Enrolled Copy H.B. 106 1

Income Tax Revisions 2025 GENERAL SESSION STATE OF UTAH Chief Sponsor: Kay J. Christofferson Senate Sponsor: Daniel McCay 2

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LONG TITLE 4

General Description: 5

This bill amends income tax provisions. 6

Highlighted Provisions: 7

This bill: 8 ▸ amends the corporate franchise and income tax rates; 9 ▸ amends the individual income tax rate; 10 ▸ enacts nonrefundable corporate and individual income tax credits for employer-provided 11 child care; 12 ▸ allows a taxpayer to claim the nonrefundable child tax credit for child dependents under 13 one year old and up to five years old; and 14 ▸ makes conforming changes. 15

Money Appropriated in this Bill: 16

None 17

Other Special Clauses: 18

This bill provides retrospective operation. 19

Utah Code Sections Affected: 20

AMENDS: 21

59-7-104, as last amended by Laws of Utah 2024, Chapter 255 22

59-7-201, as last amended by Laws of Utah 2024, Chapter 255 23

59-10-104, as last amended by Laws of Utah 2024, Chapter 255 24

59-10-1002.2, as last amended by Laws of Utah 2023, Chapters 460, 462 25

59-10-1047, as last amended by Laws of Utah 2024, Chapter 235 26

ENACTS: 27

59-7-627, Utah Code Annotated 1953

H.B. 106 Enrolled Copy 28

59-10-1048, Utah Code Annotated 1953 29

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Be it enacted by the Legislature of the state of Utah: 31

Section 1. Section 59-7-104 is amended to read: 32

59-7-104 . Tax -- Minimum tax. 33

(1) Each domestic and foreign corporation, except a corporation that is exempt under 34 Section 59-7-102, shall pay an annual tax to the state based on the corporation's Utah 35 taxable income for the taxable year for the privilege of exercising the corporation's 36 corporate franchise or for the privilege of doing business in the state. 37

(2) The tax shall be [4.55] 4.5% of a corporation's Utah taxable income. 38

(3) The minimum tax a corporation shall pay under this chapter is $100. 39

Section 2. Section 59-7-201 is amended to read: 40

59-7-201 . Tax -- Minimum tax. 41

(1) There is imposed upon each corporation, except a corporation that is exempt under 42 Section 59-7-102, a tax upon the corporation's Utah taxable income for the taxable year 43 that is derived from sources within this state other than income for any period that the 44 corporation is required to include in the corporation's tax base under Section 59-7-104. 45

(2) The tax imposed by Subsection (1) shall be [4.55] 4.5% of a corporation's Utah taxable 46 income. 47

(3) In no case shall the tax be less than $100. 48

Section 3. Section 59-7-627 is enacted to read: 49

59-7-627 . Nonrefundable tax credits for employer-provided child care. 50

(1) As used in this section: 51 (a)(i) "Qualified child care expenditure" means an amount paid or incurred for the 52 operating costs of a qualified child care facility of the employer, whether the 53 employer operates the qualified child care facility or contracts with a third party 54 provider to provide child care services at the qualified child care facility. 55 (ii) "Qualified child care expenditure" includes costs related to training employees 56 and providing increased compensation to employees with higher levels of child 57 care training. 58 (b) "Qualified child care facility" means center based child care as that term is defined in 59 Section 26B-2-401 that is located in the state. 60 (c) "Qualified construction expenditure" means an amount paid or incurred to acquire, 61 construct, rehabilitate, or expand property: - 2 -

Enrolled Copy H.B. 106 62 (i) for a qualified child care facility of the employer; and 63 (ii) with respect to which the employer is allowed a deduction for depreciation, or 64 amortization in lieu of depreciation. 65 (d) "Qualifying taxpayer" means a taxpayer that: 66 (i) is an employer; and 67 (ii) qualifies for and claims the federal employer-provided child care tax credit 68 described in Section 45F, Internal Revenue Code, for the current taxable year. 69 (e) "Recapture event" means an employer fails to operate a qualified child care facility 70 for which the employer claims a tax credit under this section as a child care facility 71 for at least five consecutive taxable years after the taxable year on which the 72 employer first claims a tax credit under this section. 73 (f) "Third party provider" means: 74 (i) a new child care provider; or 75 (ii) an existing child care provider that can perform the contract without reducing the 76 provider's existing child care services. 77

(2)(a) A qualifying taxpayer may claim a nonrefundable tax credit equal to 20% of the 78 qualified construction expenditures the qualifying taxpayer incurred during the 79 taxable year. 80 (b) A qualifying taxpayer may carry forward, to the next five taxable years, the amount 81 of the qualifying taxpayer's tax credit described in this Subsection (2) that exceeds 82 the qualifying taxpayer's income tax liability for the taxable year. 83

(3)(a)(i) Subject to Subsection (3)(a)(ii), a qualifying taxpayer may claim a 84 nonrefundable tax credit equal to 10% of the qualified child care expenditures the 85 qualifying taxpayer incurred during the taxable year. 86 (ii) A qualifying taxpayer may claim a tax credit under this Subsection (3) for 87 qualified child care expenditures only if the qualifying taxpayer claims a tax credit 88 under Subsection (2) for the current taxable year or a previous taxable year. 89 (b) A qualifying taxpayer may not carry forward or carry back the tax credit described in 90 this Subsection (3) that exceeds the qualifying taxpayer's income tax liability for the 91 taxable year. 92

(4)(a)(i) If a recapture event happens within two taxable years after the first taxable 93 year in which the qualifying taxpayer claims a tax credit under this section, a 94 qualifying taxpayer shall repay 100% of the tax credit a qualifying taxpayer 95 receives under this section for any taxable year. - 3 -

H.B. 106 Enrolled Copy 96 (ii) If a recapture event happens more than two taxable years but fewer than three 97 taxable years after the first taxable year in which the qualifying taxpayer claims a 98 tax credit under this section, a qualifying taxpayer shall repay 75% of the tax 99 credit a qualifying taxpayer receives under this section for any taxable year. 100 (iii) If a recapture event happens more than three taxable years but fewer than four 101 taxable years after the first taxable year in which the qualifying taxpayer claims a 102 tax credit under this section, a qualifying taxpayer shall repay 50% of the tax 103 credit a qualifying taxpayer receives under this section for any taxable year. 104 (iv) If a recapture event happens more than four taxable years but fewer than five 105 taxable years after the first taxable year in which the qualifying taxpayer claims a 106 tax credit under this section, a qualifying taxpayer shall repay 25% of the tax 107 credit a qualifying taxpayer receives under this section for any taxable year. 108 (b) A qualifying taxpayer shall make a payment for a recapture event for the taxable year 109 in which the recapture event occurs. 110

Section 4. Section 59-10-104 is amended to read: 111

59-10-104 . Tax basis -- Tax rate -- Exemption. 112

(1) A tax is imposed on the state taxable income of a resident individual as provided in this 113 section. 114

(2) For purposes of Subsection (1), for a taxable year, the tax is an amount equal to the 115 product of: 116 (a) the resident individual's state taxable income for that taxable year; and 117 (b) [4.55] 4.5%. 118

(3) This section does not apply to a resident individual exempt from taxation under Section 119 59-10-104.1. 120

Section 5. Section 59-10-1002.2 is amended to read: 121

59-10-1002.2 . Apportionment of tax credits. 122

(1) A nonresident individual or a part-year resident individual that claims a tax credit in 123 accordance with Section 59-10-1017, 59-10-1018, 59-10-1019, 59-10-1022, 59-10-1023, 124 59-10-1024, 59-10-1028, 59-10-1042, 59-10-1043, 59-10-1044, 59-10-1046, [or ] 125 59-10-1047, or 59-10-1048 may only claim an apportioned amount of the tax credit 126 equal to: 127 (a) for a nonresident individual, the product of: 128 (i) the state income tax percentage for the nonresident individual; and 129 (ii) the amount of the tax credit that the nonresident individual would have been - 4 -

Enrolled Copy H.B. 106 130 allowed to claim but for the apportionment requirements of this section; or 131 (b) for a part-year resident individual, the product of: 132 (i) the state income tax percentage for the part-year resident individual; and 133 (ii) the amount of the tax credit that the part-year resident individual would have been 134 allowed to claim but for the apportionment requirements of this section. 135

(2) A nonresident estate or trust that claims a tax credit in accordance with Section 136 59-10-1017, 59-10-1020, 59-10-1022, 59-10-1024, [or ]59-10-1028, or 59-10-1048 may 137 only claim an apportioned amount of the tax credit equal to the product of: 138 (a) the state income tax percentage for the nonresident estate or trust; and 139 (b) the amount of the tax credit that the nonresident estate or trust would have been 140 allowed to claim but for the apportionment requirements of this section. 141

Section 6. Section 59-10-1047 is amended to read: 142

59-10-1047 . Nonrefundable child tax credit. 143

(1) As used in this section: 144 (a) "Joint filing status" means the same as that term is defined in Section 59-10-1018. 145 (b) "Head of household filing status" means the same as that term is defined in Section 146 59-10-1018. 147 (c) "Married filing separately status" means a married individual who: 148 (i) does not file a single federal individual income tax return jointly with that married 149 individual's spouse for the taxable year; and 150 (ii) files a single federal individual income tax return for the taxable year. 151 (d) "Modified adjusted gross income" means the sum of the following for a claimant or, 152 if the claimant's federal individual income tax return is allowed a joint filing status, 153 the claimant and the claimant's spouse: 154 (i) adjusted gross income for the taxable year for which a tax credit is claimed under 155 this section; 156 (ii) any interest income that is not included in adjusted gross income for the taxable 157 year described in Subsection (1)(d)(i); and 158 (iii) any addition to adjusted gross income required by Section 59-10-114 for the 159 taxable year described in Subsection (1)(d)(i). 160 (e) "Qualifying child" means an individual: 161 (i) with respect to whom the claimant is allowed to claim a tax credit under Section 162 24, Internal Revenue Code, on the claimant's federal individual income tax return 163 for the taxable year; and - 5 -

H.B. 106 Enrolled Copy 164 (ii) who is [at least one year old and younger than five] under six years old on the last 165 day of the claimant's taxable year. 166 (f) "Single filing status" means a single individual who files a single federal individual 167 income tax return for the taxable year. 168

(2) Subject to [Subsection] Section 59-10-1002.2, a claimant may claim a nonrefundable tax 169 credit of $1,000 for each qualifying child. 170

(3) A claimant may not carry forward or carry back the amount of the tax credit that 171 exceeds the claimant's tax liability. 172

(4) The tax credit allowed by Subsection (2) claimed on a return filed under this part shall 173 be reduced by $.10 for each dollar by which modified adjusted gross income for 174 purposes of the return exceeds: 175 (a) for a federal individual income tax return that is allowed a married filing separately 176 status, $27,000; 177 (b) for a federal individual income tax return that is allowed a single filing status or head 178 of household filing status, $43,000; and 179 (c) for a federal individual income tax return that is allowed a joint filing status, $54,000. 180

Section 7. Section 59-10-1048 is enacted to read: 181

59-10-1048 . Nonrefundable tax credits for employer-provider child care. 182

(1) As used in this section: 183 (a) "Qualified child care expenditure" means the same as that term is defined in Section 184 59-7-627. 185 (b) "Qualified child care facility" means the same as that term is defined in Section 186 59-7-627. 187 (c) "Qualified construction expenditure" means the same as that term is defined in 188 Section 59-7-627. 189 (d) "Qualifying claimant" means a claimant, estate, or trust that: 190 (i) is an employer; and 191 (ii) qualifies for and claims the federal employer-provided child care tax credit 192 described in Section 45F, Internal Revenue Code, for the current taxable year. 193 (e) "Recapture event" means the same as that term is defined in Section 59-7-627. 194 (f) "Third party provider" means the same as that term is defined in Section 59-7-627. 195

(2)(a) A qualifying claimant may claim a nonrefundable tax credit equal to 20% of the 196 qualified construction expenditures the qualifying claimant incurred during the 197 taxable year. - 6 -

Enrolled Copy H.B. 106 198 (b) A qualifying claimant may carry forward, to the next five taxable years, the amount 199 of the qualifying claimant's tax credit described in this Subsection (2) that exceeds 200 the qualifying claimant's income tax liability for the taxable year. 201

(3)(a)(i) Subject to Subsection (3)(a)(ii), a qualifying claimant may claim a 202 nonrefundable tax credit equal to 10% of the qualified child care expenditures the 203 qualifying claimant incurred during the taxable year. 204 (ii) A qualifying claimant may claim a tax credit under this Subsection (3) for 205 qualified child care expenditures only if the qualifying claimant claims a tax credit 206 under Subsection (2) for the current taxable year or a previous taxable year. 207 (b) A qualifying claimant may not carry forward or carry back the tax credit described in 208 this Subsection (3) that exceeds the qualifying claimant's income tax liability for the 209 taxable year. 210

(4)(a)(i) If a recapture event happens within two taxable years after the first taxable 211 year in which the qualifying claimant claims a tax credit under this section, a 212 qualifying claimant shall repay 100% of the tax credit a qualifying claimant 213 receives under this section for any taxable year. 214 (ii) If a recapture event happens more than two taxable years but fewer than three 215 taxable years after the first taxable year in which the qualifying claimant claims a 216 tax credit under this section, a qualifying claimant shall repay 75% of the tax 217 credit a qualifying claimant receives under this section for any taxable year. 218 (iii) If a recapture event happens more than three taxable years but fewer than four 219 taxable years after the first taxable year in which the qualifying claimant claims a 220 tax credit under this section, a qualifying claimant shall repay 50% of the tax 221 credit a qualifying claimant receives under this section for any taxable year. 222 (iv) If a recapture event happens more than four taxable years but fewer than five 223 taxable years after the first taxable year in which the qualifying claimant claims a 224 tax credit under this section, a qualifying claimant shall repay 25% of the tax 225 credit a qualifying claimant receives under this section for any taxable year. 226 (b) A qualifying claimant shall make a payment for a recapture event for the taxable year 227 in which the recapture event occurs. 228

Section 8. Effective Date. 229

This bill takes effect on May 7, 2025. 230

Section 9. Retrospective operation. 231

This bill has retrospective operation for a taxable year beginning on or after January 1, - 7 -

H.B. 106 Enrolled Copy 232

2025. - 8 -