calculated by:
614 (I) determining the part-year resident individual's adjusted gross income for that time
615 period, after making the:
616 (Aa) additions and subtractions required by Section 59-10-114; and
617 (Bb) adjustments required by Section 59-10-115; and
618 (II) calculating the portion of the amount determined under Subsection
619 (1)[
620 and
621 (ii) the denominator of which is the difference between:
622 (A) the part-year resident individual's total adjusted gross income for that taxable year,
623 after making the:
624 (I) additions and subtractions required by Section 59-10-114; and
625 (II) adjustments required by Section 59-10-115; and
626 (B) if the part-year resident individual is a servicemember, any compensation the
627 servicemember receives for military service during the portion of the taxable year that the
628 servicemember is a nonresident if the servicemember is serving in compliance with military
629 orders.
630 [
631 (i) subject to Section 59-10-1404.5, for a resident individual, means the resident
632 individual's adjusted gross income after making the:
633 (A) additions and subtractions required by Section 59-10-114; and
634 (B) adjustments required by Section 59-10-115;
635 (ii) for a nonresident individual, is an amount calculated by:
636 (A) determining the nonresident individual's adjusted gross income for the taxable
637 year, after making the:
638 (I) additions and subtractions required by Section 59-10-114; and
639 (II) adjustments required by Section 59-10-115; and
640 (B) calculating the portion of the amount determined under Subsection
641 (1)[
642 (iii) for a resident estate or trust, is as calculated under Section 59-10-201.1; and
643 (iv) for a nonresident estate or trust, is as calculated under Section 59-10-204.
644 [
645 trust, that has income subject in whole or part to the tax imposed by this chapter.
646 [
647 (i) beginning on the day on which a qualified nongrantor charitable lead trust is
648 created; and
649 (ii) ending on the day on which the qualified nongrantor charitable lead trust described
650 in Subsection (1)[
651 [
652 included within the Uintah and Ouray Reservation in:
653 (i) Hagen v. Utah, 510 U.S. 399 (1994); and
654 (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
655 [
656 (i) the total income required to be reported by a resident or nonresident estate or trust
657 on the resident or nonresident estate's or trust's federal income tax return for estates and trusts
658 for the taxable year; and
659 (ii) the sum of the following:
660 (A) fees paid or incurred to the fiduciary of a resident or nonresident estate or trust:
661 (I) for administering the resident or nonresident estate or trust; and
662 (II) that the resident or nonresident estate or trust deducts as allowed on the resident or
663 nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
664 year;
665 (B) the income distribution deduction that a resident or nonresident estate or trust
666 deducts under Section 651 or 661, Internal Revenue Code, as allowed on the resident or
667 nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
668 year;
669 (C) the amount that a resident or nonresident estate or trust deducts as a deduction for
670 estate tax or generation skipping transfer tax under Section 691(c), Internal Revenue Code, as
671 allowed on the resident or nonresident estate's or trust's federal income tax return for estates
672 and trusts for the taxable year; and
673 (D) the amount that a resident or nonresident estate or trust deducts as a personal
674 exemption under Section 642(b), Internal Revenue Code, as allowed on the resident or
675 nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
676 year.
677 [
678 26 C.F.R. Sec. 1.170A-6(c)(2).
679 [
680 member of the Ute Indian Tribe of the Uintah and Ouray Reservation.
681 [
682 Reservation.
683 [
684 59-10-401.
685 (2) (a) Any term used in this chapter has the same meaning as when used in
686 comparable context in the laws of the United States relating to federal income taxes unless a
687 different meaning is clearly required.
688 (b) Any reference to the Internal Revenue Code or to the laws of the United States shall
689 mean the Internal Revenue Code or other provisions of the laws of the United States relating to
690 federal income taxes that are in effect for the taxable year.
691 (c) Any reference to a specific section of the Internal Revenue Code or other provision
692 of the laws of the United States relating to federal income taxes shall include any
693 corresponding or comparable provisions of the Internal Revenue Code as amended,
694 redesignated, or reenacted.
695 Section 5. Section 59-10-114 is amended to read:
696 59-10-114. Additions to and subtractions from adjusted gross income of an
697 individual.
698 (1) There shall be added to adjusted gross income of a resident or nonresident
699 individual:
700 (a) a lump sum distribution that the taxpayer does not include in adjusted gross income
701 on the taxpayer's federal individual income tax return for the taxable year;
702 (b) the amount of a child's income calculated under Subsection (4) that:
703 (i) a parent elects to report on the parent's federal individual income tax return for the
704 taxable year; and
705 (ii) the parent does not include in adjusted gross income on the parent's federal
706 individual income tax return for the taxable year;
707 (c) (i) a withdrawal from a medical care savings account and any penalty imposed for
708 the taxable year if:
709 (A) the resident or nonresident individual does not deduct the amounts on the resident
710 or nonresident individual's federal individual income tax return under Section 220, Internal
711 Revenue Code;
712 (B) the withdrawal is subject to Subsections 31A-32a-105(1) and (2); and
713 (C) the withdrawal is subtracted on, or used as the basis for claiming a tax credit on, a
714 return the resident or nonresident individual files under this chapter;
715 (ii) a disbursement required to be added to adjusted gross income in accordance with
716 Subsection 31A-32a-105(3); or
717 (iii) an amount required to be added to adjusted gross income in accordance with
718 Subsection 31A-32a-105(5)(c);
719 (d) the amount withdrawn under Title 53B, Chapter 8a, Utah Educational Savings Plan,
720 from the account of a resident or nonresident individual who is an account owner as defined in
721 Section 53B-8a-102, for the taxable year for which the amount is withdrawn, if that amount
722 withdrawn from the account of the resident or nonresident individual who is the account
723 owner:
724 (i) is not expended for:
725 (A) higher education costs as defined in Section 53B-8a-102.5; or
726 (B) a payment or distribution that qualifies as an exception to the additional tax for
727 distributions not used for educational expenses provided in Sections 529(c) and 530(d),
728 Internal Revenue Code; and
729 (ii) is:
730 (A) subtracted by the resident or nonresident individual:
731 (I) who is the account owner; and
732 (II) on the resident or nonresident individual's return filed under this chapter for a
733 taxable year beginning on or before December 31, 2007; or
734 (B) used as the basis for the resident or nonresident individual who is the account
735 owner to claim a tax credit under Section 59-10-1017;
736 (e) except as provided in Subsection (5), for bonds, notes, and other evidences of
737 indebtedness acquired on or after January 1, 2003, the interest from bonds, notes, and other
738 evidences of indebtedness:
739 (i) issued by one or more of the following entities:
740 (A) a state other than this state;
741 (B) the District of Columbia;
742 (C) a political subdivision of a state other than this state; or
743 (D) an agency or instrumentality of an entity described in Subsections (1)(e)(i)(A)
744 through (C); and
745 (ii) to the extent the interest is not included in adjusted gross income on the taxpayer's
746 federal income tax return for the taxable year;
747 (f) subject to Subsection (2)(c), any distribution received by a resident beneficiary of a
748 resident trust of income that was taxed at the trust level for federal tax purposes, but was
749 subtracted from state taxable income of the trust pursuant to Subsection 59-10-202(2)(b);
750 (g) any distribution received by a resident beneficiary of a nonresident trust of
751 undistributed distributable net income realized by the trust on or after January 1, 2004, if that
752 undistributed distributable net income was taxed at the trust level for federal tax purposes, but
753 was not taxed at the trust level by any state, with undistributed distributable net income
754 considered to be distributed from the most recently accumulated undistributed distributable net
755 income; and
756 (h) any adoption expense:
757 (i) for which a resident or nonresident individual receives reimbursement from another
758 person; and
759 (ii) to the extent to which the resident or nonresident individual subtracts that adoption
760 expense:
761 (A) on a return filed under this chapter for a taxable year beginning on or before
762 December 31, 2007; or
763 (B) from federal taxable income on a federal individual income tax return.
764 (2) There shall be subtracted from adjusted gross income of a resident or nonresident
765 individual:
766 (a) the difference between:
767 (i) the interest or a dividend on an obligation or security of the United States or an
768 authority, commission, instrumentality, or possession of the United States, to the extent that
769 interest or dividend is:
770 (A) included in adjusted gross income for federal income tax purposes for the taxable
771 year; and
772 (B) exempt from state income taxes under the laws of the United States; and
773 (ii) any interest on indebtedness incurred or continued to purchase or carry the
774 obligation or security described in Subsection (2)(a)(i);
775 (b) for taxable years beginning on or after January 1, 2000, if the conditions of
776 Subsection (3)(a) are met, the amount of income derived by a Ute tribal member:
777 (i) during a time period that the Ute tribal member resides on homesteaded land
778 diminished from the Uintah and Ouray Reservation; and
779 (ii) from a source within the Uintah and Ouray Reservation;
780 (c) an amount received by a resident or nonresident individual or distribution received
781 by a resident or nonresident beneficiary of a resident trust:
782 (i) if that amount or distribution constitutes a refund of taxes imposed by:
783 (A) a state; or
784 (B) the District of Columbia; and
785 (ii) to the extent that amount or distribution is included in adjusted gross income for
786 that taxable year on the federal individual income tax return of the resident or nonresident
787 individual or resident or nonresident beneficiary of a resident trust;
788 (d) the amount of a railroad retirement benefit:
789 (i) paid:
790 (A) in accordance with The Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
791 seq.;
792 (B) to a resident or nonresident individual; and
793 (C) for the taxable year; and
794 (ii) to the extent that railroad retirement benefit is included in adjusted gross income on
795 that resident or nonresident individual's federal individual income tax return for that taxable
796 year;
797 (e) an amount:
798 (i) received by an enrolled member of an American Indian tribe; and
799 (ii) to the extent that the state is not authorized or permitted to impose a tax under this
800 part on that amount in accordance with:
801 (A) federal law;
802 (B) a treaty; or
803 (C) a final decision issued by a court of competent jurisdiction;
804 (f) an amount received:
805 (i) for the interest on a bond, note, or other obligation issued by an entity for which
806 state statute provides an exemption of interest on its bonds from state individual income tax;
807 (ii) by a resident or nonresident individual;
808 (iii) for the taxable year; and
809 (iv) to the extent the amount is included in adjusted gross income on the taxpayer's
810 federal income tax return for the taxable year;
811 (g) the amount of all income, including income apportioned to another state, of a
812 nonmilitary spouse of an active duty military member if:
813 (i) both the nonmilitary spouse and the active duty military member are nonresident
814 individuals;
815 (ii) the active duty military member is stationed in Utah;
816 (iii) the nonmilitary spouse is subject to the residency provisions of 50 U.S.C. Sec.
817 4001(a)(2); and
818 (iv) the income is included in adjusted gross income for federal income tax purposes
819 for the taxable year;
820 (h) for a taxable year beginning on or after January 1, 2019, but beginning on or before
821 December 31, 2019, only:
822 (i) the amount of any FDIC premium paid or incurred by the taxpayer that is
823 disallowed as a deduction for federal income tax purposes under Section 162(r), Internal
824 Revenue Code, on the taxpayer's 2018 federal income tax return; plus
825 (ii) the amount of any FDIC premium paid or incurred by the taxpayer that is
826 disallowed as a deduction for federal income tax purposes under Section 162(r), Internal
827 Revenue Code, for the taxable year;
828 (i) for a taxable year beginning on or after January 1, 2020, the amount of any FDIC
829 premium paid or incurred by the taxpayer that is disallowed as a deduction for federal income
830 tax purposes under Section 162(r), Internal Revenue Code, for the taxable year; and
831 (j) for a taxable year beginning on or after January 1, 2020, but beginning on or before
832 December 31, 2020, the amount [
833 (i) of a paycheck protection loan similar to a loan forgiven in accordance with 15
834 U.S.C. Sec. 636(a)(36) that is:
835 (A) authorized by the federal government;
836 (B) provided in response to COVID-19;
837 (C) forgiven if the borrower meets the expenditure requirements; and
838 (D) subject to federal income tax, to the extent that a deduction for the expenditures
839 paid with the loan is disallowed;
840 (ii) that a resident or a nonresident individual receives that is:
841 (A) authorized by the federal government as a tax credit for the 2020 tax year;
842 (B) provided in response to COVID-19;
843 (C) paid in advance of the filing of the individual's 2020 federal income tax return; and
844 (D) subject to federal income tax; and
845 (iii) of any grant funds [
846
847
848
849 (A) the resident or nonresident individual receives from the state, a county within the
850 state, or a municipality within the state in response to COVID-19;
851 (B) are funded by using federal revenue received by the state, the county, or the
852 municipality to respond to COVID-19; and
853 (C) are included in adjusted gross income.
854 (3) (a) A subtraction for an amount described in Subsection (2)(b) is allowed only if:
855 (i) the taxpayer is a Ute tribal member; and
856 (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
857 requirements of this Subsection (3).
858 (b) The agreement described in Subsection (3)(a):
859 (i) may not:
860 (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
861 (B) provide a subtraction under this section greater than or different from the
862 subtraction described in Subsection (2)(b); or
863 (C) affect the power of the state to establish rates of taxation; and
864 (ii) shall:
865 (A) provide for the implementation of the subtraction described in Subsection (2)(b);
866 (B) be in writing;
867 (C) be signed by:
868 (I) the governor; and
869 (II) the chair of the Business Committee of the Ute tribe;
870 (D) be conditioned on obtaining any approval required by federal law; and
871 (E) state the effective date of the agreement.
872 (c) (i) The governor shall report to the commission by no later than February 1 of each
873 year regarding whether or not an agreement meeting the requirements of this Subsection (3) is
874 in effect.
875 (ii) If an agreement meeting the requirements of this Subsection (3) is terminated, the
876 subtraction permitted under Subsection (2)(b) is not allowed for taxable years beginning on or
877 after the January 1 following the termination of the agreement.
878 (d) For purposes of Subsection (2)(b) and in accordance with Title 63G, Chapter 3,
879 Utah Administrative Rulemaking Act, the commission may make rules:
880 (i) for determining whether income is derived from a source within the Uintah and
881 Ouray Reservation; and
882 (ii) that are substantially similar to how adjusted gross income derived from Utah
883 sources is determined under Section 59-10-117.
884 (4) (a) For purposes of this Subsection (4), "Form 8814" means:
885 (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
886 Interest and Dividends; or
887 (ii) (A) a form designated by the commission in accordance with Subsection
888 (4)(a)(ii)(B) as being substantially similar to 2000 Form 8814 if for purposes of federal
889 individual income taxes the information contained on 2000 Form 8814 is reported on a form
890 other than Form 8814; and
891 (B) for purposes of Subsection (4)(a)(ii)(A) and in accordance with Title 63G, Chapter
892 3, Utah Administrative Rulemaking Act, the commission may make rules designating a form as
893 being substantially similar to 2000 Form 8814 if for purposes of federal individual income
894 taxes the information contained on 2000 Form 8814 is reported on a form other than Form
895 8814.
896 (b) The amount of a child's income added to adjusted gross income under Subsection
897 (1)(b) is equal to the difference between:
898 (i) the lesser of:
899 (A) the base amount specified on Form 8814; and
900 (B) the sum of the following reported on Form 8814:
901 (I) the child's taxable interest;
902 (II) the child's ordinary dividends; and
903 (III) the child's capital gain distributions; and
904 (ii) the amount not taxed that is specified on Form 8814.
905 (5) Notwithstanding Subsection (1)(e), interest from bonds, notes, and other evidences
906 of indebtedness issued by an entity described in Subsections (1)(e)(i)(A) through (D) may not
907 be added to adjusted gross income of a resident or nonresident individual if, as annually
908 determined by the commission:
909 (a) for an entity described in Subsection (1)(e)(i)(A) or (B), the entity and all of the
910 political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
911 income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
912 (b) for an entity described in Subsection (1)(e)(i)(C) or (D), the following do not
913 impose a tax based on income on any part of the bonds, notes, and other evidences of
914 indebtedness of this state:
915 (i) the entity; or
916 (ii) (A) the state in which the entity is located; or
917 (B) the District of Columbia, if the entity is located within the District of Columbia.
918 Section 6. Effective date.
919 If approved by two-thirds of all the members elected to each house, this bill takes effect
920 upon approval by the governor, or the day following the constitutional time limit of Utah
921 Constitution, Article VII, Section 8, without the governor's signature, or in the case of a veto,
922 the date of veto override.
923 Section 7. Retrospective operation.
924 This bill has retrospective operation for a taxable year beginning on or after January 1,
925 2020.