Rep. Norm Thurston — Voting Record

Bill

Number

S.B. 171 Second Substitute (2016GS)

Sponsor

Sen. Bramble, C.

Final action

Governor Signed 3/28/2016

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• repeals refundable corporate and individual income tax credits for certain business entities generating state tax revenue increases;
• provides that the Governor's Office of Economic Development may issue additional income tax credit certificates for investment in certain life science establishments; and
• makes technical and conforming changes.

Every vote on this bill

Bill text

ECONOMIC DEVELOPMENT TAX CREDITS AMENDMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Curtis S. Bramble
House Sponsor: 
 Robert M. Spendlove
LONG TITLE
General Description:
This bill addresses economic development tax credits.
Highlighted Provisions:
This bill:
▸ repeals refundable corporate and individual income tax credits for certain business
entities generating state tax revenue increases;
▸ provides that the Governor's Office of Economic Development may issue additional
income tax credit certificates for investment in certain life science establishments;
and
▸ makes technical and conforming changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
This bill provides retrospective operation.
Utah Code Sections Affected:
AMENDS:
59-10-1025
, as last amended by Laws of Utah 2015, Chapter 283
63N-2-802
, as renumbered and amended by Laws of Utah 2015, Chapter 283
63N-2-803
, as renumbered and amended by Laws of Utah 2015, Chapter 283
63N-2-808
, as renumbered and amended by Laws of Utah 2015, Chapter 283
63N-2-810
, as renumbered and amended by Laws of Utah 2015, Chapter 283
REPEALS:
59-7-614.6
, as last amended by Laws of Utah 2015, Chapter 283
59-10-1109
, as last amended by Laws of Utah 2015, Chapter 283
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
59-10-1025
 is amended to read:
59-10-1025.
Nonrefundable tax credit for investment in certain life science
establishments.
(1) As used in this section:
(a) "Commercial domicile" means the principal place from which the trade or business
of a Utah small business corporation is directed or managed.
(b) "Eligible claimant, estate, or trust" [
is as
] 
means the same as that term is
 defined in
Section 
63N-2-802
.
[
(c) "Life science establishment" means an establishment described in one of the
following NAICS codes of the 2007 North American Industry Classification System of the
federal Executive Office of the President, Office of Management and Budget:
]
[
(i) NAICS Code 33911, Medical Equipment and Supplies Manufacturing;
]
[
(ii) NAICS Code 334510, Electromedical and Electrotherapeutic Apparatus
Manufacturing; or
]
[
(iii) NAICS Code 334517, Irradiation Apparatus Manufacturing.
]
(c) "Life science establishment" means an establishment primarily engaged in the
development or manufacture of products in one or more of the following categories:
(i) biotechnologies;
(ii) medical devices;
(iii) medical diagnostics; and
(iv) pharmaceuticals.
(d) "Office" means the Governor's Office of Economic Development.
(e) "Pass-through entity" [
is as
] 
means the same as that term is
 defined in Section
59-10-1402
.
(f) "Pass-through entity taxpayer" [
is as
] 
means the same as that term is
 defined in
Section 
59-10-1402
.
(g) "Qualifying ownership interest" means an ownership interest that is:
(i) (A) common stock;
(B) preferred stock; or
(C) an ownership interest in a pass-through entity;
(ii) originally issued to:
(A) an eligible claimant, estate, or trust; or
(B) a pass-through entity if the eligible claimant, estate, or trust that claims a tax credit
under this section was a pass-through entity taxpayer of the pass-through entity on the day on
which the qualifying ownership interest was issued and remains a pass-through entity taxpayer
of the pass-through entity until the last day of the taxable year for which the eligible claimant,
estate, or trust claims a tax credit under this section; and
(iii) issued:
(A) by a Utah small business corporation;
(B) on or after January 1, 2011; and
(C) for money or other property, except for stock or securities.
(h) (i) Except as provided in Subsection (1)(h)(ii), "Utah small business corporation"
[
is as
] 
means the same as that term is
 defined in Section 
59-10-1022
.
(ii) For purposes of this section, a corporation under Section 1244(c)(3)(A), Internal
Revenue Code, is considered to include a pass-through entity.
(2) Subject to the other provisions of this section, for a taxable year beginning on or
after January 1, 2011, an eligible claimant, estate, or trust that holds a tax credit certificate
issued to the eligible claimant, estate, or trust in accordance with Section 
63N-2-808
 for that
taxable year may claim a nonrefundable tax credit in an amount up to 35% of the purchase
price of a qualifying ownership interest in a Utah small business corporation by the claimant,
estate, or trust if:
(a) the qualifying ownership interest is issued by a Utah small business corporation that
is a life science establishment;
(b) the qualifying ownership interest in the Utah small business corporation is
purchased for at least $25,000;
(c) the eligible claimant, estate, or trust owned less than 30% of the qualifying
ownership interest of the Utah small business corporation at the time of the purchase of the
qualifying ownership interest; and
(d) on each day of the taxable year [
of
] 
in which
 the purchase of the qualifying
ownership interest 
was made
, the Utah small business corporation described in Subsection
(2)(a) has at least 50% of its employees in the state.
(3) Subject to Subsection (4), the tax credit under Subsection (2):
(a) may only be claimed by [
the
] 
an
 eligible claimant, estate, or trust:
(i) for a taxable year for which the eligible claimant, estate, or trust holds a tax credit
certificate issued in accordance with Section 
63N-2-808
; and
(ii) subject to obtaining a tax credit certificate for each taxable year as required by
Subsection (3)(a)(i), for a period of three taxable years as follows:
(A) the tax credit in the taxable year [
of
] 
in which
 the purchase of the qualifying
ownership interest 
was made
 may not exceed 10% of the purchase price of the qualifying
ownership interest;
(B) the tax credit in the taxable year after the taxable year described in Subsection
(3)(a)(ii)(A) may not exceed 10% of the purchase price of the qualifying ownership interest;
and
(C) the tax credit in the taxable year two years after the taxable year described in
Subsection (3)(a)(ii)(A) may not exceed 15% of the purchase price of the qualifying ownership
interest; and
(b) may not exceed the lesser of:
(i) the amount listed on the tax credit certificate issued in accordance with Section
63N-2-808
; or
(ii) $350,000 in a taxable year.
(4) An eligible claimant, estate, or trust may not claim a tax credit under this section
for a taxable year if the eligible claimant, estate, or trust:
(a) has sold any of the qualifying ownership interest during the taxable year; or
(b) does not hold a tax credit certificate for that taxable year that is issued to the
eligible claimant, estate, or trust by the office in accordance with Section 
63N-2-808
.
(5) If a Utah small business corporation in which an eligible claimant, estate, or trust
purchases a qualifying ownership interest fails, dissolves, or otherwise goes out of business, the
eligible claimant, estate, or trust may not claim both the tax credit provided in this section and
a capital loss on the qualifying ownership interest.
(6) If an eligible claimant is a pass-through entity taxpayer that files a return under
Chapter 7, Corporate Franchise and Income Taxes, the eligible claimant may claim the tax
credit under this section on the return filed under Chapter 7, Corporate Franchise and Income
Taxes.
(7) A claimant, estate, or trust may not carry forward or carry back a tax credit under
this section.
Section 2. Section 
63N-2-802
 is amended to read:
63N-2-802.
Definitions.
As used in this part:
(1) "Claimant" [
has the same meaning as
] 
means the same as that term is
 defined in
Section 
59-10-1002
.
[
(2) "Eligible business entity" means a person that:
]
[
(a) enters into an agreement with the office in accordance with this part to receive a
tax credit certificate for a tax credit under Section 
59-7-614.6
 or 
59-10-1109
;
]
[
(b) is:
]
[
(i) a life science establishment; or
]
[
(ii) described in NAICS Code 334413, Semiconductor and Related Device
Manufacturing, of the 2007 North American Industry Classification System of the federal
Executive Office of the President, Office of Management and Budget;
]
[
(c) has at least 50% of its employees in the state for each day of a taxable year the
eligible business entity claims a tax credit under Section 
59-7-614.6
 or 
59-10-1109
; and
]
[
(d) receives a tax credit certificate from the office in accordance with this part.
]
[
(3)
] 
(2)
 "Eligible claimant, estate, or trust" means a claimant, estate, or trust that:
(a) enters into an agreement with the office in accordance with this part to receive a tax
credit certificate for a tax credit under Section 
59-10-1025
; and
(b) receives a tax credit certificate from the office in accordance with this part.
[
(4) "Eligible new state tax revenues" means an increased amount of tax revenues
generated as a result of an eligible product or project by an eligible business entity or a new
incremental job within the state under the following:
]
[
(a) Title 59, Chapter 7, Corporate Franchise and Income Taxes;
]
[
(b) Title 59, Chapter 10, Individual Income Tax Act; and
]
[
(c) Title 59, Chapter 12, Sales and Use Tax Act.
]
[
(5) "Eligible product or project" means any product or project produced by an eligible
business entity that was not produced prior to the date of an agreement with the office under
Section 
63N-2-808
:
]
[
(a) by the eligible business entity; and
]
[
(b) within the state.
]
[
(6) "Life science establishment" has the same meaning as defined in Section
59-10-1025
.
]
[
(7) "New incremental job within the state" means, with respect to an eligible business
entity, an employment position that:
]
[
(a) did not exist within the state before:
]
[
(i) the eligible business entity entered into an agreement with the office in accordance
with this part; and
]
[
(ii) the eligible product was produced or the eligible project began;
]
[
(b) is not shifted from one location in the state to another location in the state; and
]
[
(c) is established to the satisfaction of the office, including by amounts paid or
withheld by the eligible business entity under Title 59, Chapter 10, Individual Income Tax
Act.
]
[
(8)
] 
(3)
 "Tax credit" means a tax credit under[
:
] 
Section 
59-10-1025
.
[
(a) Section 
59-7-614.6
;
]
[
(b) Section 
59-10-1025
; or
]
[
(c) Section 
59-10-1109
.
]
[
(9)
] 
(4)
 "Tax credit applicant" means a person that applies to the office to receive a tax
credit certificate under this part.
[
(10)
] 
(5)
 "Tax credit certificate" means a certificate issued by the office that:
(a) lists the name of the tax credit certificate recipient;
(b) lists the tax credit certificate recipient's taxpayer identification number;
(c) lists the amount of the tax credit certificate recipient's tax credits authorized under
this part for a taxable year; and
(d) includes other information as determined by the office.
[
(11)
] 
(6)
 "Tax credit certificate recipient" means[
: (a) an eligible business entity that
receives a tax credit certificate in accordance with this part for a tax credit under Section
59-7-614.6
 or 
59-10-1109
; or (b)
] an eligible claimant, estate, or trust that receives a tax credit
certificate in accordance with this part for a tax credit under Section 
59-10-1025
.
Section 3. Section 
63N-2-803
 is amended to read:
63N-2-803.
Tax credits issued by office.
(1) [
(a)
] The office may issue tax credit certificates under this part only to the extent
that the Legislature, by statute, expressly authorizes the office to issue the tax credit certificates
under this part for a fiscal year.
[
(b) The Legislature intends that a statutory authorization under Subsection (1)(a)
specify:
]
[
(i) the total allocation to the tax credits under Sections 
59-7-614.6
 and 
59-10-1109
;
and
]
[
(ii) the allocation to the tax credit under Section 
59-10-1025
.
]
(2) 
(a)
 For fiscal year 2011-12 only, the office may issue a total of $1,300,000 in tax
credit certificates in accordance with this part.
(b) For fiscal year 2016-17 only, the office may issue a total of $1,000,000 in tax credit
certificates in accordance with this part.
(c) For fiscal year 2017-18 only, the office may issue a total of $1,000,000 in tax credit
certificates in accordance with this part.
(3) [
(a)
] If the total amount of tax credit certificates the office issues in a fiscal year is
less than the amount of tax credit certificates the office may issue under this part in a fiscal
year, the office may issue the remaining amount of tax credit certificates in a fiscal year after
the fiscal year for which there is a remaining amount of tax credit certificates.
[
(b) Except as provided in Subsection (3)(c), if the total amount of tax credit
certificates the office issues in a quarter of a fiscal year is less than the amount of tax credit
certificates the office may issue under this part in that quarter, the office may issue the
remaining amount of tax credit certificates in a quarter after the quarter for which there is a
remaining amount of tax credit certificates.
]
[
(c) For fiscal year 2011-12 only, if the total amount of tax credit certificates the office
issues in fiscal year 2011-12 is less than the amount of tax credit certificates the office may
issue in tax credit certificates under Subsection (2), the office:
]
[
(i) may issue the remaining amount of tax credit certificates in a fiscal year after fiscal
year 2011-12; and
]
[
(ii) is not required to allocate the tax credit certificates to any particular quarter.
]
Section 4. Section 
63N-2-808
 is amended to read:
63N-2-808.
Agreement between tax credit applicant and office -- Tax credit
certificate.
[
(1) (a) Except as provided in Subsection 
63N-2-803
(3)(b), for each quarter of a fiscal
year after fiscal year 2011-12, the office shall allocate:
]
[
(i) 25% of the total amounts made available for allocation in accordance with Section
63N-2-803
 for the tax credits under Sections 
59-7-614.6
 and 
59-10-1109
; and
]
[
(ii) 25% of the amounts made available for allocation in accordance with Section
63N-2-803
 for the tax credit under Section 
59-10-1025
.
]
[
(b) Subject to the other provisions of this part, the office, with advice from the board,
shall determine quarterly:
]
[
(i) the tax credit applicant or applicants to which a tax credit certificate may be
provided; and
]
[
(ii) the amount of tax credit a tax credit applicant may receive.
]
[
(2)
] 
(1)
 The office, with advice from the board, may enter into an agreement to grant a
tax credit certificate to a tax credit applicant selected in accordance with this part, if the tax
credit applicant meets the conditions established in the agreement and under this part.
[
(3)
] 
(2)
 The agreement described in Subsection [
(2)
] 
(1)
 shall:
(a) detail the requirements that the tax credit applicant shall meet prior to receiving a
tax credit certificate;
(b) require the tax credit certificate recipient to retain records supporting a claim for a
tax credit for at least four years after the tax credit certificate recipient claims a tax credit under
this part; and
(c) require the tax credit certificate recipient to submit to audits for verification of the
tax credit claimed, including audits by the office and by the State Tax Commission.
Section 5. Section 
63N-2-810
 is amended to read:
63N-2-810.
Reports on tax credit certificates -- Study by legislative committees.
(1) The office shall include the following information in the annual written report
described in Section 
63N-1-301
:
(a) the total amount listed on tax credit certificates the office issues under this part;
(b) the criteria that the office uses in prioritizing the issuance of tax credits amongst tax
credit applicants under this part; and
(c) the economic impact on the state related to providing tax credits under this part.
(2) (a) On or before November 1, 2016, and every five years after November 1, 2016,
the Revenue and Taxation Interim Committee shall:
(i) study the tax [
credits
] 
credit
 allowed under [
Sections 
59-7-614.6
,
] 
Section
59-10-1025
[
, and 
59-10-1109
]; and
(ii) make recommendations concerning whether the tax [
credits
] 
credit
 should be
continued, modified, or repealed.
(b) The study under Subsection (2)(a) shall include an evaluation of:
(i) the cost of the tax [
credits
] 
credit
 under [
Sections 
59-7-614.6
,
] 
Section
59-10-1025
[
,
and 
59-10-1109
];
(ii) the purposes and effectiveness of the tax [
credits
] 
credit
; and
(iii) the extent to which the state benefits from the tax [
credits
] 
credit
.
Section 6. 
Repealer.
This bill repeals:
Section 
59-7-614.6
,
Refundable tax credit for certain business entities generating
state tax revenue increases.
Section 
59-10-1109
,
Refundable tax credit for certain business entities generating
state tax revenue increases.
Section 7. 
Retrospective operation.
This bill has retrospective operation for a taxable year beginning on or after January 1,
2016.
Legislative Review Note
Office of Legislative Research and General Counsel