Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 377 Second Substitute (2017GS)

Sponsor

Rep. McCay, D.

Final action

House/ filed 3/9/2017

Outcome

Failed / filed without passage

Summary

What it does

• This bill:
• addresses the apportionment of business income to the state for purposes of income taxes by requiring all taxpayers, for certain taxable years, to use only the sales factor to calculate the fraction for apportioning business income to the state; and
• makes technical and conforming changes.

Every vote on this bill

Bill text

TAX REVISIONS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Daniel McCay
Senate Sponsor: 
____________
LONG TITLE
General Description:
This bill addresses apportionment of business income to the state for purposes of
income taxes.
Highlighted Provisions:
This bill:
▸ addresses the apportionment of business income to the state for purposes of income
taxes by requiring all taxpayers, for certain taxable years, to use only the sales factor
to calculate the fraction for apportioning business income to the state; 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:
59-7-302
, as last amended by Laws of Utah 2016, Chapters 311 and 368
59-7-311
, as last amended by Laws of Utah 2016, Chapters 311 and 323
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
59-7-302
 is amended to read:
59-7-302.
Definitions.
(1) As used in this part, unless the context otherwise requires:
(a) "Aircraft type" means a particular model of aircraft as designated by the
manufacturer of the aircraft.
(b) "Airline" means the same as that term is defined in Section 
59-2-102
.
(c) "Airline revenue ton miles" means, for an airline, the total revenue ton miles during
the airline's tax period.
(d) "Business income" means income arising from transactions and activity in the
regular course of the taxpayer's trade or business and includes income from tangible and
intangible property if the acquisition, management, and disposition of the property constitutes
integral parts of the taxpayer's regular trade or business operations.
(e) "Commercial domicile" means the principal place from which the trade or business
of the taxpayer is directed or managed.
(f) "Compensation" means wages, salaries, commissions, and any other form of
remuneration paid to employees for personal services.
(g) (i) Except as provided in Subsection (1)(g)(ii), "mobile flight equipment" [
is as
]
means the same as that term is
 defined in Section 
59-2-102
.
(ii) "Mobile flight equipment" does not include:
(A) a spare engine; or
(B) tangible personal property described in Subsection 
59-2-102
(27) owned by an:
(I) air charter service; or
(II) air contract service.
(h) "Nonbusiness income" means all income other than business income.
(i) "Optional sales factor weighted taxpayer" means:
(i) for a taxpayer that is not a unitary group, regardless of the number of economic
activities the taxpayer performs, a taxpayer having greater than 50% of the taxpayer's total sales
everywhere generated by economic activities performed by the taxpayer if the economic
activities are classified in a NAICS code within NAICS Subsector 334 of the 2002 or 2007
North American Industry Classification System of the federal Executive Office of the
President, Office of Management and Budget; or
(ii) for a taxpayer that is a unitary group, a taxpayer having greater than 50% of the
taxpayer's total sales everywhere generated by economic activities performed by the taxpayer if
the economic activities are classified in a NAICS code within NAICS Subsector 334 of the
2002 or 2007 North American Industry Classification System of the federal Executive Office of
the President, Office of Management and Budget.
(j) "Revenue ton miles" is determined in accordance with 14 C.F.R. Part 241.
(k) "Sales" means all gross receipts of the taxpayer not allocated under Sections
59-7-306
 through 
59-7-310
.
(l) Subject to Subsection (2), "sales factor weighted taxpayer" means:
(i) for a taxpayer that is not a unitary group, regardless of the number of economic
activities the taxpayer performs, a taxpayer having greater than 50% of the taxpayer's total sales
everywhere generated by economic activities performed by the taxpayer if the economic
activities are classified in a NAICS code of the 2002 or 2007 North American Industry
Classification System of the federal Executive Office of the President, Office of Management
and Budget, except for:
(A) a NAICS code within NAICS Sector 21, Mining;
(B) a NAICS code within NAICS Industry Group 2212, Natural Gas Distribution;
(C) a NAICS code within NAICS Sector 31-33, Manufacturing;
(D) a NAICS code within NAICS Sector 48-49, Transportation and Warehousing;
(E) a NAICS code within NAICS Sector 51, Information, except for NAICS Subsector
519, Other Information Services; or
(F) a NAICS code within NAICS Sector 52, Finance and Insurance; or
(ii) for a taxpayer that is a unitary group, a taxpayer having greater than 50% of the
taxpayer's total sales everywhere generated by economic activities performed by the taxpayer if
the economic activities are classified in a NAICS code of the 2002 or 2007 North American
Industry Classification System of the federal Executive Office of the President, Office of
Management and Budget, except for a NAICS code under Subsections (1)(l)(i)(A) through (F).
(m) "State" means any state of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, any territory or possession of the United States, and any
foreign country or political subdivision thereof.
(n) "Transportation revenue" means revenue an airline earns from:
(i) transporting a passenger or cargo; or
(ii) from miscellaneous sales of merchandise as part of providing transportation
services.
(o) "Utah revenue ton miles" means, for an airline, the total revenue ton miles within
the borders of this state:
(i) during the airline's tax period; and
(ii) from flight stages that originate or terminate in this state.
(2) The following apply to Subsection (1)(l):
(a) (i) Subject to the other provisions of this Subsection (2) 
and except for a taxable
year beginning on or after January 1, 2017, but ending on or before December 31, 2020
, a
taxpayer shall for each taxable year determine whether the taxpayer is a sales factor weighted
taxpayer.
(ii) A taxpayer shall make the determination required by Subsection (2)(a)(i) before the
due date for filing the taxpayer's return under this chapter for the taxable year, including
extensions.
(iii) For purposes of making the determination required by Subsection (2)(a)(i), total
sales everywhere include only the total sales everywhere:
(A) as determined in accordance with this part; and
(B) made during the taxable year for which a taxpayer makes the determination
required by Subsection (2)(a)(i).
(b) A taxpayer that files a return as a unitary group for a taxable year is considered to
be a unitary group for that taxable year.
(c) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
commission may define the term "economic activity" consistent with the use of the term
"activity" in the 2007 North American Industry Classification System of the federal Executive
Office of the President, Office of Management and Budget.
Section 2. Section 
59-7-311
 is amended to read:
59-7-311.
Method of apportionment of business income.
(1) For a taxable year, all business income shall be apportioned to this state by
multiplying the business income by a fraction calculated as provided in this section.
(2) Subject to the other provisions of this part, a taxpayer, except for a sales factor
weighted taxpayer and an optional sales factor weighted taxpayer, shall calculate the fraction
for apportioning business income to this state using one of the following fractions:
(a) a fraction where:
(i) the numerator of the fraction is the sum of:
(A) the property factor as calculated under Section 
59-7-312
;
(B) the payroll factor as calculated under Section 
59-7-315
; and
(C) the sales factor as calculated under Section 
59-7-317
; and
(ii) the denominator of the fraction is three; or
(b) a fraction where:
(i) the numerator of the fraction is the sum of:
(A) the property factor as calculated under Section 
59-7-312
;
(B) the payroll factor as calculated under Section 
59-7-315
; and
(C) the sales factor as calculated under Section 
59-7-317
 multiplied by two; and
(ii) the denominator of the fraction is four.
(3) Subject to the other provisions of this part, a sales factor weighted taxpayer shall
calculate the fraction for apportioning business income to this state using a fraction where:
(a) the numerator of the fraction is the sales factor as calculated under Section
59-7-317
; and
(b) the denominator of the fraction is one.
(4) Subject to the other provisions of this part, an optional sales factor weighted
taxpayer shall calculate the fraction for apportioning business income to this state using a
method described in Subsection (2)(a), (2)(b), or (3). 
(5) Notwithstanding Subsections (2) through (4) and subject to the other provisions of
this part, for a taxable year beginning on or after January 1, 2017, but ending on or before
December 31, 2020, all taxpayers shall calculate the fraction for apportioning business income
to this state using the method described in Subsection (3).
[
(5)
] 
(6)
 (a) The taxpayer shall determine the method for calculating the fraction for
apportioning business income to this state under this section on or before the due date for filing
the taxpayer's return under this chapter for the taxable year, including extensions.
(b) The method described in Subsection [
(5)
] 
(6)
(a) is in effect for the taxable year.
[
(6)
] 
(7)
 In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking
Act, the commission may make rules providing procedures for a taxpayer to make the election
required by Subsections (2) and (4). 
Section 3. 
Retrospective operation.
This bill has retrospective operation for a taxable year beginning on or after January 1,
2017.
Legislative Review Note
Office of Legislative Research and General Counsel