No. 31153 (New Rule): R357-3. Refundable Economic Development Tax Credit

DAR File No.: 31153
Filed: 04/15/2008, 04:35
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this new rule is to specify the conditions whereby a business entity may qualify for a refundable economic development tax credit, as required by the Legislature in S.B. 185. (DAR NOTE: S.B. 185 (2008) is found at Chapter 372, Laws of Utah 2008, and will be effective 05/05/2008.)

Summary of the rule or change:

The rule establishes conditions whereby a business entity may qualify for a refundable economic development tax credit, including: being located and making direct investment within an economic development zone; bringing new jobs to Utah; having significant capital investment, creating high-paying jobs, or making significant purchases from Utah vendors; and generating new state revenues.

State statutory or constitutional authorization for this rule:

Sections 63M-1-2404, 59-7-614.2, 59-10-1107, 59-10-1, 59-10-2, and 59-10-4, and Title 59, Chapter 7

Anticipated cost or savings to:

the state budget:

The refundable economic development tax credit program establishes that the tax credit be limited to a maximum of 30 percent of new state tax revenue generated by the qualifying project. Because the tax credit is based on a portion of the new state tax revenue, qualified projects will always result in a net gain to the state budget.

local governments:

The refundable economic development tax credit does not directly impact local government budgets. Qualified projects will likely generate local tax revenue from secondary economic impacts of the business activity. The rule establishes criteria under which business entities apply to the state for tax credits. Local governments are not involved in evaluating the application nor are they eligible to apply.

small businesses and persons other than businesses:

Small businesses which qualify for the tax credit would benefit from the incentive. A firm estimate on the benefit received by small business cannot be provided: 1) because this is a new program and there is not sufficient data to allow a prediction on how many businesses will apply for the credit; and 2) because the amount of the tax credit may vary.

Compliance costs for affected persons:

Compliance costs include the cost associated with the time and paperwork for applying for an refundable economic development tax credit. Those application costs are negligible. There are no application fees.

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

Qualified businesses will have the fiscal benefit of the tax credit and reduced corporate income tax liability. Jason Perry, Executive Director

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

Governor
Economic Development
324 S State
5th Floor
SALT LAKE CITY UT 84111

Direct questions regarding this rule to:

Michael Sullivan at the above address, by phone at 801-538-8811, by FAX at 801-538-8888, 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:

06/02/2008

This rule may become effective on:

06/09/2008

Authorized by:

Jason Perry, Director

RULE TEXT

R357. Governor, Economic Development.

R357-3. Refundable Economic Development Tax Credit.

R357-3-1. Authority.

(1) Subsection 63M-1-2404 requires the office to make rules establishing the conditions that a business entity must meet to qualify for a tax credit under Part 24 of the Utah Code Annotated.

 

R357-3-2. Definitions.

____(1) Terms in these rules are used as defined in UCA 63M-1-2403.

 

R357-3-3. Conditions.

(1) To qualify for an economic development tax credit a business entity must have a new commercial project which:

(a) must be within an economic development zone created under UCA 63M-1-2404;

(b) Includes direct investment within the geographic boundaries of the development zone created under UCA 63M-1-2404;

(c) brings new incremental jobs to Utah;

(d) includes significant capital investment, the creation of high paying jobs, or significant purchases from Utah vendors and providers, or any combination of these three economic factors;

(e) generates new state revenues; and

(2) The business entity must follow the procedure in UCA 63M-1-2405 for obtaining a tax credit certificate.

(3) The office, with advice from the board, may enter into an agreement with a business entity authorizing a tax credit if the business entity meets the standards under subsections (1) and (2).

(4) A business entity is eligible for an economic development tax credit only if the office has entered into an agreement under subsection (3) with the business entity.

 

KEY: economic development, tax credit, jobs

Date of Enactment or Last Substantive Amendment: 2008

Authorizing, and Implemented or Interpreted Law: 63M-1-2404