DAR File No. 31534

Tax Commission, Auditing

R865-6F-35

S Corporation Determination of Tax Pursuant to Utah Code Ann. Section 59-7-703

NOTICE OF PROPOSED RULE

DAR File No.: 31534
Filed: 06/06/2008, 10:19
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The proposed amendment is necessary because of recent changes in the law regarding the calculation of state income tax.

Summary of the rule or change:

The proposed amendment deletes language referring to deductions that no longer exist because of recent statutory changes; adds a recapture provision required by federal law that has been commission practice.

State statutory or constitutional authorization for this rule:

Section 59-7-703

Anticipated cost or savings to:

the state budget:

None--Any fiscal impacts were taken into account in H.B. 359 (2008). (DAR NOTE: H.B. 359 (2008) is found at Chapter 389, Laws of Utah 2008, and was effective 05/05/2008.)

local governments:

None--Any fiscal impacts were taken into account in H.B. 359 (2008).

small businesses and persons other than businesses:

None--Any fiscal impacts were taken into account in H.B. 359 (2008).

Compliance costs for affected persons:

None--The proposed amendment removes a deduction statutes no longer allow.

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

There are no anticipated impacts. 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 clee@utah.gov

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:

07/31/2008

This rule may become effective on:

08/07/2008

Authorized by:

D'Arcy Dixon, Commissioner

R865. Tax Commission, Auditing.

R865-6F. Franchise Tax.

R865-6F-35. S Corporation Determination of Tax Pursuant to Utah Code Ann. Section 59-7-703.

(1) For purposes of Section 59-7-703(2)(b)(i), "items of income or loss from Schedule K of the 1120S federal form" shall be calculated by:

(a) adding back to the line on the Schedule K labeled "Income/loss reconciliation" the amount included on that schedule for:

(i) charitable contributions;[ and]

(ii) total foreign taxes paid or accrued; and

(iii) recapture of a benefit derived from a deduction under Section 179, Internal Revenue Code.

(b) If the S corporation was not required to complete the line labeled "Income/loss reconciliation" on the Schedule K, a pro forma calculation of the amounts for charitable contributions and foreign taxes paid or accrued, and of the amount that would have been entered on the "Income/loss reconciliation" line shall be used for purposes of this rule.

[(2) The amount that the S corporation shall withhold for nonresident shareholders shall be computed as follows:

(a) The deduction shall be equal to 15 percent of the Utah income attributable to nonresident shareholders.

(b) The deduction in Subsection (2)(a) shall be allowed in place of a standard deduction, itemized deductions, personal exemptions, federal tax determined for the same period, or any other deductions.

(3) The tax shall be computed using the maximum Utah individual income tax rate applied to the combined nonresident shareholders' share of the S corporation's income after deduction of the amount allowed under Subsection (2).](2) An S corporation shall withhold tax on behalf of a nonresident shareholder at the rate in effect in Section 59-10-104.

[(4)](3) An S corporation with nonresident shareholders shall complete Schedule N of form TC-20S, and shall provide the following information for each nonresident shareholder:

(a) name;

(b) social security number;

(c) percentage of S corporation held; and

(d) amount of Utah tax paid or withheld on behalf of that shareholder.

 

KEY: taxation, franchises, historic preservation, trucking industries

Date of Enactment or Last Substantive Amendment: [March 14], 2008

Notice of Continuation: March 8, 2007

Authorizing, and Implemented or Interpreted Law: 59-7-703