Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 444 First Substitute (2022GS)

Sponsor

Rep. Spendlove, R.

Final action

Governor Signed 3/23/2022

Outcome

Became law — signed by Gov. Spencer J. Cox

Summary

What it does

• This bill:
• authorizes a pass-through entity to pay a tax on behalf of pass-through entity taxpayers who are individuals for a taxable year that begins on or after January 1, 2022, but begins on or before December 31, 2025;
• requires an individual whose tax on income attributed to the pass-through entity taxpayer is paid by the pass-through entity to add the amount of tax paid to the pass-through entity taxpayer's individual tax return;
• creates a nonrefundable income tax credit equal to the amount of the tax paid by the pass-through entity;
• requires a pass-through entity to report information to a pass-through entity taxpayer regarding income attributed to the pass-through entity taxpayer and tax paid;
• creates penalties for failure to provide the report or to pay the tax; and
• makes technical and conforming changes.

Every vote on this bill

Bill text

INCOME TAX REVISIONS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Robert M. Spendlove
Senate Sponsor: 
Lincoln Fillmore
LONG TITLE
General Description:
This bill modifies the tax obligations of pass-through entities and pass-through entity
taxpayers. 
Highlighted Provisions:
This bill:
▸ authorizes a pass-through entity to pay a tax on behalf of pass-through entity
taxpayers who are individuals for a taxable year that begins on or after January 1,
2022, but begins on or before December 31, 2025;
▸ requires an individual whose tax on income attributed to the pass-through entity
taxpayer is paid by the pass-through entity to add the amount of tax paid to the
pass-through entity taxpayer's individual tax return;
▸ creates a nonrefundable income tax credit equal to the amount of the tax paid by the
pass-through entity;
▸ requires a pass-through entity to report information to a pass-through entity taxpayer
regarding income attributed to the pass-through entity taxpayer and tax paid;
▸ creates penalties for failure to provide the report or to pay the tax; and
▸ makes technical and conforming changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
This bill provides a special effective date.
This bill provides retrospective operation.
Utah Code Sections Affected:
AMENDS:
59-1-401
, as last amended by Laws of Utah 2021, Chapter 367
59-10-114
, as last amended by Laws of Utah 2021, Chapter 367
59-10-406
, as last amended by Laws of Utah 2017, Chapter 226
59-10-1103
, as last amended by Laws of Utah 2009, Chapter 312
59-10-1402
, as last amended by Laws of Utah 2012, Chapter 95
59-10-1403
, as last amended by Laws of Utah 2021, Chapter 367
59-10-1403.2
, as last amended by Laws of Utah 2012, Chapter 95
ENACTS:
59-10-1044
, Utah Code Annotated 1953
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
59-1-401
 is amended to read:
59-1-401.
Definitions -- Offenses and penalties -- Rulemaking authority -- Statute
of limitations -- Commission authority to waive, reduce, or compromise penalty or
interest.
(1) As used in this section:
(a) "Activated tax, fee, or charge" means a tax, fee, or charge with respect to which the
commission:
(i) has implemented the commission's GenTax system; and
(ii) at least 30 days before implementing the commission's GenTax system as described
in Subsection (1)(a)(i), has provided notice in a conspicuous place on the commission's website
stating:
(A) the date the commission will implement the GenTax system with respect to the tax,
fee, or charge; and
(B) that, at the time the commission implements the GenTax system with respect to the
tax, fee, or charge:
(I) a person that files a return after the due date as described in Subsection (2)(a) is
subject to the penalty described in Subsection (2)(c)(ii); and
(II) a person that fails to pay the tax, fee, or charge as described in Subsection (3)(a) is
subject to the penalty described in Subsection (3)(b)(ii).
(b) "Activation date for a tax, fee, or charge" means with respect to a tax, fee, or
charge, the later of:
(i) the date on which the commission implements the commission's GenTax system
with respect to the tax, fee, or charge; or
(ii) 30 days after the date the commission provides the notice described in Subsection
(1)(a)(ii) with respect to the tax, fee, or charge.
(c) (i) Except as provided in Subsection (1)(c)(ii), "tax, fee, or charge" means:
(A) a tax, fee, or charge the commission administers under:
(I) this title;
(II) Title 10, Chapter 1, Part 3, Municipal Energy Sales and Use Tax Act;
(III) Title 10, Chapter 1, Part 4, Municipal Telecommunications License Tax Act;
(IV) Section 
19-6-410.5
;
(V) Section 
19-6-714
;
(VI) Section 
19-6-805
;
(VII) Section 
34A-2-202
;
(VIII) Section 
40-6-14
; or
(IX) Title 69, Chapter 2, Part 4, Prepaid Wireless Telecommunications Service
Charges; or
(B) another amount that by statute is subject to a penalty imposed under this section.
(ii) "Tax, fee, or charge" does not include a tax, fee, or charge imposed under:
(A) Title 41, Chapter 1a, Motor Vehicle Act, except for Section 
41-1a-301
;
(B) Title 41, Chapter 3, Motor Vehicle Business Regulation Act;
(C) Chapter 2, Property Tax Act, except for Section 
59-2-1309
;
(D) Chapter 3, Tax Equivalent Property Act; or
(E) Chapter 4, Privilege Tax.
(d) "Unactivated tax, fee, or charge" means a tax, fee, or charge except for an activated
tax, fee, or charge.
(2) (a) The due date for filing a return is:
(i) if the person filing the return is not allowed by law an extension of time for filing
the return, the day on which the return is due as provided by law; or
(ii) if the person filing the return is allowed by law an extension of time for filing the
return, the earlier of:
(A) the date the person files the return; or
(B) the last day of that extension of time as allowed by law.
(b) A penalty in the amount described in Subsection (2)(c) is imposed if a person files a
return after the due date described in Subsection (2)(a).
(c) For purposes of Subsection (2)(b), the penalty is an amount equal to the greater of:
(i) if the return described in Subsection (2)(b) is filed with respect to an unactivated
tax, fee, or charge:
(A) $20; or
(B) 10% of the unpaid unactivated tax, fee, or charge due on the return; or
(ii) if the return described in Subsection (2)(b) is filed with respect to an activated tax,
fee, or charge, beginning on the activation date for the tax, fee, or charge:
(A) $20; or
(B) (I) 2% of the unpaid activated tax, fee, or charge due on the return if the return is
filed no later than five days after the due date described in Subsection (2)(a);
(II) 5% of the unpaid activated tax, fee, or charge due on the return if the return is filed
more than five days after the due date but no later than 15 days after the due date described in
Subsection (2)(a); or
(III) 10% of the unpaid activated tax, fee, or charge due on the return if the return is
filed more than 15 days after the due date described in Subsection (2)(a).
(d) This Subsection (2) does not apply to:
(i) an amended return; or
(ii) a return with no tax due.
(3) (a) [
A
] 
Except as provided in Subsection (15), a
 person is subject to a penalty for
failure to pay a tax, fee, or charge if:
(i) the person files a return on or before the due date for filing a return described in
Subsection (2)(a), but fails to pay the tax, fee, or charge due on the return on or before that due
date;
(ii) the person:
(A) is subject to a penalty under Subsection (2)(b); and
(B) fails to pay the tax, fee, or charge due on a return within a 90-day period after the
due date for filing a return described in Subsection (2)(a);
(iii) (A) the person is subject to a penalty under Subsection (2)(b); and
(B) the commission estimates an amount of tax due for that person in accordance with
Subsection 
59-1-1406
(2);
(iv) the person:
(A) is mailed a notice of deficiency; and
(B) within a 30-day period after the day on which the notice of deficiency described in
Subsection (3)(a)(iv)(A) is mailed:
(I) does not file a petition for redetermination or a request for agency action; and
(II) fails to pay the tax, fee, or charge due on a return;
(v) (A) the commission:
(I) issues an order constituting final agency action resulting from a timely filed petition
for redetermination or a timely filed request for agency action; or
(II) is considered to have denied a request for reconsideration under Subsection
63G-4-302
(3)(b) resulting from a timely filed petition for redetermination or a timely filed
request for agency action; and
(B) the person fails to pay the tax, fee, or charge due on a return within a 30-day period
after the date the commission:
(I) issues the order constituting final agency action described in Subsection
(3)(a)(v)(A)(I); or
(II) is considered to have denied the request for reconsideration described in
Subsection (3)(a)(v)(A)(II); or
(vi) the person fails to pay the tax, fee, or charge within a 30-day period after the date
of a final judicial decision resulting from a timely filed petition for judicial review.
(b) For purposes of Subsection (3)(a), the penalty is an amount equal to the greater of:
(i) if the failure to pay a tax, fee, or charge as described in Subsection (3)(a) is with
respect to an unactivated tax, fee, or charge:
(A) $20; or
(B) 10% of the unpaid unactivated tax, fee, or charge due on the return; or
(ii) if the failure to pay a tax, fee, or charge as described in Subsection (3)(a) is with
respect to an activated tax, fee, or charge, beginning on the activation date:
(A) $20; or
(B) (I) 2% of the unpaid activated tax, fee, or charge due on the return if the activated
tax, fee, or charge due on the return is paid no later than five days after the due date for filing a
return described in Subsection (2)(a);
(II) 5% of the unpaid activated tax, fee, or charge due on the return if the activated tax,
fee, or charge due on the return is paid more than five days after the due date for filing a return
described in Subsection (2)(a) but no later than 15 days after that due date; or
(III) 10% of the unpaid activated tax, fee, or charge due on the return if the activated
tax, fee, or charge due on the return is paid more than 15 days after the due date for filing a
return described in Subsection (2)(a).
(4) (a) [
Beginning January 1, 1995, in
] 
In
 the case of any underpayment of estimated
tax or quarterly installments required by Sections 
59-5-107
, 
59-5-207
, 
59-7-504
, and 
59-9-104
,
there shall be added a penalty in an amount determined by applying the interest rate provided
under Section 
59-1-402
 plus four percentage points to the amount of the underpayment for the
period of the underpayment.
(b) (i) For purposes of Subsection (4)(a), the amount of the underpayment shall be the
excess of the required installment over the amount, if any, of the installment paid on or before
the due date for the installment.
(ii) The period of the underpayment shall run from the due date for the installment to
whichever of the following dates is the earlier:
(A) the original due date of the tax return, without extensions, for the taxable year; or
(B) with respect to any portion of the underpayment, the date on which that portion is
paid.
(iii) For purposes of this Subsection (4), a payment of estimated tax shall be credited
against unpaid required installments in the order in which the installments are required to be
paid.
(5) (a) Notwithstanding Subsection (2) and except as provided in Subsection (6), a
person allowed by law an extension of time for filing a corporate franchise or income tax return
under Chapter 7, Corporate Franchise and Income Taxes, or an individual income tax return
under Chapter 10, Individual Income Tax Act, is subject to a penalty in the amount described in
Subsection (5)(b) if, on or before the day on which the return is due as provided by law, not
including the extension of time, the person fails to pay:
(i) for a person filing a corporate franchise or income tax return under Chapter 7,
Corporate Franchise and Income Taxes, the payment required by Subsection 
59-7-507
(1)(b); or
(ii) for a person filing an individual income tax return under Chapter 10, Individual
Income Tax Act, the payment required by Subsection 
59-10-516
(2).
(b) For purposes of Subsection (5)(a), the penalty per month during the period of the
extension of time for filing the return is an amount equal to 2% of the tax due on the return,
unpaid as of the day on which the return is due as provided by law.
(6) If a person does not file a return within an extension of time allowed by Section
59-7-505
 or 
59-10-516
, the person:
(a) is not subject to a penalty in the amount described in Subsection (5)(b); and
(b) is subject to a penalty in an amount equal to the sum of:
(i) a late file penalty in an amount equal to the greater of:
(A) $20; or
(B) 10% of the tax due on the return, unpaid as of the day on which the return is due as
provided by law, not including the extension of time; and
(ii) a late pay penalty in an amount equal to the greater of:
(A) $20; or
(B) 10% of the unpaid tax due on the return, unpaid as of the day on which the return is
due as provided by law, not including the extension of time.
(7) (a) Additional penalties for an underpayment of a tax, fee, or charge are as provided
in this Subsection (7)(a).
(i) Except as provided in Subsection (7)(c), if any portion of an underpayment of a tax,
fee, or charge is due to negligence, the penalty is 10% of the portion of the underpayment that
is due to negligence.
(ii) Except as provided in Subsection (7)(d), if any portion of an underpayment of a
tax, fee, or charge is due to intentional disregard of law or rule, the penalty is 15% of the entire
underpayment.
(iii) If any portion of an underpayment is due to an intent to evade a tax, fee, or charge,
the penalty is the greater of $500 per period or 50% of the entire underpayment.
(iv) If any portion of an underpayment is due to fraud with intent to evade a tax, fee, or
charge, the penalty is the greater of $500 per period or 100% of the entire underpayment.
(b) If the commission determines that a person is liable for a penalty imposed under
Subsection (7)(a)(ii), (iii), or (iv), the commission shall notify the person of the proposed
penalty.
(i) The notice of proposed penalty shall:
(A) set forth the basis of the assessment; and
(B) be mailed by certified mail, postage prepaid, to the person's last-known address.
(ii) Upon receipt of the notice of proposed penalty, the person against whom the
penalty is proposed may:
(A) pay the amount of the proposed penalty at the place and time stated in the notice;
or
(B) proceed in accordance with the review procedures of Subsection (7)(b)(iii).
(iii) A person against whom a penalty is proposed in accordance with this Subsection
(7) may contest the proposed penalty by filing a petition for an adjudicative proceeding with
the commission.
(iv) (A) If the commission determines that a person is liable for a penalty under this
Subsection (7), the commission shall assess the penalty and give notice and demand for
payment.
(B) The commission shall mail the notice and demand for payment described in
Subsection (7)(b)(iv)(A):
(I) to the person's last-known address; and
(II) in accordance with Section 
59-1-1404
.
(c) A seller that voluntarily collects a tax under Subsection 
59-12-107
(2)(d) is not
subject to the penalty under Subsection (7)(a)(i) if on or after July 1, 2001:
(i) a court of competent jurisdiction issues a final unappealable judgment or order
determining that:
(A) the seller meets one or more of the criteria described in Subsection 
59-12-107
(2)(a)
or is a seller required to pay or collect and remit sales and use taxes under Subsection
59-12-107
(2)(b) or (2)(c); and
(B) the commission or a county, city, or town may require the seller to collect a tax
under Subsections 
59-12-103
(2)(a) through (e); or
(ii) the commission issues a final unappealable administrative order determining that:
(A) the seller meets one or more of the criteria described in Subsection 
59-12-107
(2)(a)
or is a seller required to pay or collect and remit sales and use taxes under Subsection
59-12-107
(2)(b) or (2)(c); and
(B) the commission or a county, city, or town may require the seller to collect a tax
under Subsections 
59-12-103
(2)(a) through (e).
(d) A seller that voluntarily collects a tax under Subsection 
59-12-107
(2)(d) is not
subject to the penalty under Subsection (7)(a)(ii) if:
(i) (A) a court of competent jurisdiction issues a final unappealable judgment or order
determining that:
(I) the seller meets one or more of the criteria described in Subsection 
59-12-107
(2)(a)
or is a seller required to pay or collect and remit sales and use taxes under Subsection
59-12-107
(2)(b) or (2)(c); and
(II) the commission or a county, city, or town may require the seller to collect a tax
under Subsections 
59-12-103
(2)(a) through (e); or
(B) the commission issues a final unappealable administrative order determining that:
(I) the seller meets one or more of the criteria described in Subsection 
59-12-107
(2)(a)
or is a seller required to pay or collect and remit sales and use taxes under Subsection
59-12-107
(2)(b) or (2)(c); and
(II) the commission or a county, city, or town may require the seller to collect a tax
under Subsections 
59-12-103
(2)(a) through (e); and
(ii) the seller's intentional disregard of law or rule is warranted by existing law or by a
nonfrivolous argument for the extension, modification, or reversal of existing law or the
establishment of new law.
(8) (a) Subject to Subsections (8)(b) and (c), the penalty for failure to file an
information return, information report, or a complete supporting schedule is $50 for each
information return, information report, or supporting schedule up to a maximum of $1,000.
(b) If an employer is subject to a penalty under Subsection (13), the employer may not
be subject to a penalty under Subsection (8)(a).
(c) If an employer is subject to a penalty under this Subsection (8) for failure to file a
return in accordance with Subsection 
59-10-406
(3) on or before the due date described in
Subsection 
59-10-406
(3)(b)(ii), the commission may not impose a penalty under this
Subsection (8) unless the return is filed more than 14 days after the due date described in
Subsection 
59-10-406
(3)(b)(ii).
(9) If a person, in furtherance of a frivolous position, has a prima facie intent to delay
or impede administration of a law relating to a tax, fee, or charge and files a purported return
that fails to contain information from which the correctness of reported tax, fee, or charge
liability can be determined or that clearly indicates that the tax, fee, or charge liability shown is
substantially incorrect, the penalty is $500.
(10) (a) A seller that fails to remit a tax, fee, or charge monthly as required by
Subsection 
59-12-108
(1)(a):
(i) is subject to a penalty described in Subsection (2); and
(ii) may not retain the percentage of sales and use taxes that would otherwise be
allowable under Subsection 
59-12-108
(2).
(b) A seller that fails to remit a tax, fee, or charge by electronic funds transfer as
required by Subsection 
59-12-108
(1)(a)(ii)(B):
(i) is subject to a penalty described in Subsection (2); and
(ii) may not retain the percentage of sales and use taxes that would otherwise be
allowable under Subsection 
59-12-108
(2).
(11) (a) A person is subject to the penalty provided in Subsection (11)(c) if that person:
(i) commits an act described in Subsection (11)(b) with respect to one or more of the
following documents:
(A) a return;
(B) an affidavit;
(C) a claim; or
(D) a document similar to Subsections (11)(a)(i)(A) through (C);
(ii) knows or has reason to believe that the document described in Subsection (11)(a)(i)
will be used in connection with any material matter administered by the commission; and
(iii) knows that the document described in Subsection (11)(a)(i), if used in connection
with any material matter administered by the commission, would result in an understatement of
another person's liability for a tax, fee, or charge.
(b) The following acts apply to Subsection (11)(a)(i):
(i) preparing any portion of a document described in Subsection (11)(a)(i);
(ii) presenting any portion of a document described in Subsection (11)(a)(i);
(iii) procuring any portion of a document described in Subsection (11)(a)(i);
(iv) advising in the preparation or presentation of any portion of a document described
in Subsection (11)(a)(i);
(v) aiding in the preparation or presentation of any portion of a document described in
Subsection (11)(a)(i);
(vi) assisting in the preparation or presentation of any portion of a document described
in Subsection (11)(a)(i); or
(vii) counseling in the preparation or presentation of any portion of a document
described in Subsection (11)(a)(i).
(c) For purposes of Subsection (11)(a), the penalty:
(i) shall be imposed by the commission;
(ii) is $500 for each document described in Subsection (11)(a)(i) with respect to which
the person described in Subsection (11)(a) meets the requirements of Subsection (11)(a); and
(iii) is in addition to any other penalty provided by law.
(d) The commission may seek a court order to enjoin a person from engaging in
conduct that is subject to a penalty under this Subsection (11).
(e) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
commission may make rules prescribing the documents that are similar to Subsections
(11)(a)(i)(A) through (C).
(12) (a) As provided in Section 
76-8-1101
, criminal offenses and penalties are as
provided in Subsections (12)(b) through (e).
(b) (i) A person who is required by this title or any laws the commission administers or
regulates to register with or obtain a license or permit from the commission, who operates
without having registered or secured a license or permit, or who operates when the registration,
license, or permit is expired or not current, is guilty of a class B misdemeanor.
(ii) Notwithstanding Section 
76-3-301
, for purposes of Subsection (12)(b)(i), the
penalty may not:
(A) be less than $500; or
(B) exceed $1,000.
(c) (i) With respect to a tax, fee, or charge, a person who knowingly and intentionally,
and without a reasonable good faith basis, fails to make, render, sign, or verify a return within
the time required by law or to supply information within the time required by law, or who
makes, renders, signs, or verifies a false or fraudulent return or statement, or who supplies false
or fraudulent information, is guilty of a third degree felony.
(ii) Notwithstanding Section 
76-3-301
, for purposes of Subsection (12)(c)(i), the
penalty may not:
(A) be less than $1,000; or
(B) exceed $5,000.
(d) (i) A person who intentionally or willfully attempts to evade or defeat a tax, fee, or
charge or the payment of a tax, fee, or charge is, in addition to other penalties provided by law,
guilty of a second degree felony.
(ii) Notwithstanding Section 
76-3-301
, for purposes of Subsection (12)(d)(i), the
penalty may not:
(A) be less than $1,500; or
(B) exceed $25,000.
(e) (i) A person is guilty of a second degree felony if that person commits an act:
(A) described in Subsection (12)(e)(ii) with respect to one or more of the following
documents:
(I) a return;
(II) an affidavit;
(III) a claim; or
(IV) a document similar to Subsections (12)(e)(i)(A)(I) through (III); and
(B) subject to Subsection (12)(e)(iii), with knowledge that the document described in
Subsection (12)(e)(i)(A):
(I) is false or fraudulent as to any material matter; and
(II) could be used in connection with any material matter administered by the
commission.
(ii) The following acts apply to Subsection (12)(e)(i):
(A) preparing any portion of a document described in Subsection (12)(e)(i)(A);
(B) presenting any portion of a document described in Subsection (12)(e)(i)(A);
(C) procuring any portion of a document described in Subsection (12)(e)(i)(A);
(D) advising in the preparation or presentation of any portion of a document described
in Subsection (12)(e)(i)(A);
(E) aiding in the preparation or presentation of any portion of a document described in
Subsection (12)(e)(i)(A);
(F) assisting in the preparation or presentation of any portion of a document described
in Subsection (12)(e)(i)(A); or
(G) counseling in the preparation or presentation of any portion of a document
described in Subsection (12)(e)(i)(A).
(iii) This Subsection (12)(e) applies:
(A) regardless of whether the person for which the document described in Subsection
(12)(e)(i)(A) is prepared or presented:
(I) knew of the falsity of the document described in Subsection (12)(e)(i)(A); or
(II) consented to the falsity of the document described in Subsection (12)(e)(i)(A); and
(B) in addition to any other penalty provided by law.
(iv) Notwithstanding Section 
76-3-301
, for purposes of this Subsection (12)(e), the
penalty may not:
(A) be less than $1,500; or
(B) exceed $25,000.
(v) The commission may seek a court order to enjoin a person from engaging in
conduct that is subject to a penalty under this Subsection (12)(e).
(vi) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act,
the commission may make rules prescribing the documents that are similar to Subsections
(12)(e)(i)(A)(I) through (III).
(f) The statute of limitations for prosecution for a violation of this Subsection (12) is
the later of six years:
(i) from the date the tax should have been remitted; or
(ii) after the day on which the person commits the criminal offense.
(13) (a) Subject to Subsection (13)(b), an employer that is required to file a form with
the commission in accordance with Subsection 
59-10-406
(8) 
or (9)
 is subject to a penalty
described in Subsection (13)(b) if the employer:
(i) fails to file the form with the commission in an electronic format approved by the
commission as required by Subsection 
59-10-406
(8) 
or (9)
;
(ii) fails to file the form on or before the due date provided in Subsection 
59-10-406
(8)
or (9)
;
(iii) fails to provide accurate information on the form; or
(iv) fails to provide all of the information required by the Internal Revenue Service to
be contained on the form.
(b) For purposes of Subsection (13)(a), the penalty is:
(i) $30 per form, not to exceed $75,000 in a calendar year, if the employer files the
form in accordance with Subsection 
59-10-406
(8) 
or (9)
, more than 14 days after the due date
provided in Subsection 
59-10-406
(8) 
or (9)
 but no later than 30 days after the due date
provided in Subsection 
59-10-406
(8) 
or (9)
;
(ii) $60 per form, not to exceed $200,000 in a calendar year, if the employer files the
form in accordance with Subsection 
59-10-406
(8) 
or (9)
, more than 30 days after the due date
provided in Subsection 
59-10-406
(8) 
or (9)
 but on or before June 1; or
(iii) $100 per form, not to exceed $500,000 in a calendar year, if the employer:
(A) files the form in accordance with Subsection 
59-10-406
(8) 
or (9)
 after June 1; or
(B) fails to file the form.
(14) Upon making a record of [
its
] 
the commission's
 actions, and upon reasonable
cause shown, the commission may waive, reduce, or compromise any of the penalties or
interest imposed under this part.
(15) Failure to pay a tax described in Subsection 
59-10-1403.2
(2) shall be subject to a
penalty as described in Subsection (3) except that the penalty shall be:
(a) assessed only if the pass-through entity reports tax paid on a Utah Schedule K-1 but
does not pay some or all of the tax reported; and
(b) calculated based on the difference between the amount of tax reported and the
amount of tax paid.
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 subtracted on, or used as the basis for claiming a tax credit on, a
return the resident or nonresident individual files under this chapter;
(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-102.5
; 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:
(i) issued by one or more of the following entities:
(A) a state other than this state;
(B) the District of Columbia;
(C) a political subdivision of a state other than this state; or
(D) an agency or instrumentality of an entity described in Subsections (1)(e)(i)(A)
through (C); and
(ii) to the extent the interest is not included in adjusted gross income on the taxpayer's
federal income tax return for the taxable year;
(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[
.
]
;
(i) the amount of tax paid on income attributed to the individual in accordance with
Subsection 
59-10-1403.2
(2); and
(j) the amount of tax paid:
(i) on income attributed to the individual and taxable in this state;
(ii) to another state; and
(iii) that the commission determines is substantially similar to the tax imposed under
Subsection 
59-10-1403.2
(2).
(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) 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;
(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;
(f) an amount received:
(i) for the interest on a bond, note, or other obligation issued by an entity for which
state statute provides an exemption of interest on its bonds from state individual income tax;
(ii) by a resident or nonresident individual;
(iii) for the taxable year; and
(iv) to the extent the amount is included in adjusted gross income on the taxpayer's
federal income tax return for the taxable year;
(g) the amount of all income, including income apportioned to another state, of a
nonmilitary spouse of an active duty military member if:
(i) both the nonmilitary spouse and the active duty military member are nonresident
individuals;
(ii) the active duty military member is stationed in Utah;
(iii) the nonmilitary spouse is subject to the residency provisions of 50 U.S.C. Sec.
4001(a)(2); and
(iv) the income is included in adjusted gross income for federal income tax purposes
for the taxable year;
(h) for a taxable year beginning on or after January 1, 2019, but beginning on or before
December 31, 2019, only:
(i) the amount of any FDIC premium paid or incurred by the taxpayer that is
disallowed as a deduction for federal income tax purposes under Section 162(r), Internal
Revenue Code, on the taxpayer's 2018 federal income tax return; plus
(ii) the amount of any FDIC premium paid or incurred by the taxpayer that is
disallowed as a deduction for federal income tax purposes under Section 162(r), Internal
Revenue Code, for the taxable year;
(i) for a taxable year beginning on or after January 1, 2020, the amount of any FDIC
premium paid or incurred by the taxpayer that is disallowed as a deduction for federal income
tax purposes under Section 162(r), Internal Revenue Code, for the taxable year; and
(j) an amount of a distribution from a qualified retirement plan under Section 401(a),
Internal Revenue Code, if:
(i) the amount of the distribution is included in adjusted gross income on the resident
or nonresident individual's federal individual income tax return for the taxable year; and
(ii) for the taxable year when the amount of the distribution was contributed to the
qualified retirement plan, the amount of the distribution:
(A) was not included in adjusted gross income on the resident or nonresident
individual's federal individual income tax return for the taxable year; and
(B) was taxed by another state of the United States, the District of Columbia, or a
possession of the United States.
(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)(A) through (D) 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)(A) or (B), 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)(i)(C) or (D), 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. Section 
59-10-406
 is amended to read:
59-10-406.
Collection and payment of tax -- Forms filed electronically.
(1) (a) Each employer shall, on or before the last day of April, July, October, and
January, pay to the commission the amount required to be deducted and withheld from wages
paid to any employee during the preceding calendar quarter under this part.
(b) The commission may change the time or period for making reports and payments
if:
(i) in its opinion, the tax is in jeopardy; or
(ii) a different time or period will facilitate the collection and payment of the tax by the
employer.
(2) (a) Each employer shall file a return, in a form the commission prescribes, with
each payment of the amount deducted and withheld under this part showing:
(i) the total amount of wages paid to his employees;
(ii) the amount of federal income tax deducted and withheld;
(iii) the amount of tax under this part deducted and withheld; and
(iv) any other information the commission may require.
(b) The employer shall file the return described in Subsection (2)(a) in an electronic
format approved by the commission.
(3) (a) Each employer shall file an annual return, in a form the commission prescribes,
summarizing:
(i) the total compensation paid;
(ii) the federal income tax deducted and withheld; and
(iii) the state tax deducted and withheld for each employee during the calendar year.
(b) The return required by Subsection (3)(a) shall be filed with the commission:
(i) in an electronic format approved by the commission; and
(ii) on or before January 31 of the year following that for which the report is made.
(4) (a) Each employer shall also, in accordance with rules prescribed by the
commission, provide each employee from whom state income tax has been withheld with a
statement of the amounts of total compensation paid and the amounts deducted and withheld
for that employee during the preceding calendar year in accordance with this part.
(b) The statement shall be made available to each employee described in Subsection
(4)(a) on or before January 31 of the year following that for which the report is made.
(5) (a) The employer is liable to the commission for the payment of the tax required to
be deducted and withheld under this part.
(b) If an employer pays the tax required to be deducted and withheld under this part:
(i) an employee of the employer is not liable for the amount of any payment described
in Subsection (5)(a); and
(ii) the employer is not liable to any person or to any employee for the amount of any
such payment described in Subsection (5)(a).
(c) For the purpose of making penal provisions of this title applicable, any amount
deducted or required to be deducted and remitted to the commission under this part is
considered to be the tax of the employer and with respect to such amounts the employer is
considered to be the taxpayer.
(6) (a) Each employer that deducts and withholds any amount under this part shall hold
the amount in trust for the state for the payment of the amount to the commission in the manner
and at the time provided for in this part.
(b) So long as any delinquency continues, the state shall have a lien to secure the
payment of any amounts withheld, and not remitted as provided under this section, upon all of
the assets of the employer and all property owned or used by the employer in the conduct of the
employer's business, including stock-in-trade, business fixtures, and equipment.
(c) The lien described in Subsection (6)(b) shall be prior to any lien of any kind,
including existing liens for taxes.
(7) To the extent consistent with this section, the commission may use all the
provisions of this chapter relating to records, penalties, interest, deficiencies, redetermination
of deficiencies, overpayments, refunds, assessments, and venue to enforce this section.
(8) (a) Subject to Subsections (8)(b) and (c), the commission shall require an employer
that issues the following forms for a taxable year to file the forms with the commission in an
electronic format approved by the commission:
(i) a federal Form W-2;
(ii) a federal Form 1099 filed for purposes of withholding under Section 
59-10-404
; or
(iii) a federal form substantially similar to a form described in Subsection (8)(a)(i) or
(ii) if designated by the commission in accordance with Subsection (8)(d).
(b) An employer that is required to file a form with the commission in accordance with
Subsection (8)(a) shall file the form on or before January 31.
(c) An employer that is required to file a form with the commission in accordance with
Subsection (8)(a) shall provide:
(i) accurate information on the form; and
(ii) all of the information required by the Internal Revenue Service to be contained on
the form.
(d) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, for
purposes of Subsection (8)(a), the commission may designate a federal form as being
substantially similar to a form described in Subsection (8)(a)(i) or (ii) if:
(i) for purposes of federal individual income taxes a different federal form contains
substantially similar information to a form described in Subsection (8)(a)(i) or (ii); or
(ii) the Internal Revenue Service replaces a form described in Subsection (8)(a)(i) or
(ii) with a different federal form.
(9) (a) Subject to Subsection (9)(b), a pass-through entity shall file with the
commission in an electronic format approved by the commission a Utah Schedule K-1, or a
substantially similar form designated by the commission, for each pass-through entity taxpayer
of a pass-through entity that elected to pay a tax in accordance with Subsection
59-10-1403.2
(2).
(b) The pass-through entity shall file a form described in Subsection (9)(a) with the
pass-through entity's return.
Section 4. Section 
59-10-1044
 is enacted to read:
 59-10-1044.
Nonrefundable tax credit for taxes paid by pass-through entity.
(1) As used in this section, "taxed pass-through entity taxpayer" means a resident or
nonresident individual who:
(a) has income attributed to the individual by a pass-through entity;
(b) receives the income described in Subsection (1)(a) after the pass-through entity
pays the tax described in Subsection 
59-10-1403.2
(2); and
(c) adds the amount of tax paid on the income described in Subsection (1)(a) to
adjusted gross income in accordance with Subsection 
59-10-114
(1)(i).
(2) (a) A taxed pass-through entity taxpayer may claim a nonrefundable tax credit for
the taxes imposed under Subsection 
59-10-1403.2
(2).
(b) The tax credit is equal to the amount of the tax paid under Subsection
59-10-1403.2
(2) by the pass-through entity on the income attributed to the taxed pass-through
entity taxpayer.
(3) (a) A taxed pass-through entity taxpayer may carry forward the amount of the tax
credit that exceeds the taxed pass-through entity's tax liability for a period that does not exceed
the next five taxable years.
(b) A taxed pass-through entity taxpayer may not carry back the amount of the tax
credit that exceeds the taxed pass-through entity's tax liability for the taxable year.
Section 5. Section 
59-10-1103
 is amended to read:
59-10-1103.
Tax credit for pass-through entity taxpayer.
(1) As used in this section:
(a) "Pass-through entity" [
is as
] 
means the same as that term is
 defined in Section
59-10-1402
.
(b) "Pass-through entity taxpayer" [
is as
] 
means the same as that term is
 defined in
Section 
59-10-1402
.
(2) A pass-through entity taxpayer may claim a refundable tax credit against the tax
otherwise due under this chapter if that pass-through entity taxpayer is a:
(a) claimant;
(b) estate; or
(c) trust.
(3) The tax credit described in Subsection (2) is equal to the amount paid or withheld
by the pass-through entity on behalf of the pass-through entity taxpayer described in Subsection
(2) in accordance with Section 
59-10-1403.2
, other than a tax described in Subsection
59-10-1403.2
(2)
.
(4) A pass-through entity taxpayer may not claim a tax credit under this section for an
amount for which the pass-through entity taxpayer claims a tax credit under Section
59-7-614.4
.
Section 6. Section 
59-10-1402
 is amended to read:
59-10-1402.
Definitions.
As used in this part:
(1) "Addition, subtraction, or adjustment" means:
(a) for a pass-through entity taxpayer that is classified as a C corporation for federal
income tax purposes, under Chapter 7, Corporate Franchise and Income Taxes:
(i) an addition to unadjusted income described in Section 
59-7-105
; or
(ii) a subtraction from unadjusted income described in Section 
59-7-106
;
(b) for a pass-through entity taxpayer that is classified as an individual, partnership, or
S corporation for federal income tax purposes:
(i) an addition to or subtraction from adjusted gross income described in Section
59-10-114
; or
(ii) an adjustment to adjusted gross income described in Section 
59-10-115
; or
(c) for a pass-through entity taxpayer that is classified as an estate or a trust for federal
income tax purposes:
(i) an addition to or subtraction from unadjusted income described in Section
59-10-202
; or
(ii) an adjustment to unadjusted income described in Section 
59-10-209.1
.
(2) "Business income" means income arising from transactions and activity in the
regular course of a pass-through entity'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 pass-through entity's regular trade or business operations.
(3) "C corporation" [
is as
] 
means the same as that term is
 defined in Section 1361,
Internal Revenue Code.
(4) "Commercial domicile" means the principal place from which the trade or business
of a business entity is directed or managed.
(5) "Dependent beneficiary" means an individual who:
(a) is claimed as a dependent under Section 151, Internal Revenue Code, on another
person's federal income tax return; and
(b) is a beneficiary of a trust that is a pass-through entity.
(6) "Derived from or connected with Utah sources" means:
(a) if a pass-through entity taxpayer is classified as a C corporation for federal income
tax purposes, derived from or connected with Utah sources in accordance with Chapter 7, Part
3, Allocation and Apportionment of Income - Utah UDITPA Provisions; or
(b) if a pass-through entity or pass-through entity taxpayer is classified as an estate,
individual, partnership, S corporation, or a trust for federal income tax purposes, derived from
or connected with Utah sources in accordance with Sections 
59-10-117
 and 
59-10-118
.
(7) "Final pass-through entity taxpayer" means a pass-through entity taxpayer who is a
resident or nonresident individual.
[
(7)
] 
(8)
 "Nonbusiness income" means all income of a pass-through entity other than
business income.
[
(8)
] 
(9)
 "Nonresident business entity" means a business entity that does not have its
commercial domicile in this state.
[
(9)
] 
(10)
 "Nonresident pass-through entity taxpayer" means a pass-through entity
taxpayer that is a:
(a) nonresident individual; or
(b) nonresident business entity.
[
(10)
] 
(11)
 "Pass-through entity" means a business entity that is:
(a) the following if classified as a partnership for federal income tax purposes:
(i) a general partnership;
(ii) a limited liability company;
(iii) a limited liability partnership; or
(iv) a limited partnership;
(b) an S corporation;
(c) an estate or trust with respect to which the estate's or trust's income, gain, loss,
deduction, or credit is divided among and passed through to one or more pass-through entity
taxpayers; or
(d) a business entity similar to Subsections [
(10)
] 
(11)
(a) through (c):
(i) with respect to which the business entity's income, gain, loss, deduction, or credit is
divided among and passed through to one or more pass-through entity taxpayers; and
(ii) as defined by the commission by rule made in accordance with Title 63G, Chapter
3, Utah Administrative Rulemaking Act.
[
(11)
] 
(12)
 "Pass-through entity taxpayer" means a resident or nonresident individual, a
resident or nonresident business entity, or a resident or nonresident estate or trust:
(a) that is:
(i) for a general partnership, a partner;
(ii) for a limited liability company, a member;
(iii) for a limited liability partnership, a partner;
(iv) for a limited partnership, a partner;
(v) for an S corporation, a shareholder;
(vi) for an estate or trust described in Subsection [
(10)
]
(11)
(c), a beneficiary; or
(vii) for a business entity described in Subsection [
(10)
]
(11)
(d), a member, partner,
shareholder, or other title designated by the commission by rule made in accordance with Title
63G, Chapter 3, Utah Administrative Rulemaking Act; and
(b) to which the income, gain, loss, deduction, or credit of a pass-through entity is
passed through.
[
(12)
] 
(13)
 "Resident business entity" means a business entity that is not a nonresident
business entity.
[
(13)
] 
(14)
 "Resident pass-through entity taxpayer" means a pass-through entity
taxpayer that is a:
(a) resident individual; or
(b) resident business entity.
[
(14)
] 
(15)
 "Return" means a return that a pass-through entity taxpayer files:
(a) for a pass-through entity taxpayer that is classified as a C corporation for federal
income tax purposes, under Chapter 7, Corporate Franchise and Income Taxes; or
(b) for a pass-through entity taxpayer that is classified as an estate, individual,
partnership, S corporation, or a trust for federal income tax purposes, under this chapter.
[
(15)
] 
(16)
 "S corporation" [
is as
] 
means the same as that term is
 defined in Section
1361, Internal Revenue Code.
[
(16)
] 
(17)
 "Share of income, gain, loss, deduction, or credit of a pass-through entity"
means:
(a) for a pass-through entity except for a pass-through entity that is an S corporation:
(i) for a resident pass-through entity taxpayer, the resident pass-through entity
taxpayer's distributive share of income, gain, loss, deduction, or credit of the pass-through
entity as determined under Section 704 et seq., Internal Revenue Code; and
(ii) for a nonresident pass-through entity taxpayer, the nonresident pass-through entity
taxpayer's distributive share of income, gain, loss, deduction, or credit of the pass-through
entity:
(A) as determined under Section 704 et seq., Internal Revenue Code; and
(B) derived from or connected with Utah sources; or
(b) for an S corporation:
(i) for a resident pass-through entity taxpayer, the resident pass-through entity
taxpayer's pro rata share of income, gain, loss, deduction, or credit of the S corporation, as
determined under Sec. 1366 et seq., Internal Revenue Code; or
(ii) for a nonresident pass-through entity taxpayer, the nonresident pass-through entity
taxpayer's pro rata share of income, gain, loss, deduction, or credit of the S corporation:
(A) as determined under Section 1366 et seq., Internal Revenue Code; and
(B) derived from or connected with Utah sources.
[
(17)
] 
(18)
 "Statement of dependent beneficiary income" means a statement:
(a) signed by the person who claims a dependent beneficiary as a dependent under
Section 151, Internal Revenue Code, on the person's federal income tax return for the taxable
year;
(b) attesting that the dependent is a dependent beneficiary; and
(c) indicating that the person expects that the dependent beneficiary's adjusted gross
income for the taxable year will not exceed the basic standard deduction for the dependent
beneficiary, as calculated under Section 63, Internal Revenue Code, for that taxable year.
(19) "Voluntary taxable income" means the sum of a pass-through entity's income that
is:
(a) attributed to a final pass-through entity taxpayer who is a resident individual; and
(b) (i) business income and nonbusiness income that is derived from or connected with
Utah sources; and
(ii) attributed to a final pass-through entity taxpayer who is a nonresident individual.
Section 7. Section 
59-10-1403
 is amended to read:
59-10-1403.
Income tax treatment of a pass-through entity -- Returns --
Classification same as under Internal Revenue Code.
(1) Subject to Subsection (3) 
and except as provided in Subsection 
59-10-1403.2
(2)
, a
pass-through entity is not subject to a tax imposed by this chapter.
(2) Except as provided in Section 
59-10-1403.3
, the income, gain, loss, deduction, or
credit of a pass-through entity shall be passed through to one or more pass-through entity
taxpayers as provided in this part.
(3) A pass-through entity is subject to the return filing requirements of Sections
59-10-507
, 
59-10-514
, and 
59-10-516
.
(4) For purposes of taxation under this title, a pass-through entity that transacts
business in the state shall be classified in the same manner as the pass-through entity is
classified for federal income tax purposes.
Section 8. Section 
59-10-1403.2
 is amended to read:
59-10-1403.2.
Pass-through entity payment or withholding of tax on behalf of a
pass-through entity taxpayer -- Exceptions to payment or withholding requirement --
Procedures and requirements -- Failure to pay or withhold a tax on behalf of a
pass-through entity taxpayer.
(1) (a) Except as provided in [
Subsection (1)(b)
] 
Subsections (1)(b) and (2)
, for a
taxable year, a pass-through entity shall pay or withhold a tax:
(i) on:
(A) the business income of the pass-through entity; and
(B) the nonbusiness income of the pass-through entity derived from or connected with
Utah sources; and
(ii) on behalf of a pass-through entity taxpayer.
(b) A pass-through entity is not required to pay or withhold a tax under Subsection
(1)(a):
(i) on behalf of a pass-through entity taxpayer who is a resident individual;
(ii) if the pass-through entity is an organization exempt from taxation under Subsection
59-7-102
(1)(a);
(iii) if the pass-through entity:
(A) is a plan under Section 401, 408, or 457, Internal Revenue Code; and
(B) is not required to file a return under Chapter 7, Corporate Franchise and Income
Taxes, or this chapter; [
or
]
(iv) if the pass-through entity is a publicly traded partnership:
(A) as defined in Section 7704(b), Internal Revenue Code;
(B) that is classified as a partnership for federal income tax purposes; and
(C) that files an annual information return reporting the following with respect to each
partner of the publicly traded partnership with income derived from or connected with Utah
sources that exceeds $500 in a taxable year:
(I) the partner's name;
(II) the partner's address;
(III) the partner's taxpayer identification number; and
(IV) other information required by the commission[
.
]
; or
(v) on behalf of a pass-through entity taxpayer that is a nonresident individual if the
pass-through entity pays the tax described in Subsection (2).
(2) (a) For each taxable year that begins on or after January 1, 2022, but begins on or
before December 31, 2025, a pass-through entity that is not a disregarded pass-through entity
may elect to pay a tax in an amount equal to:
(i) the percentage listed in Subsection 
59-10-104
(2); and
(ii) voluntary taxable income.
(b) A pass-through entity that elects to pay the tax in accordance with Subsection (2)(a)
shall notify any final pass-through entity taxpayer of that election.
(c) A pass-through entity that pays a tax described in Subsection (2)(a) shall provide to
each pass-through entity taxpayer a statement that states the amount of tax paid on the income
attributed to the pass-through entity taxpayer.
(d) A payment of the tax described in Subsection (2)(a) on or before the last day of the
taxable year is an irrevocable election to be subject to the tax for the taxable year.
[
(2) (a)
] 
(3) (a)
 Subject to Subsection [
(2)
] 
(3)
(b), the tax a pass-through entity shall
pay or withhold on behalf of a pass-through entity taxpayer for a taxable year is an amount:
(i) determined by the commission by rule made in accordance with Title 63G, Chapter
3, Utah Administrative Rulemaking Act; and
(ii) that the commission estimates will be sufficient to pay the tax liability of the
pass-through entity taxpayer under this chapter with respect to the income described in
Subsection (1)(a)(i) 
or (2)(a)(ii)
 of that pass-through entity for the taxable year.
(b) The rules the commission makes in accordance with Subsection [
(2)
] 
(3)
(a):
(i) except as provided in Subsection [
(2)
] 
(3)
(c):
(A) shall:
(I) for a pass-through entity except for a pass-through entity that is an S corporation,
take into account items of income, gain, loss, deduction, and credit as analyzed on the schedule
for reporting partners' distributive share items as part of the federal income tax return for the
pass-through entity; or
(II) for a pass-through entity that is an S corporation, take into account items of
income, gain, loss, deduction, and credit as reconciled on the schedule for reporting
shareholders' pro rata share items as part of the federal income tax return for the pass-through
entity; and
(B) notwithstanding Subsection [
(2)
] 
(3)
(b)(ii)(D), take into account the refundable tax
credit provided in Section 
59-6-102
; and
(ii) may not take into account the following items if taking those items into account
does not result in an accurate estimate of a pass-through entity taxpayer's tax liability under this
chapter for the taxable year:
(A) a capital loss;
(B) a passive loss;
(C) another item of deduction or loss if that item of deduction or loss is generally
subject to significant reduction or limitation in calculating:
(I) for a pass-through entity taxpayer that is classified as a C corporation for federal
income tax purposes, unadjusted income as defined in Section 
59-7-101
;
(II) for a pass-through entity that is classified as an individual, partnership, or S
corporation for federal income tax purposes, adjusted gross income; or
(III) for a pass-through entity that is classified as an estate or a trust for federal income
tax purposes, unadjusted income as defined in Section 
59-10-103
; or
(D) a tax credit allowed against a tax imposed under:
(I) Chapter 7, Corporate Franchise and Income Taxes; or
(II) this chapter.
(c) The rules the commission makes in accordance with Subsection [
(2)
] 
(3)
(a) may
establish a method for taking into account items of income, gain, loss, deduction, or credit of a
pass-through entity if:
(i) for a pass-through entity except for a pass-through entity that is an S corporation,
the pass-through entity does not analyze the items of income, gain, loss, deduction, or credit on
the schedule for reporting partners' distributive share items as part of the federal income tax
return for the pass-through entity; or
(ii) for a pass-through entity that is an S corporation, the pass-through entity does not
reconcile the items of income, gain, loss, deduction, or credit on the schedule for reporting
shareholders' pro rata share items as part of the federal income tax return for the pass-through
entity.
[
(3) A
] 
(4) (a) Except as provided in Subsection (4)(b), a
 pass-through entity shall
remit to the commission the tax the pass-through entity pays or withholds on behalf of a
pass-through entity taxpayer under this section:
[
(a)
] 
(i)
 on or before the due date of the pass-through entity's return, not including
extensions; and
[
(b)
] 
(ii)
 on a form provided by the commission.
(b) A pass-through entity shall remit the tax described in Subsection (2) on or before
the last day of the pass-through entity's taxable year.
[
(4)
] 
(5)
 A pass-through entity shall provide a statement to a pass-through entity
taxpayer on behalf of whom the pass-through entity pays or withholds a tax under this section
showing the amount of tax the pass-through entity pays or withholds under this section for the
taxable year on behalf of the pass-through entity taxpayer.
[
(5)
] 
(6)
 Notwithstanding Section 
59-1-401
 or 
59-1-402
, the commission may not
collect an amount under this section for a taxable year from a pass-through entity and shall
waive any penalty and interest on that amount if:
(a) the pass-through entity fails to pay or withhold the tax on the amount as required by
this section on behalf of the pass-through entity taxpayer;
(b) the pass-through entity taxpayer:
(i) files a return on or before the due date for filing the pass-through entity's return,
including extensions; and
(ii) on or before the due date including extensions described in Subsection [
(5)
]
(6)
(b)(i), pays the tax on the amount for the taxable year:
(A) if the pass-through entity taxpayer is classified as a C corporation for federal
income tax purposes, under Chapter 7, Corporate Franchise and Income Taxes; or
(B) if the pass-through entity taxpayer is classified as an estate, individual, partnership,
S corporation, or a trust for federal income tax purposes, under this chapter; and
(c) the pass-through entity applies to the commission.
[
(6)
] 
(7)
 Notwithstanding Section 
59-1-401
 or 
59-1-402
, the commission may not
collect an amount under this section for a taxable year from a pass-through entity that is a trust
and shall waive any penalty and interest on that amount if:
(a) the pass-through entity fails to pay or withhold the tax on the amount as required by
this section on behalf of a dependent beneficiary;
(b) the pass-through entity applies to the commission; and
(c) (i) the dependent beneficiary complies with the requirements of Subsection [
(5)
]
(6)
(b); or
(ii) (A) the dependent beneficiary's adjusted gross income for the taxable year does not
exceed the basic standard deduction for the dependent beneficiary, as calculated under Section
63, Internal Revenue Code, for that taxable year; and
(B) the trustee of the trust retains a statement of dependent beneficiary income on
behalf of the dependent beneficiary.
[
(7)
] 
(8)
 If a pass-through entity would have otherwise qualified for a waiver of a
penalty and interest under Subsection [
(6)
] 
(7)
, except that the trustee of a trust has not applied
to the commission as required by Subsection [
(6)
] 
(7)
(b) or retained the statement of dependent
beneficiary income required by Subsection [
(6)
] 
(7)
(c)(ii)(B), it is a rebuttable presumption in
an audit that the pass-through entity would have otherwise qualified for the waiver of the
penalty and interest under Subsection [
(6)
] 
(7)
.
Section 9. 
Effective date.
If approved by two-thirds of all the members elected to each house, this bill takes effect
upon approval by the governor, or the day following the constitutional time limit of Utah
Constitution, Article VII, Section 8, without the governor's signature, or in the case of a veto,
the date of veto override.
Section 10. 
Retrospective operation.
(1) Except as provided in Subsection (2), this bill has retrospective operation for a
taxable year beginning on or after January 1, 2022.
(2) The changes to Section 
59-10-114
 have retrospective operation for a taxable year
beginning on or after January 1, 2021.