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7 LONG TITLE
8 General Description:
9 This bill amends corporate franchise and income tax provisions related to Utah net loss.
10 Highlighted Provisions:
11 This bill:
12 ▸ clarifies the calculation of the 80% limitation on carrying forward a Utah net loss.
13 Money Appropriated in this Bill:
14 None
15 Other Special Clauses:
16 This bill provides retrospective operation.
17 Utah Code Sections Affected:
18 AMENDS:
19 59-7-110, as last amended by Laws of Utah 2020, Sixth Special Session, Chapter 10
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21 Be it enacted by the Legislature of the state of Utah:
22 Section 1. Section 59-7-110 is amended to read:
23 59-7-110. Utah net loss -- Carry forward -- Deduction.
24 (1) A taxpayer shall determine the amount of Utah net loss that the taxpayer may carry
25 forward to offset income of another taxable year as provided in this section.
26 (2) Subject to the other provisions of this section, a taxpayer:
27 (a) may carry forward a Utah net loss from a taxable year to a future taxable year; and
28 (b) may not carry back a Utah net loss from a taxable year.
29 (3) A taxpayer that carries forward a Utah net loss shall carry forward the Utah net loss
30 to the earliest eligible year for which the Utah taxable income before net loss deduction, minus
31 Utah net losses from previous years that a taxpayer applied or was required to apply to offset
32 income, is not less than zero.
33 (4) (a) Subject to Subsection (4)(b), the amount of Utah net loss that a taxpayer may
34 carry to the year identified in Subsection (3) is the lesser of:
35 (i) the remaining Utah net loss after deduction of any amounts of the Utah net loss that
36 a taxpayer carried to previous years; or
37 (ii) the remaining Utah taxable income before net loss deduction of the year identified
38 in Subsection (3) after deduction of Utah net losses from previous years that a taxpayer carried
39 or was required to carry to the year identified in Subsection (3).
40 (b) (i) For a taxable year beginning on or after January 1, 2021, the amount of Utah net
41 loss that a taxpayer may carry forward to a taxable year may not exceed 80% of Utah taxable
42 income computed without regard to the deduction [
43 net loss.
44 (ii) A taxpayer may carry a remaining Utah net loss to one or more taxable years in
45 accordance with this section.
46 (c) If the only Utah net loss that a taxpayer carries forward is from a taxable year that
47 began before January 1, 2018, the commission:
48 (i) shall instruct the taxpayer to calculate the 80% limitation described in Subsection
49 (4)(b) by following federal guidance for calculating the 80% taxable income limitation for
50 federal income tax purposes; or
51 (ii) if the commission determines that adequate federal corporate guidance on how to
52 calculate the 80% limitation is unavailable, may not apply the 80% limitation to the Utah net
53 loss.
54 (d) If a taxpayer carries forward a Utah net loss from a taxable year beginning before
55 January 1, 2018, and a Utah net loss from a taxable year beginning on or after January 1, 2018,
56 the commission shall instruct the taxpayer to calculate the 80% limitation described in
57 Subsection (4)(b) by:
58 (i) following federal guidance for calculating the 80% of taxable income limitation for
59 federal income tax purposes; or
60 (ii) if the commission determines that adequate federal corporate guidance on how to
61 calculate the 80% limitation is unavailable, by:
62 (A) calculating 80% of Utah taxable income before deducting any Utah net losses from
63 Utah taxable income; and
64 (B) applying the limitation that the Utah net loss that a taxpayer carries forward may
65 not exceed 80% of Utah taxable income to Utah net losses incurred on or after January 1, 2018,
66 without regard to Utah net losses from a previous taxable year that the taxpayer carries
67 forward.
68 (e) The commission shall:
69 (i) make a determination annually, on or before April 15 of the year after the taxable
70 year ends, about whether adequate federal corporate guidance on how to calculate the 80%
71 limitation is available; and
72 (ii) if the commission determines that adequate federal corporate guidance on how to
73 calculate the 80% limitation is unavailable, notify the Revenue and Taxation Interim
74 Committee, electronically before the next interim committee meeting, that the commission
75 intends to issue instructions in accordance with Subsection (4)(c)(ii) or (d)(ii).
76 (5) (a) (i) Subject to Subsection (5)(a)(ii), a corporation acquiring the assets or stock of
77 another corporation may not deduct any net loss incurred by the acquired corporation prior to
78 the date of acquisition.
79 (ii) Subsection (5)(a)(i) does not apply if the only change in the corporation is that of
80 the state of incorporation.
81 (b) An acquired corporation may deduct the acquired corporation's net losses incurred
82 before the date of acquisition against the acquired corporation's separate income as calculated
83 under Subsections (6) and (7) if the acquired corporation has continued to carry on a trade or
84 business substantially the same as that conducted before the acquisition.
85 (6) For purposes of Subsection (5)(b), the amount of net loss an acquired corporation
86 that is acquired by a unitary group may deduct is calculated by:
87 (a) subject to Subsection (7):
88 (i) except as provided in Subsection (6)(a)(ii), calculating the sum of:
89 (A) an amount determined by dividing the average value of the acquired corporation's
90 real and tangible personal property owned or rented and used in this state during the taxable
91 year by the average value of all of the unitary group's real and tangible personal property owned
92 or rented and used during the taxable year;
93 (B) an amount determined by dividing the total amount paid in this state during the
94 taxable year by the acquired corporation for compensation by the total compensation paid
95 everywhere by the unitary group during the taxable year; and
96 (C) an amount determined by:
97 (I) dividing the total sales of the acquired corporation in this state during the taxable
98 year by the total sales of the unitary group everywhere during the taxable year; and
99 (II) if the unitary group elects or is required to calculate the fraction for apportioning
100 business income to this state using the method described in Subsection 59-7-311(4) in taxable
101 year 2019 or taxable year 2020, multiplying the amount calculated under Subsection (6)
102 (a)(i)(C)(I) by , for the taxable year 2019, four, or, for the taxable year 2020, eight ; or
103 (ii) if the unitary group is required or elects to calculate the fraction for apportioning
104 business income to this state using the method described in Subsection 59-7-311(2), calculating
105 an amount determined by dividing the total sales of the acquired corporation in this state during
106 the taxable year by the total sales of the unitary group everywhere during the taxable year;
107 (b) dividing the amount calculated under Subsection (6)(a) by the same denominator of
108 the fraction the unitary group uses to apportion business income to this state for that taxable
109 year in accordance with Section 59-7-311;
110 (c) multiplying the amount calculated under Subsection (6)(b) by the business income
111 of the unitary group for the taxable year that is subject to apportionment under Section
112 59-7-311; and
113 (d) calculating the sum of:
114 (i) the amount calculated under Subsection (6)(c); and
115 (ii) the following amounts allocable to the acquired corporation for the taxable year:
116 (A) nonbusiness income allocable to this state; or
117 (B) nonbusiness loss allocable to this state.
118 (7) The amounts calculated under Subsection (6)(a) shall be derived in the same
119 manner as those amounts are derived for purposes of apportioning the unitary group's business
120 income before deducting the net loss, including a modification made in accordance with
121 Section 59-7-320.
122 Section 2. Retrospective operation.
123 This bill has retrospective operation for a taxable year beginning on or after January 1,
124 2021.