Part 2 – Subtractions from Income

Enter the following subtractions from income that apply. Attach TC-40A to your return.

Write the code and amount of each subtraction from income in Part 2. Total the amounts and carry the total to TC-40, line 8.

Codes for Subtractions from Income, TC-40A, Part 2

71 Interest from Utah municipal bonds and U. S. government obligations

77 Native American income

78 Railroad retirement income

79 Equitable adjustments

82 Nonresident active duty military pay

85 State tax refund distributed to beneficiary of trust

88 Nonresident military spouse income

89 FDIC premiums

90 Previously taxed retirement income

Each subtraction from income is explained below.

(71) Interest from Utah Municipal Bonds and U. S. Government Obligations (UCA §59-10-114(2)(a) and (f))

Utah Municipal Bonds

Interest earned on Utah municipal bonds is exempt from Utah income tax.

Municipal bond interest is usually excluded from federal adjusted gross income. In these cases, do not subtract municipal bond interest.

Some municipal bond interest is included in federal adjusted gross income, (e.g., Build America Bonds, etc.). In these cases, deduct Utah municipal bond interest from Utah taxable income. Enter the non-taxable subtraction on TC-40A, Part 2, using code 71.

Keep all records and documentation to support this subtraction.

U.S. Government Obligations

Interest earned on U.S. Government obligations is exempt from Utah income tax. These obligations include:

Treasury bills

Treasury notes

E, EE, H, HH, and I bonds

The following income is NOT exempt from Utah income tax:

Interest or dividends from Federal National Mortgage Association (FNMA) and Government National Mortgage Association (GNMA).

Interest on IRS or other federal agency refunds.

The following conditions determine if the instrument qualifies as a U.S. Government obligation (see U.S. Supreme Court decision, Smith vs. Davis , 323 U.S. 111 (1944)). The instrument must:

be a written document,

bear interest,

contain a binding promise by the U.S. Government to pay a specific sum on a specific date, and

have congressional authorization to pledge the full faith and credit of the United States in support of the promise to pay.

You may only deduct interest or dividend income from U.S. Government obligations included in your federal adjusted gross income. Before entering an amount, subtract any related interest expense on money borrowed to purchase the obligation or security.

See Pub 33, Interest from U.S. Government Obligations .

Keep all records, forms and worksheets to support this subtraction.

(77) Native American Income (UCA §59-10-114(2)(b) and (e))

Some income of Utah Native Americans is exempt from Utah income tax. To qualify, you must:

be an enrolled member of a Native American tribe in Utah,

live on your tribe’s reservation, and

earn the income on your tribe’s reservation (for active duty military income, see Pub 57 ).

Also, enrolled members of the Ute tribe who work on the Uintah and Ouray Reservation and live on land removed from that reservation under Hagen vs. Utah (510 U.S. 399 (1994)) are exempt from Utah income tax on income earned on the reservation.

Enter the exempt income included in your federal total income on TC-40A, Part 2, using code 77. Enter your enrollment/census number and your Nation/Tribe Code from the following list: