DAR File No. 32789

Tax Commission, Auditing

R865-9I-56

Determination of Amounts Withheld by a Pass-Through Entity that is an S Corporation Pursuant to Utah Code Ann. Section 59-10-116, 59-10-117, 59-10-118, 59-10-1403.2 and 59-10-1405

NOTICE OF PROPOSED RULE

DAR File No.: 32789
Filed: 07/06/2009, 01:18
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

S.B. 23 (2009 General Session) moves S Corporations from the corporate tax chapter of Title 59 to the individual income tax chapter of Title 59. (DAR NOTE: S.B. 23 (2009) is found at Chapter 312, Laws of Utah 2009, and was effective 03/25/2009.)

Summary of the rule or change:

The proposed rule takes the language of Section R865-6F-35, which is deleted, and brings it into the individual income tax rule, Rule R865-9I, since an S Corporation is now treated as a pass-through entity under the individual income tax chapter of Title 59. (DAR NOTE: The proposed amendment to Section R865-6F-35 is under DAR No. 32788 in this issue, August 1, 2009, of the Bulletin.)

State statutory or constitutional authorization for this rule:

Sections 59-10-116, 59-10-117, 59-10-118, 59-10-1403.2, and 59-10-1405

Anticipated cost or savings to:

the state budget:

None--Any impacts were considered in S.B. 23 (2009).

local governments:

None--Any impacts were considered in S.B. 23 (2009).

small businesses and persons other than businesses:

None--Any impacts were considered in S.B. 23 (2009).

Compliance costs for affected persons:

None--The rule has been moved from the corporate tax rules to the individual income tax rules.

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

There are no anticipated costs. 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:

08/31/2009

This rule may become effective on:

09/07/2009

Authorized by:

D'Arcy Dixon, Commissioner

R865. Tax Commission, Auditing.

R865-9I. Income Tax.

R865-9I-56. Determination of Amounts Withheld by a Pass-Through Entity that is an S Corporation Pursuant to Utah Code Ann. Section 59-10-116, 59-10-117, 59-10-118, 59-10-1403.2, and 59-10-1405.

(1) The provisions of this rule apply to a pass-through entity that is an S corporation. For provisions that apply to a pass-through entity that is not an S corporation, see rule R865-9I-13.

(2) A pass-through entity that is an S corporation with nonresident shareholders shall complete Schedule N of form TC-20S, and shall provide the following information for each nonresident pass-through entity taxpayer:

(a) name;

(b) address;

(c) social security number;

(d) percentage of S corporation held; and

(e) amount of Utah tax paid or withheld on behalf of that pass-through entity taxpayer.

(3) The income of a pass-through entity that is an S corporation 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;

(ii) total foreign taxes paid or accrued; and

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

(b) if the pass-through entity that is an 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.

(4) A pass-through entity that is an S corporation shall calculate the tax it withholds on behalf of its nonresident pass-through entity taxpayers by:

(a) multiplying the income of the pass-through entity by the rate in effect under Section 59-10-104; and

(b) subtracting from the amount calculated in Subsection (4)(a) any amounts withheld under Section 59-6-102.

 

KEY: historic preservation, income tax, tax returns, enterprise zones

Date of Enactment or Last Substantive Amendment: [August 18, 2008]2009

Notice of Continuation: March 20, 2007

Authorizing, and Implemented or Interpreted Law: 59-10-108 through 59-10-122; 59-10-1403.2; 59-10-1405