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