No. 30689 (Amendment): R865-9I-37. Enterprise Zone Individual Income Tax Credits Pursuant to Utah Code Ann. Sections 9-2-401 through 9-2-414

DAR File No.: 30689
Filed: 11/07/2007, 01:19
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of the amendment is to more clearly state the commission's interpretation of the enterprise zone investment tax credit.

Summary of the rule or change:

The proposed amendment clarifies that, for purposes of the investment tax credit, the plant, equipment, or other depreciable property for which the credit is taken is located within the boundaries of the enterprise zone and is used exclusively in business operations conducted within the enterprise zone.

State statutory or constitutional authorization for this rule:

Sections 63-38f-401 through 63-38f-414

Anticipated cost or savings to:

the state budget:

None--The proposed amendment clarifies the current Tax Commission practice.

local governments:

None--The proposed amendment clarifies the current Tax Commission practice.

small businesses and persons other than businesses:

None--The proposed amendment clarifies the current Tax Commission practice.

Compliance costs for affected persons:

None--The proposed amendments clarify current Tax Commission practice.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are no anticipated costs. D'Arcy Dixon, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Tax Commission
Auditing
210 N 1950 W
SALT LAKE CITY UT 84134

Direct questions regarding this rule to:

Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/31/2007

This rule may become effective on:

01/07/2008

Authorized by:

D'Arcy Dixon, Commissioner

RULE TEXT

R865. Tax Commission, Auditing.

R865-9I. Income Tax.

R865-9I-37. Enterprise Zone Individual Income Tax Credits Pursuant to Utah Code Ann. Sections 63-38f-401 through 63-38f-414.

(1) Definitions:

(a) "Business engaged in retail trade" means a business that makes a retail sale as defined in Section 59-12-102.

(b) "Construction work" does not include facility maintenance or repair work.

(c) "Employee" means a person who qualifies as an employee under Internal Revenue Service Regulation 26 CFR 31.3401(c)(1).

(d) "Public utilities business" means a public utility under Section 54-2-1.

(e) "Transfer" pursuant to Section 63-38f-411, means the relocation of assets and operations of a business, including personnel, plant, property, and equipment.

(2) For purposes of the investment tax credit, an investment is a qualifying investment if the plant, equipment, or other depreciable property for which the credit is taken is:

(a) [The plant, equipment, or other depreciable property for which the credit is taken is ]located within the boundaries of the enterprise zone[.]; and

(b) [The plant, equipment, or other depreciable property for which the investment tax credit is taken is in a business that is operational]used exclusively in business operations conducted within the enterprise zone.

(3) Plant, equipment, or other depreciable property used in operations conducted outside the enterprise zone do not qualify for the credit, even though those operations may be related to operations conducted within an enterprise zone that qualify for the credit.

(4) The following examples relate to the investment tax credit.

(a) A furniture manufacturer operates a manufacturing facility that is located in an enterprise zone. The manufacturer purchases two trucks that are based at the facility and used to pick up raw materials from suppliers, some or all of whom may be outside the enterprise zone, and to deliver finished product to final customers, some or all of whom may be outside the enterprise zone. The trucks qualify for the investment tax credit because they are used exclusively in a business operation, the furniture manufacturing facility, that is located within the enterprise zone.

(b) If the same manufacturer described in Subsection (4)(a) had two facilities, one located within the enterprise zone, and one located outside the enterprise zone, and used the same two trucks for the same purposes for both facilities, the trucks would not qualify for the investment tax credit because they are not used exclusively in the facility located within the enterprise zone.

(c) A business consists of a mine office located in an enterprise zone and a mine located outside the enterprise zone. The business may claim the investment tax credit for plant, equipment, or other depreciable property located in the mine office, but not for plant, equipment, or other depreciable property used in the mine outside the enterprise zone.

[(3)](5) The calculation of the number of full-time positions for purposes of the credits allowed under Subsections 63-38f-413(1)(a) through (d) shall be based on the average number of employees reported to the Department of Workforce Services for the four quarters prior to the area's designation as an enterprise zone.

[(4)](6) To determine whether at least 51 percent of the business firm's employees reside in the county in which the enterprise zone is located, the business firm shall consider every employee reported to the Department of Workforce Services for the tax year for which an enterprise zone credit is sought.

[(5)](7) A business firm that conducts non-retail operations and is engaged in retail trade qualifies for the credits under Section 63-38f-413 if the retail trade operations constitute a de minimis portion of the business firm's total operations.

[(6)](8) An employee whose duties include both non-construction work and construction work does not perform a construction job if the construction work performed by the employee constitutes a de minimis portion of the employee's total duties.

[(7)](9) Records and supporting documentation shall be maintained for three years after the date any returns are filed to support the credits taken. For example: If credits are originally taken in 1988 and unused portions are carried forward to 1992, records to support the original credits taken in 1988 must be maintained for three years after the date the 1992 return is filed.

[(8)](10) If an enterprise zone designation is revoked prior to the expiration of the period for which it was designated, only tax credits earned prior to the loss of that designation will be allowed.

 

KEY: historic preservation, income tax, tax returns, enterprise zones

Date of Enactment or Last Substantive Amendment: [April 16, 2007]2008

Notice of Continuation: March 20, 2007

Authorizing, and Implemented or Interpreted Law: 63-38f-401 through 63-38f-414