Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 233 First Substitute (2016GS)

Sponsor

Rep. Ray, P.

Final action

Governor Signed 3/18/2016

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• defines a term; and
• exempts from income tax certain military survivor benefits.

Every vote on this bill

Bill text

TAX EXEMPTION FOR MILITARY SURVIVOR BENEFITS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Paul Ray
Senate Sponsor: 
 Peter C. Knudson
LONG TITLE
General Description:
This bill exempts certain military survivor benefits from individual income tax.
Highlighted Provisions:
This bill:
▸ defines a term; and
▸ exempts from income tax certain military survivor benefits.
Money Appropriated in this Bill:
None
Other Special Clauses:
This bill provides a special effective date.
Utah Code Sections Affected:
AMENDS:
59-10-103
, as last amended by Laws of Utah 2010, Chapter 202
59-10-114
, as last amended by Laws of Utah 2010, Chapter 6
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
59-10-103
 is amended to read:
59-10-103.
Definitions.
(1) As used in this chapter:
(a) "Adjusted gross income":
(i) for a resident or nonresident individual, [
is as
] 
means the same as that term is
defined in Section 62, Internal Revenue Code; or
(ii) for a resident or nonresident estate or trust, is as calculated in Section 67(e),
Internal Revenue Code.
(b) "Corporation" includes:
(i) an association;
(ii) a joint stock company; and
(iii) an insurance company.
(c) "Distributable net income" [
is as
] 
means the same as that term is
 defined in Section
643, Internal Revenue Code.
(d) "Employee" [
is as
] 
means the same as that term is
 defined in Section 
59-10-401
.
(e) "Employer" [
is as
] 
means the same as that term is
 defined in Section 
59-10-401
.
(f) "Federal taxable income":
(i) for a resident or nonresident individual, means taxable income as defined by Section
63, Internal Revenue Code; or
(ii) for a resident or nonresident estate or trust, is as calculated in Section 641(a) and
(b), Internal Revenue Code.
(g) "Fiduciary" means:
(i) a guardian;
(ii) a trustee;
(iii) an executor;
(iv) an administrator;
(v) a receiver;
(vi) a conservator; or
(vii) any person acting in any fiduciary capacity for any individual.
(h) "Guaranteed annuity interest" [
is as
] 
means the same as that term is
 defined in 26
C.F.R. Sec. 1.170A-6(c)(2).
(i) "Homesteaded land diminished from the Uintah and Ouray Reservation" means the
homesteaded land that was held to have been diminished from the Uintah and Ouray
Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
(j) "Individual" means a natural person and includes aliens and minors.
(k) "Irrevocable trust" means a trust in which the settlor may not revoke or terminate
all or part of the trust without the consent of a person who has a substantial beneficial interest
in the trust and the interest would be adversely affected by the exercise of the settlor's power to
revoke or terminate all or part of the trust.
(l) "Military service" [
is as
] 
means the same as that term is
 defined in Pub. L. No.
108-189, Sec. 101.
(m) "Nonresident individual" means an individual who is not a resident of this state.
(n) "Nonresident trust" or "nonresident estate" means a trust or estate [
which
] 
that
 is
not a resident estate or trust.
(o) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
unincorporated organization:
(A) through or by means of which any business, financial operation, or venture is
carried on; and
(B) which is not, within the meaning of this chapter:
(I) a trust;
(II) an estate; or
(III) a corporation.
(ii) "Partnership" does not include any organization not included under the definition of
"partnership" in Section 761, Internal Revenue Code.
(iii) "Partner" includes a member in a syndicate, group, pool, joint venture, or
organization described in Subsection (1)(o)(i).
(p) "Qualified nongrantor charitable lead trust" means a trust:
(i) that is irrevocable;
(ii) that has a trust term measured by:
(A) a fixed term of years; or
(B) the life of a person living on the day on which the trust is created;
(iii) under which:
(A) a portion of the value of the trust assets is distributed during the trust term:
(I) to an organization described in Section 170(c), Internal Revenue Code; and
(II) as a:
(Aa) guaranteed annuity interest; or
(Bb) unitrust interest; and
(B) assets remaining in the trust at the termination of the trust term are distributed to a
beneficiary:
(I) designated in the trust; and
(II) that is not an organization described in Section 170(c), Internal Revenue Code;
(iv) for which the trust is allowed a deduction under Section 642(c), Internal Revenue
Code; and
(v) under which the grantor of the trust is not treated as the owner of any portion of the
trust for federal income tax purposes.
(q) "Reserve components" means the same as that term is described in 10 U.S.C. Sec.
10101.
[
(q)
] 
(r)
 (i) "Resident individual" means:
(A) an individual who is domiciled in this state for any period of time during the
taxable year, but only for the duration of the period during which the individual is domiciled in
this state; or
(B) an individual who is not domiciled in this state but:
(I) maintains a place of abode in this state; and
(II) spends in the aggregate 183 or more days of the taxable year in this state.
(ii) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act,
and for purposes of Subsection (1)[
(q)
]
(r)
(i)(B), the commission shall by rule define what
constitutes spending a day of the taxable year in the state.
[
(r)
] 
(s)
 "Resident estate" or "resident trust" [
is as
] 
means the same as that term is
defined in Section 
75-7-103
.
[
(s)
] 
(t)
 "Servicemember" [
is as
] 
means the same as that term is
 defined in Pub. L. No.
108-189, Sec. 101.
[
(t)
] 
(u)
 "State income tax percentage for a nonresident estate or trust" means a
percentage equal to a nonresident estate's or trust's state taxable income for the taxable year
divided by the nonresident estate's or trust's total adjusted gross income for that taxable year
after making the adjustments required by:
(i) Section 
59-10-202
;
(ii) Section 
59-10-207
;
(iii) Section 
59-10-209.1
; or
(iv) Section 
59-10-210
.
[
(u)
] 
(v)
 "State income tax percentage for a nonresident individual" means a percentage
equal to a nonresident individual's state taxable income for the taxable year divided by the
difference between:
(i) subject to Section 
59-10-1405
, the nonresident individual's total adjusted gross
income for that taxable year, after making the:
(A) additions and subtractions required by Section 
59-10-114
; and
(B) adjustments required by Section 
59-10-115
; and
(ii) if the nonresident individual described in Subsection (1)[
(u)
]
(v)
(i) is a
servicemember, the compensation the servicemember receives for military service if the
servicemember is serving in compliance with military orders.
[
(v)
] 
(w)
 "State income tax percentage for a part-year resident individual" means, for a
taxable year, a fraction:
(i) the numerator of which is the sum of:
(A) subject to Section 
59-10-1404.5
, for the time period during the taxable year that the
part-year resident individual is a resident, the part-year resident individual's total adjusted gross
income for that time period, after making the:
(I) additions and subtractions required by Section 
59-10-114
; and
(II) adjustments required by Section 
59-10-115
; and
(B) for the time period during the taxable year that the part-year resident individual is a
nonresident, an amount calculated by:
(I) determining the part-year resident individual's adjusted gross income for that time
period, after making the:
(Aa) additions and subtractions required by Section 
59-10-114
; and
(Bb) adjustments required by Section 
59-10-115
; and
(II) calculating the portion of the amount determined under Subsection
(1)[
(v)
]
(w)
(i)(B)(I) that is derived from Utah sources in accordance with Section 
59-10-117
;
and
(ii) the denominator of which is the difference between:
(A) the part-year resident individual's total adjusted gross income for that taxable year,
after making the:
(I) additions and subtractions required by Section 
59-10-114
; and
(II) adjustments required by Section 
59-10-115
; and
(B) if the part-year resident individual is a servicemember, any compensation the
servicemember receives for military service during the portion of the taxable year that the
servicemember is a nonresident if the servicemember is serving in compliance with military
orders.
[
(w)
] 
(x)
 "Taxable income" or "state taxable income":
(i) subject to Section 
59-10-1404.5
, for a resident individual, means the resident
individual's adjusted gross income after making the:
(A) additions and subtractions required by Section 
59-10-114
; and
(B) adjustments required by Section 
59-10-115
;
(ii) for a nonresident individual, is an amount calculated by:
(A) determining the nonresident individual's adjusted gross income for the taxable
year, after making the:
(I) additions and subtractions required by Section 
59-10-114
; and
(II) adjustments required by Section 
59-10-115
; and
(B) calculating the portion of the amount determined under Subsection
(1)[
(w)
]
(x)
(ii)(A) that is derived from Utah sources in accordance with Section 
59-10-117
;
(iii) for a resident estate or trust, is as calculated under Section 
59-10-201.1
; and
(iv) for a nonresident estate or trust, is as calculated under Section 
59-10-204
.
[
(x)
] 
(y)
 "Taxpayer" means any individual, estate, trust, or beneficiary of an estate or
trust, that has income subject in whole or part to the tax imposed by this chapter.
[
(y)
] 
(z)
 "Trust term" means a time period:
(i) beginning on the day on which a qualified nongrantor charitable lead trust is
created; and
(ii) ending on the day on which the qualified nongrantor charitable lead trust described
in Subsection (1)[
(y)
]
(z)
(i) terminates.
[
(z)
] 
(aa)
 "Uintah and Ouray Reservation" means the lands recognized as being
included within the Uintah and Ouray Reservation in:
(i) Hagen v. Utah, 510 U.S. 399 (1994); and
(ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
[
(aa)
] 
(bb)
 "Unadjusted income" means an amount equal to the difference between:
(i) the total income required to be reported by a resident or nonresident estate or trust
on the resident or nonresident estate's or trust's federal income tax return for estates and trusts
for the taxable year; and
(ii) the sum of the following:
(A) fees paid or incurred to the fiduciary of a resident or nonresident estate or trust:
(I) for administering the resident or nonresident estate or trust; and
(II) that the resident or nonresident estate or trust deducts as allowed on the resident or
nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
year;
(B) the income distribution deduction that a resident or nonresident estate or trust
deducts under Section 651 or 661, Internal Revenue Code, as allowed on the resident or
nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
year;
(C) the amount that a resident or nonresident estate or trust deducts as a deduction for
estate tax or generation skipping transfer tax under Section 691(c), Internal Revenue Code, as
allowed on the resident or nonresident estate's or trust's federal income tax return for estates
and trusts for the taxable year; and
(D) the amount that a resident or nonresident estate or trust deducts as a personal
exemption under Section 642(b), Internal Revenue Code, as allowed on the resident or
nonresident estate's or trust's federal income tax return for estates and trusts for the taxable
year.
[
(bb)
] 
(cc)
 "Unitrust interest" [
is as
] 
means the same as that term is
 defined in 26
C.F.R. Sec. 1.170A-6(c)(2).
[
(cc)
] 
(dd)
 "Ute tribal member" means a person who is enrolled as a member of the Ute
Indian Tribe of the Uintah and Ouray Reservation.
[
(dd)
] 
(ee)
 "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray
Reservation.
[
(ee)
] 
(ff)
 "Wages" [
is as
] 
means the same as that term is
 defined in Section 
59-10-401
.
(2) (a) Any term used in this chapter has the same meaning as when used in
comparable context in the laws of the United States relating to federal income taxes unless a
different meaning is clearly required.
(b) Any reference to the Internal Revenue Code or to the laws of the United States shall
mean the Internal Revenue Code or other provisions of the laws of the United States relating to
federal income taxes that are in effect for the taxable year.
(c) Any reference to a specific section of the Internal Revenue Code or other provision
of the laws of the United States relating to federal income taxes shall include any
corresponding or comparable provisions of the Internal Revenue Code as amended,
redesignated, or reenacted.
Section 2. Section 
59-10-114
 is amended to read:
59-10-114.
Additions to and subtractions from adjusted gross income of an
individual.
(1) There shall be added to adjusted gross income of a resident or nonresident
individual:
(a) a lump sum distribution that the taxpayer does not include in adjusted gross income
on the taxpayer's federal individual income tax return for the taxable year;
(b) the amount of a child's income calculated under Subsection (4) that:
(i) a parent elects to report on the parent's federal individual income tax return for the
taxable year; and
(ii) the parent does not include in adjusted gross income on the parent's federal
individual income tax return for the taxable year;
(c) (i) a withdrawal from a medical care savings account and any penalty imposed for
the taxable year if:
(A) the resident or nonresident individual does not deduct the amounts on the resident
or nonresident individual's federal individual income tax return under Section 220, Internal
Revenue Code;
(B) the withdrawal is subject to Subsections 
31A-32a-105
(1) and (2); and
(C) the withdrawal is:
(I) subtracted on a return the resident or nonresident individual files under this chapter
for a taxable year beginning on or before December 31, 2007; or
(II) used as the basis for a resident or nonresident individual to claim a tax credit under
Section 
59-10-1021
;
(ii) a disbursement required to be added to adjusted gross income in accordance with
Subsection 
31A-32a-105
(3); or
(iii) an amount required to be added to adjusted gross income in accordance with
Subsection 
31A-32a-105
(5)(c);
(d) the amount withdrawn under Title 53B, Chapter 8a, Utah Educational Savings Plan,
from the account of a resident or nonresident individual who is an account owner as defined in
Section 
53B-8a-102
, for the taxable year for which the amount is withdrawn, if that amount
withdrawn from the account of the resident or nonresident individual who is the account
owner:
(i) is not expended for:
(A) higher education costs as defined in Section 
53B-8a-102
; or
(B) a payment or distribution that qualifies as an exception to the additional tax for
distributions not used for educational expenses provided in Sections 529(c) and 530(d),
Internal Revenue Code; and
(ii) is:
(A) subtracted by the resident or nonresident individual:
(I) who is the account owner; and
(II) on the resident or nonresident individual's return filed under this chapter for a
taxable year beginning on or before December 31, 2007; or
(B) used as the basis for the resident or nonresident individual who is the account
owner to claim a tax credit under Section 
59-10-1017
;
(e) except as provided in Subsection (5), for bonds, notes, and other evidences of
indebtedness acquired on or after January 1, 2003, the interest from bonds, notes, and other
evidences of indebtedness issued by one or more of the following entities:
(i) a state other than this state;
(ii) the District of Columbia;
(iii) a political subdivision of a state other than this state; or
(iv) an agency or instrumentality of an entity described in Subsections (1)(e)(i) through
(iii);
(f) subject to Subsection (2)(c), any distribution received by a resident beneficiary of a
resident trust of income that was taxed at the trust level for federal tax purposes, but was
subtracted from state taxable income of the trust pursuant to Subsection 
59-10-202
(2)(b);
(g) any distribution received by a resident beneficiary of a nonresident trust of
undistributed distributable net income realized by the trust on or after January 1, 2004, if that
undistributed distributable net income was taxed at the trust level for federal tax purposes, but
was not taxed at the trust level by any state, with undistributed distributable net income
considered to be distributed from the most recently accumulated undistributed distributable net
income; and
(h) any adoption expense:
(i) for which a resident or nonresident individual receives reimbursement from another
person; and
(ii) to the extent to which the resident or nonresident individual subtracts that adoption
expense:
(A) on a return filed under this chapter for a taxable year beginning on or before
December 31, 2007; or
(B) from federal taxable income on a federal individual income tax return.
(2) There shall be subtracted from adjusted gross income of a resident or nonresident
individual:
(a) the difference between:
(i) the interest or a dividend on an obligation or security of the United States or an
authority, commission, instrumentality, or possession of the United States, to the extent that
interest or dividend is:
(A) included in adjusted gross income for federal income tax purposes for the taxable
year; and
(B) exempt from state income taxes under the laws of the United States; and
(ii) any interest on indebtedness incurred or continued to purchase or carry the
obligation or security described in Subsection (2)(a)(i);
(b) for taxable years beginning on or after January 1, 2000, if the conditions of
Subsection (3)(a) are met, the amount of income derived by a Ute tribal member:
(i) during a time period that the Ute tribal member resides on homesteaded land
diminished from the Uintah and Ouray Reservation; and
(ii) from a source within the Uintah and Ouray Reservation;
(c) an amount received by a resident or nonresident individual or distribution received
by a resident or nonresident beneficiary of a resident trust:
(i) if that amount or distribution constitutes a refund of taxes imposed by:
(A) a state; or
(B) the District of Columbia; and
(ii) to the extent that amount or distribution is included in adjusted gross income for
that taxable year on the federal individual income tax return of the resident or nonresident
individual or resident or nonresident beneficiary of a resident trust;
(d) the amount of a railroad retirement benefit:
(i) paid:
(A) in accordance with the Railroad Retirement Act of 1974, 45 U.S.C. Sec. 231 et
seq.;
(B) to a resident or nonresident individual; and
(C) for the taxable year; and
(ii) to the extent that railroad retirement benefit is included in adjusted gross income on
that resident or nonresident individual's federal individual income tax return for that taxable
year; [
and
]
(e) an amount:
(i) received by an enrolled member of an American Indian tribe; and
(ii) to the extent that the state is not authorized or permitted to impose a tax under this
part on that amount in accordance with:
(A) federal law;
(B) a treaty; or
(C) a final decision issued by a court of competent jurisdiction[
.
]
; and
(f) the amount of survivor benefits paid by the federal government, in accordance with
U.S.C. Secs. 1447 to 1455, to the spouse, dependent children, or both the spouse and
dependent children of:
(i) a member of the armed forces or the reserve components who dies on active duty; or
(ii) a member of the reserve components who dies of a service-connected cause while
performing inactive duty training.
(3) (a) A subtraction for an amount described in Subsection (2)(b) is allowed only if:
(i) the taxpayer is a Ute tribal member; and
(ii) the governor and the Ute tribe execute and maintain an agreement meeting the
requirements of this Subsection (3).
(b) The agreement described in Subsection (3)(a):
(i) may not:
(A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
(B) provide a subtraction under this section greater than or different from the
subtraction described in Subsection (2)(b); or
(C) affect the power of the state to establish rates of taxation; and
(ii) shall:
(A) provide for the implementation of the subtraction described in Subsection (2)(b);
(B) be in writing;
(C) be signed by:
(I) the governor; and
(II) the chair of the Business Committee of the Ute tribe;
(D) be conditioned on obtaining any approval required by federal law; and
(E) state the effective date of the agreement.
(c) (i) The governor shall report to the commission by no later than February 1 of each
year regarding whether or not an agreement meeting the requirements of this Subsection (3) is
in effect.
(ii) If an agreement meeting the requirements of this Subsection (3) is terminated, the
subtraction permitted under Subsection (2)(b) is not allowed for taxable years beginning on or
after the January 1 following the termination of the agreement.
(d) For purposes of Subsection (2)(b) and in accordance with Title 63G, Chapter 3,
Utah Administrative Rulemaking Act, the commission may make rules:
(i) for determining whether income is derived from a source within the Uintah and
Ouray Reservation; and
(ii) that are substantially similar to how adjusted gross income derived from Utah
sources is determined under Section 
59-10-117
.
(4) (a) For purposes of this Subsection (4), "Form 8814" means:
(i) the federal individual income tax Form 8814, Parents' Election To Report Child's
Interest and Dividends; or
(ii) (A) a form designated by the commission in accordance with Subsection
(4)(a)(ii)(B) as being substantially similar to 2000 Form 8814 if for purposes of federal
individual income taxes the information contained on 2000 Form 8814 is reported on a form
other than Form 8814; and
(B) for purposes of Subsection (4)(a)(ii)(A) and in accordance with Title 63G, Chapter
3, Utah Administrative Rulemaking Act, the commission may make rules designating a form as
being substantially similar to 2000 Form 8814 if for purposes of federal individual income
taxes the information contained on 2000 Form 8814 is reported on a form other than Form
8814.
(b) The amount of a child's income added to adjusted gross income under Subsection
(1)(b) is equal to the difference between:
(i) the lesser of:
(A) the base amount specified on Form 8814; and
(B) the sum of the following reported on Form 8814:
(I) the child's taxable interest;
(II) the child's ordinary dividends; and
(III) the child's capital gain distributions; and
(ii) the amount not taxed that is specified on Form 8814.
(5) Notwithstanding Subsection (1)(e), interest from bonds, notes, and other evidences
of indebtedness issued by an entity described in Subsections (1)(e)(i) through (iv) may not be
added to adjusted gross income of a resident or nonresident individual if, as annually
determined by the commission:
(a) for an entity described in Subsection (1)(e)(i) or (ii), the entity and all of the
political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
(b) for an entity described in Subsection (1)(e)(iii) or (iv), the following do not impose
a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
this state:
(i) the entity; or
(ii) (A) the state in which the entity is located; or
(B) the District of Columbia, if the entity is located within the District of Columbia.
Section 3. 
Effective date.
This bill takes effect on January 1, 2017.
Legislative Review Note
Office of Legislative Research and General Counsel