2
3
4
5
6
7 LONG TITLE
8 General Description:
9 This bill addresses the tax liability and withholding requirements for a nonresident
10 individual earning wages in the state.
11 Highlighted Provisions:
12 This bill:
13 ▸ creates an exemption from income tax if a nonresident individual works in the state
14 for 20 or fewer days during a taxable year and provides the circumstances for
15 qualification;
16 ▸ modifies the employer's withholding obligations, including penalties, for a
17 nonresident individual whose wages are exempt from income tax; and
18 ▸ makes technical changes.
19 Money Appropriated in this Bill:
20 None
21 Other Special Clauses:
22 This bill provides a special effective date.
23 Utah Code Sections Affected:
24 AMENDS:
25 59-10-116, as last amended by Laws of Utah 2008, Chapters 382 and 389
26 59-10-117, as last amended by Laws of Utah 2020, Chapter 239
27 59-10-402, as last amended by Laws of Utah 2020, Chapter 239
28 59-10-405.5, as last amended by Laws of Utah 2021, Chapter 16
29 ENACTS:
30 59-10-117.5, Utah Code Annotated 1953
31
32 Be it enacted by the Legislature of the state of Utah:
33 Section 1. Section 59-10-116 is amended to read:
34 59-10-116. Tax on nonresident individual -- Calculation -- Exemption.
35 (1) Except as provided in Subsection (2), a tax is imposed on a nonresident individual
36 in an amount equal to the product of the:
37 (a) nonresident individual's state taxable income; and
38 (b) percentage listed in Subsection 59-10-104(2).
39 (2) This section does not apply to a nonresident individual:
40 (a) exempt from taxation under Section 59-10-104.1[
41 (b) whose only state source income is wages that are excluded in accordance with
42 Section 59-10-117.5.
43 Section 2. Section 59-10-117 is amended to read:
44 59-10-117. State taxable income derived from Utah sources.
45 (1) For purposes of Section 59-10-116, state taxable income derived from Utah sources
46 includes state taxable income attributable to or resulting from:
47 (a) the ownership in this state of any interest in real or tangible personal property,
48 including real property or property rights from which gross income from mining as described
49 by Section 613(c), Internal Revenue Code, is derived;
50 (b) the carrying on of a business, trade, profession, or occupation in this state;
51 (c) an addition to adjusted gross income required by Subsection 59-10-114(1)(c), (d),
52 or (h) to the extent that the addition was previously subtracted from state taxable income;
53 (d) a subtraction from adjusted gross income required by Subsection 59-10-114(2)(c)
54 for a refund described in Subsection 59-10-114(2)(c) to the extent that the refund subtracted is
55 related to a tax imposed by this state; or
56 (e) an adjustment to adjusted gross income required by Section 59-10-115 to the extent
57 the adjustment is related to an item described in Subsections (1)(a) through (d).
58 (2) For purposes of Subsection (1):
59 (a) income from intangible personal property, including annuities, dividends, interest,
60 and gains from the disposition of intangible personal property, shall constitute income derived
61 from Utah sources only to the extent that the income is from property employed in a trade,
62 business, profession, or occupation carried on in this state;
63 (b) a deduction with respect to a capital loss, net long-term capital gain, or net
64 operating loss shall be:
65 (i) based solely on income, gain, loss, and deduction connected with Utah sources,
66 under rules prescribed by the commission in accordance with Title 63G, Chapter 3, Utah
67 Administrative Rulemaking Act; and
68 (ii) otherwise determined in the same manner as the corresponding federal deductions;
69 (c) a salary, wage, commission, or compensation for personal services rendered:
70 (i) subject to Section 59-10-117.5, inside this state is considered to be income derived
71 from Utah sources; and
72 (ii) outside this state may not be considered to be income derived from Utah sources;
73 (d) a share of income, gain, loss, deduction, or credit of a nonresident pass-through
74 entity taxpayer, as defined in Section 59-10-1402, derived from or connected with Utah sources
75 shall be determined in accordance with Section 59-10-118;
76 (e) a nonresident, other than a dealer holding property primarily for sale to customers
77 in the ordinary course of the dealer's trade or business, may not be considered to carry on a
78 trade, business, profession, or occupation in this state solely by reason of the purchase or sale
79 of property for the nonresident's own account;
80 (f) if a trade, business, profession, or occupation is carried on partly within and partly
81 without this state:
82 (i) an item of income, gain, loss, or a deduction derived from or connected with Utah
83 sources shall be determined in accordance with Section 59-10-118; and
84 (ii) a salary, a wage, a commission, or compensation for personal services rendered is
85 not considered to be an item of income from the carrying on of a business, trade, profession, or
86 occupation;
87 (g) the share of a nonresident estate or trust or a nonresident beneficiary of any estate
88 or trust in income, gain, loss, or deduction derived from or connected with Utah sources shall
89 be determined under Section 59-10-207; and
90 (h) any dividend, interest, or distributive share of income, gain, or loss from a real
91 estate investment trust, as defined in Section 59-7-101, distributed or allocated to a nonresident
92 investor in the trust, including any shareholder, beneficiary, or owner of a beneficial interest in
93 the trust, shall:
94 (i) be income from intangible personal property under Subsection (2)(a); and
95 (ii) constitute income derived from Utah sources only to the extent the nonresident
96 investor is employing its beneficial interest in the trust in a trade, business, profession, or
97 occupation carried on by the investor in this state.
98 Section 3. Section 59-10-117.5 is enacted to read:
99 59-10-117.5. Nonresident individual wage exemption.
100 (1) As used in this section:
101 (a) "Day" means any period of time during a calendar day that an individual is present
102 in the state, unless the presence is solely for transportation through the state.
103 (b) "Wages" means income that:
104 (i) is received by an individual for employment duties performed inside this state; and
105 (ii) would be subject to withholding in accordance with Section 59-10-402 without
106 regard to Subsection 59-10-402(5)(a).
107 (2) A nonresident individual's wages may not be considered income derived from Utah
108 sources if:
109 (a) the nonresident individual has no other income from sources within this state for
110 the taxable year in which the nonresident individual receives the wages;
111 (b) the nonresident individual is present in this state to perform employment duties for
112 20 or fewer days during the tax year; and
113 (c) the nonresident individual's state of residence:
114 (i) provides a substantially similar exclusion; or
115 (ii) does not impose a state individual income tax.
116 (3) This section does not apply to wages received by:
117 (a) an individual who is a professional athlete or a member of a professional athletic
118 team;
119 (b) an individual who is a professional entertainer and who performs services in the
120 professional performing arts;
121 (c) an individual of prominence who performs services for wages on a per-event basis;
122 (d) an individual who performs construction services to improve real property,
123 predominantly on a construction site, as a laborer;
124 (e) an individual who is a key employee, without regard to ownership or the existence
125 of a benefit plan, for the year immediately preceding the current tax year pursuant to
126 Subsection 416(i), Internal Revenue Code; or
127 (f) an individual who is an employee of a non-corporate employer, and who would be a
128 key employee without regard to ownership or the existence of a benefit plan, for the year
129 immediately preceding the current tax year pursuant to Subsection 416(i), Internal Revenue
130 Code, if:
131 (i) the term "employee" were substituted for the term "officer"; and
132 (ii) the individual is one of the non-corporate employer's 50 highest paid employees
133 without regard to whether the individual is an officer.
134 Section 4. Section 59-10-402 is amended to read:
135 59-10-402. Requirement of withholding -- Exceptions.
136 (1) As used in this section:
137 (a) "Day" means any period of time during a calendar day that an individual is present
138 in the state, unless the presence is solely for transportation through the state.
139 (b) "Related entity" means:
140 (i) a stockholder who is an individual, or a member of the stockholder's family as
141 described in Section 318, Internal Revenue Code, if the stockholder and the members of the
142 stockholder's family own, in the aggregate, at least 50% of the value of the nonresident
143 individual's outstanding stock;
144 (ii) a stockholder, or a stockholder's partnership, limited liability company, estate, trust,
145 or corporation, if the stockholder and the stockholder's partnerships, limited liability
146 companies, estates, trusts, or corporations own, in the aggregate, at least 50% of the value of
147 the nonresident individual's outstanding stock; or
148 (iii) a corporation, or a party related to the corporation in a manner that would require
149 an attribution of stock from the corporation to the party or from the party to the corporation
150 under the attribution rules of the Internal Revenue Code if the taxpayer owns, directly,
151 indirectly, beneficially, or constructively, at least 50% of the value of the corporation's
152 outstanding stock.
153 (c) "Related person" means a person that, with respect to the nonresident individual
154 during all or any portion of the taxable year, is:
155 (i) a related entity;
156 (ii) a component member as defined in Subsection 1563(b), Internal Revenue Code;
157 (iii) a person to or from whom there is attribution of stock ownership in accordance
158 with Subsection 1563(e), Internal Revenue Code; or
159 (iv) a person that, notwithstanding the form of organization, bears the same
160 relationship to the nonresident individual as a person described in Subsection (1)(c)(i), (ii), or
161 (iii).
162 (2) For purposes of determining whether the ownership requirements of a related entity
163 are satisfied, a person shall:
164 (a) use the attribution rules of the Internal Revenue Code; and
165 (b) include direct, indirect, beneficial, or constructive ownership.
166 [
167 wages an amount to be determined by a commission rule [
168 possible, pay the income tax imposed by this chapter.
169 [
170 within the state for a period not to exceed 60 days in the aggregate during any calendar year
171 may be relieved from the requirement provided for under this part for such period by furnishing
172 to the commission in advance a certificate so certifying.
173 [
174 business within the state for a period in excess of 60 days, that employer shall be liable for all
175 the tax that the employer would have been required to deduct and withhold.
176 [
177 for a period of not to exceed 30 days the time during which the employer is not required to
178 deduct and withhold the tax.
179 [
180
181
182 (5) (a) (i) An employer described in Subsection (3) may not deduct or withhold any
183 amount from wages paid to a nonresident individual if the nonresident individual's wages are
184 excluded from state source income in accordance with Section 59-10-117.5 without regard to
185 Subsection 59-10-117.5(2)(a).
186 (ii) For purposes of Subsection (5)(a)(i), an employer shall calculate the number of
187 days described in Subsection 59-10-117.5(2)(b) by including the days the nonresident
188 employee is present in the state to perform employment duties on behalf of the employer or any
189 related person.
190 (b) If a nonresident individual is present in this state to perform employment duties for
191 the employer, a related person, or a combination of the employer and a related person for more
192 than 20 days during a calendar year, the employer shall be liable for all the tax that the
193 employer would have been required to deduct and withhold.
194 (6) The exceptions described in Subsections (4)(a) and (5)(a) are from the withholding
195 requirement described in Subsection (3), not from an individual's obligation to pay income
196 taxes as provided in Part 1, Determination and Reporting of Tax Liability and Information.
197 [
198 the income as a credit against the tax imposed by this chapter.
199 (b) Except as provided in Subsection [
200 calendar year shall be allowed as a credit for the taxable year that begins in the calendar year in
201 which the amount is withheld.
202 (c) If more than one taxable year begins in a calendar year, the withheld amount shall
203 be allowed as a credit for the last taxable year that begins in the calendar year in which the
204 amount is withheld.
205 Section 5. Section 59-10-405.5 is amended to read:
206 59-10-405.5. Definitions -- Withholding tax license requirements -- Penalty --
207 Application process and requirements -- Fee not required -- Bonds -- Exception.
208 (1) As used in this section:
209 (a) [
210 (i) is required by this section to obtain a license; and
211 (ii) submits an application:
212 (A) to the commission; and
213 (B) for a license under this section[
214 (b) [
215 section[
216 (c) [
217 (i) is required to collect, truthfully account for, and pay over an amount under this part
218 for an applicant; and
219 (ii) (A) is a corporate officer of the applicant described in Subsection (1)(c)(i);
220 (B) is a director of the applicant described in Subsection (1)(c)(i);
221 (C) is an employee of the applicant described in Subsection (1)(c)(i);
222 (D) is a partner of the applicant described in Subsection (1)(c)(i);
223 (E) is a trustee of the applicant described in Subsection (1)(c)(i); or
224 (F) has a relationship to the applicant described in Subsection (1)(c)(i) that is similar to
225 a relationship described in Subsections (1)(c)(ii)(A) through (E) as determined by the
226 commission by rule made in accordance with Title 63G, Chapter 3, Utah Administrative
227 Rulemaking Act[
228 (d) [
229 (i) is required to collect, truthfully account for, and pay over an amount under this part
230 for a licensee; and
231 (ii) (A) is a corporate officer of the licensee described in Subsection (1)(d)(i);
232 (B) is a director of the licensee described in Subsection (1)(d)(i);
233 (C) is an employee of the licensee described in Subsection (1)(d)(i);
234 (D) is a partner of the licensee described in Subsection (1)(d)(i);
235 (E) is a trustee of the licensee described in Subsection (1)(d)(i); or
236 (F) has a relationship to the licensee described in Subsection (1)(d)(i) that is similar to
237 a relationship described in Subsections (1)(d)(ii)(A) through (E) as determined by the
238 commission by rule made in accordance with Title 63G, Chapter 3, Utah Administrative
239 Rulemaking Act[
240 (e) [
241 (f) [
242 commission.
243 (2) The following persons are guilty of a criminal violation as provided in Section
244 59-1-401:
245 (a) a person that:
246 (i) is required to withhold, report, or remit any amounts under this part; and
247 (ii) engages in business within the state before obtaining a license under this section; or
248 (b) a person that:
249 (i) pays wages under this part; and
250 (ii) engages in business within the state before obtaining a license under this section.
251 (3) The license described in Subsection (2):
252 (a) shall be granted and issued:
253 (i) by the commission in accordance with this section;
254 (ii) without a license fee; and
255 (iii) if:
256 (A) an applicant:
257 (I) states the applicant's name and address in the application; and
258 (II) provides other information in the application that the commission may require; and
259 (B) the person meets the requirements of this section to be granted a license as
260 determined by the commission;
261 (b) may not be assigned to another person; and
262 (c) is valid:
263 (i) only for the person named on the license; and
264 (ii) until:
265 (A) the person described in Subsection (3)(c)(i):
266 (I) ceases to do business; or
267 (II) changes that person's business address; or
268 (B) the commission revokes the license.
269 (4) The commission shall review an application and determine whether:
270 (a) the applicant meets the requirements of this section to be issued a license; and
271 (b) a bond is required to be posted with the commission in accordance with
272 Subsections (5) and (6) before the applicant may be issued a license.
273 (5) (a) Except as provided in Subsection (5)(c), an applicant shall post a bond with the
274 commission before the commission may issue the applicant a license if:
275 (i) a license under this section was revoked for a delinquency under this part for:
276 (A) the applicant;
277 (B) a fiduciary of the applicant; or
278 (C) a person for which the applicant or the fiduciary of the applicant is required to
279 collect, truthfully account for, and pay over an amount under this part; or
280 (ii) there is a delinquency in withholding, reporting, or remitting any amount under this
281 part for:
282 (A) an applicant;
283 (B) a fiduciary of the applicant; or
284 (C) a person for which the applicant or the fiduciary of the applicant is required to
285 collect, truthfully account for, and pay over an amount under this part.
286 (b) If the commission determines it is necessary to ensure compliance with this part,
287 the commission may require a licensee to:
288 (i) for a licensee that has not posted a bond under this section with the commission,
289 post a bond with the commission in accordance with Subsection (6); or
290 (ii) for a licensee that has posted a bond under this section with the commission,
291 increase the amount of the bond posted with the commission.
292 (c) The commission may waive the bond requirement described in Subsection (5)(a), if
293 the applicant is in compliance with a payment agreement that:
294 (i) relates to the delinquency; and
295 (ii) is approved by the commission.
296 (6) (a) A bond required by Subsection (5) shall be:
297 (i) executed by:
298 (A) for an applicant, the applicant as principal, with a corporate surety; or
299 (B) for a licensee, the licensee as principal, with a corporate surety; and
300 (ii) payable to the commission conditioned upon the faithful performance of all of the
301 requirements of this part including:
302 (A) the withholding or remitting of any amount under this part;
303 (B) the payment of any:
304 (I) penalty as provided in Section 59-1-401; or
305 (II) interest as provided in Section 59-1-402; or
306 (C) any other obligation of the[
307 [
308 [
309 (b) Except as provided in Subsection (6)(d), the commission shall calculate the amount
310 of a bond required by Subsection (5) on the basis of:
311 (i) commission estimates of:
312 (A) for an applicant, any amounts the applicant withholds, reports, or remits under this
313 part; or
314 (B) for a licensee, any amounts the licensee withholds, reports, or remits under this
315 part; and
316 (ii) any amount of a delinquency described in Subsection (6)(c).
317 (c) Except as provided in Subsection (6)(d), for purposes of Subsection (6)(b)(ii):
318 (i) for an applicant, the amount of the delinquency is the sum of:
319 (A) the amount of any delinquency that served as a basis for revoking the license under
320 this section of:
321 (I) the applicant;
322 (II) a fiduciary of the applicant; or
323 (III) a person for which the applicant or the fiduciary of the applicant is required to
324 collect, truthfully account for, and pay over an amount under this part; or
325 (B) the amount that any of the following owe under this part:
326 (I) the applicant;
327 (II) a fiduciary of the applicant; and
328 (III) a person for which the applicant or the fiduciary of the applicant is required to
329 collect, truthfully account for, and pay over an amount under this part; or
330 (ii) for a licensee, the amount of the delinquency is the sum of:
331 (A) the amount of any delinquency that served as a basis for revoking the license under
332 this section of:
333 (I) the licensee;
334 (II) a fiduciary of the licensee; or
335 (III) a person for which the licensee or the fiduciary of the licensee is required to
336 collect, truthfully account for, and pay over an amount under this part; or
337 (B) the amount that any of the following owe under this part:
338 (I) the licensee;
339 (II) a fiduciary of the licensee; and
340 (III) a person for which the licensee or the fiduciary of the licensee is required to
341 collect, truthfully account for, and pay over an amount under this part.
342 (d) Notwithstanding Subsection (6)(b) or (c), a bond required by Subsection (5) may
343 not:
344 (i) be less than $25,000; or
345 (ii) exceed $500,000.
346 (7) (a) The commission shall revoke a license under this section if:
347 (i) a licensee violates any provision of this part; and
348 (ii) before the commission revokes the license the commission provides the licensee:
349 (A) reasonable notice; and
350 (B) a hearing.
351 (b) If the commission revokes a licensee's license in accordance with Subsection (7)(a),
352 the commission may not issue another license to that licensee until that licensee complies with
353 the requirements of this part, including:
354 (i) paying any:
355 (A) amounts due under this part;
356 (B) penalty as provided in Section 59-1-401; or
357 (C) interest as provided in Section 59-1-402; and
358 (ii) posting a bond in accordance with Subsections (5) and (6).
359 (8) An employer that has erroneously applied the exception described in Subsection
360 59-10-402(5)(a) solely as a result of miscalculating the number of days a nonresident
361 individual is present in this state to perform employment duties may not be assessed a penalty
362 under this section if:
363 (a) the employer relied on a regularly maintained time and attendance system that:
364 (i) requires the employee to record, on a contemporaneous basis, the work location
365 each day the employee is present in a state other than:
366 (A) the employee's state of residence; or
367 (B) the place where services are considered performed for purposes of Section
368 35A-4-204; and
369 (ii) is used by the employer to allocate the employee's wages between all taxing
370 jurisdictions in which the employee performs employment duties;
371 (b) the employer does not maintain a time and attendance system described in
372 Subsection (8)(a) and relied on employee travel records that the employer requires the
373 employee to maintain and record on a regular and contemporaneous basis; or
374 (c) the employer does not maintain a time and attendance system described in
375 Subsection (8)(a) or require the maintenance of employee records described in Subsection
376 (8)(b) and relied on travel expense reimbursement records that the employer requires the
377 employee to submit on a regular and contemporaneous basis.
378 Section 6. Effective date.
379 This bill takes effect for a taxable year beginning on or after January 1, 2023.