No. 40461 (New Rule): Rule R357-15. Enterprise Zone Tax Credit

(New Rule)

DAR File No.: 40461
Filed: 06/01/2016 03:26:36 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is being created in response to the requirements enacted by H.B. 31 of the 2016 General Session. H.B. 31 requires the office to create rules governing the application and approval process for Enterprise Zone Tax Credits.

Summary of the rule or change:

This rule creates the form and content of an application for an Enterprise Zone tax credit, the documentation required to receive an Enterprise Zone tax credit, and the administration of the program including relevant compliance for each type of tax credit offered in an Enterprise Zone.

State statutory or constitutional authorization for this rule:

• Subsection 63N-2-213(6)

Anticipated cost or savings to:

the state budget:

There is no cost to the state and potential savings because this new application and approval process will prevent overall misuse of incorrectly claimed Enterprise Zone Tax Credits. The savings are not quantifiable at this time because we do not have any data regarding who claimed the tax credits in the past and how likely an application process vs. a "check-the-box" on the Utah tax forms will deter potential applicants from applying. Furthermore, we do not know how much of the tax credits claimed in the past were done erroneously. The lack of this information prevents the agency from being able to quantify an amount of potential savings.

local governments:

This rule does not impact local governments because they cannot receive or claim tax credits.

small businesses:

This rule will impact the businesses that apply for a tax credit because they will need to provide various forms and documentation in order to apply and be awarded a tax credit. The cost cannot be estimated because the cost will strictly be a cost associated with the time it takes to collect the requisite documents for the application and requirements outlined in the rule. There are several different tax credits covered by this rule and relevant sections of the Utah Code. Thus, times and subsequent costs will vary.

persons other than small businesses, businesses, or local governmental entities:

Other individuals may be impacted that claimed the tax credit in the past because this rule now creates an application process to claim the tax credits that did not exist before. It will not create new costs beyond those associated with the time it takes for applying and any compliance once awarded a tax credit. The cost cannot be estimated because the cost will strictly be a cost associated with the time it takes to collect the requisite documents for the application and requirements outlined in the rule. There are several different tax credits covered by this rule and relevant sections of the Utah Code. Thus, times and subsequent costs will vary.

Compliance costs for affected persons:

All those affected will not have costs beyond those associated with applying and compliance once awarded a tax credit. The cost cannot be estimated because the cost will strictly be a cost associated with the time it takes to collect the requisite documents for the application and requirements outlined in the rule. There are several different tax credits covered by this rule and relevant sections of the Utah Code. Thus, times and subsequent costs will vary.

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

There are no fiscal impacts or costs beyond those associated with applying and compliance once awarded a tax credit.

Vale Hale, 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
60 E SOUTH TEMPLE 3RD FLR
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Jeffrey Van Hulten at the above address, by phone at 801-538-8694, 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:

07/15/2016

This rule may become effective on:

07/22/2016

Authorized by:

Val Hale, Executive Director

RULE TEXT

R357. Governor, Economic Development.

R357-15. Enterprise Zone Tax Credit

R357-15-1. Authority.

(1) Subsection 63N-2-213(6) requires the office to make rules establishing the form and content of an application for an Enterprise Zone tax credit, the documentation required to receive an Enterprise Zone tax credit, and the administration of the program, including relevant timelines and deadlines.

 

R357-15-2. Definitions.

(1) The definitions below are in addition to or serve to clarify the definitions found in Utah Code Section 63N-2-201 Utah Code Section 59-7-614.10, Section 59-10-1036, and Section 63N-2-202.

(2) "Baseline" means: The highest total number of employees employed by the applicant for the previous three years. This number will be the baseline to determine all new incremental full-time employee positions

(3) "Qualifying investment in plant, equipment, or other depreciable property" means an investment in most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment that qualifies for depreciation under the Internal Revenue Service's Form 4562.

(4) "Value-added business entity" means a company that creates a change in the physical state or form of a product in a manner that enhances its value, thus expanding the customer base of the product. Examples include milling wheat into flour or making strawberries into jam.

 

R357-15-3. Application Form and Content.

(1) An application form will be provided by the Office and will contain the following content:

(a) General submission instructions;

(b) Types of tax credits available to be claimed;

(c) Criteria for qualification for each tax credit;

(d) Any required deadlines and relevant timelines; and

(e) All required documents and information necessary for verification and approval of the application.

(2) The application shall be created in an electronic format available to the public at business.utah.gov

(3) The application shall also be available in paper format for any person or entity that requests a paper copy via mail or telephone.

 

R357-15-4. Required Documentation and Verification Information.

(1) To claim any of the tax credits available under 63N-2-201 et. seq. the following basic information must be provided to the Office.

(a) Business or Individual's name that is claiming a tax credit on a Utah Tax filing submission;

(b) A contact name, email, phone number, mailing address and relevant title(s);

(c) The physical address where the business or individual is located including a screenshot of the address pinpoint within the Enterprise Zone as found on locate.utah.gov.

i. A tax credit shall not be issued if the only connection to an enterprise zone is a P.O. Box;

(d) The business or individual's tax identification number whether a federally provided Employer Identification Number (EIN) or a Social Security Number (SSN); and

(e) Additional information as required in the Application.

(2) To qualify for any of the Employment tax credits pursuant to Subsections 63N-2-213(7)(a)-(d) the following documentation and information is required:

(a) A current total of all full time employees including the total of employees as reported to the Department of Workforce Services for the last three years.

(b) The number of New Incremental Employee Positions created above the baseline.

i. For each New Incremental Employee Position above the baseline the applicant must provide:

1. Employee Name;

2. Employee Hourly Wage and/or Annual Salary;

3. Employee Average Hours worked per week;

4. Employee Hire date;

5. If applicable, proof of employer-sponsored health insurance program if the employer pays at least 50% of the premium cost;

6. If applicable, evidence that the business entity adds value to agricultural commodities through manufacturing or processing.

a. List of sample products or processes.

7. Other documentation requested by the Office on the tax credit application.

(3) To qualify for the private capital investment tax credit under Subsections 63N-2-213(7)(e)-(f) the following documentation and information is required:

(a) If the private capital investment is for the rehabilitation of a building in an Enterprise Zone the applicant must provide:

i. The rehabilitated building's physical address

ii. Documents showing the current owner such as the deed or mortgage documents;

iii. The date the building was last occupied;

iv. A current occupancy permit or certificate;

v. Receipts and paid invoices of all rehabilitation expenses totaling the amount the tax credit is calculated from; and

1. The Office may request further documentation to verify receipts and paid invoices including accompanying bank statements.

vi. Any other documentation requested by the Office including a sworn affidavit confirming the rehabilitation costs from the owner of the building if applicant is not the owner of the building.

(b) If the private capital investment is a qualifying investment in plant, equipment, or other depreciable property in an Enterprise Zone the applicant must provide:

i. Receipts and/or loan documentation showing the entire purchase price and amount paid by the applicant.

 

R357-15-5. Application Review and Authorization Process for an Enterprise Zone Tax Credit.

(1) The Office shall review all submitted applications within a reasonable amount of time and approve or deny the application

(a) The Office shall review all tax credits claimed and documentation provided.

(b) The Office may request additional documentation or information if the Office determines that further verification is required.

i. Failure to comply with a request for additional documentation may result in a denial of the application.

(2) The Office will issue tax credit certificates for all tax credits for which an applicant has applied, qualified and been approved by the Office.

(a) This Office may issue a partial approval if only parts of the application are determined to qualify.

(3) The Office must provide written notice that includes its reasoning when denying any or a portion of a tax credit application.

(4) If approved in whole or in part, the Office shall provide any necessary documents and instructions, approved by the Utah Tax Commission, for claiming the tax credit.

 

R357-15-6. Appeal of Application Denial.

(1) A hearing contesting the denial of an application in whole or in part of an Enterprise Zone Tax Credit is designated as informal hearings.

 

KEY: enterprise zones, tax credits

Date of Enactment or Last Substantive Amendment: 2016

Authorizing, Implemented, or Interpreted Law: 63N-2-213(6)

 

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