Tax Commission, Auditing

Section R865-6F-40

Foreign Operating Company Subtraction from Unadjusted Income Pursuant to Utah Code Ann. Sections 59-7-101 and 59-7-106

Notice of Proposed Rule

(Amendment)

DAR File No.: 34755
Filed: 05/02/2011 09:04:04 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The proposed section is necessary to implement S.B. 23 (2010 General Session). (DAR NOTE: S.B. 23 (2010) is effective as of 01/01/2011.)

Summary of the rule or change:

The proposed section provides that the activities of a partnership interest are taken into account in determining whether a corporation qualifies as a foreign operating company and in the calculation of any adjustment for which the corporate partner that is a foreign operating company is eligible; requires a foreign operating company that is a member of a unitary group to eliminate any transaction between that foreign operating company and a partnership held by another member of the same unitary group prior to determining the amount of the foreign operating company subtraction from unadjusted income.

State statutory or constitutional authorization for this rule:

• Section 59-7-106
• Section 59-7-101

Anticipated cost or savings to:

the state budget:

None--Any fiscal impact would have been taken into account in S.B. 23 (2010).

local governments:

None--Any fiscal impact would have been taken into account in S.B. 23 (2010).

small businesses:

None--Any fiscal impact would have been taken into account in S.B. 23 (2010).

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

None--Any fiscal impact would have been taken into account in S.B. 23 (2010).

Compliance costs for affected persons:

The proposed section describes instances in which a foreign operating corporation would be required to decrease its subtraction from unadjusted income pursuant to S.B. 23 (2010).

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

This proposal creates no additional impact beyond any considered raising SB 23 (2010).

Michael Cragun, 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:

• Christa Johnson at the above address, by phone at 801-297-3901, by FAX at 801-297-3907, or by Internet E-mail at cj@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:

06/14/2011

This rule may become effective on:

06/21/2011

Authorized by:

Michael Cragun, Tax Commissioner

R865. Tax Commission, Auditing.

R865-6F. Franchise Tax.

R865-6F-40. Foreign Operating Company Subtraction from Unadjusted Income Pursuant to Utah Code Ann. Sections 59-7-101 and 59-7-106.

(1) The activities of a partnership interest are taken into account in determining whether a corporation qualifies as a foreign operating company and calculating any adjustment for which the corporate partner that is a foreign operating company is eligible.

(a) Partnership activities are attributed to the corporation to the extent of the corporation's ownership interest in the partnership.

(b) The character of each class or type of partnership income passes through to the corporate partner. Accordingly, a corporate partner that is a foreign operating company may not make a subtraction from unadjusted income as a foreign operating company for partnership income generated from intangible property and assets held for investment and not from a regular business trading activity.

(2) Prior to determining the foreign operating company subtraction, a foreign operating company that is a member of a unitary group shall eliminate a transaction between the foreign operating company and a partnership held directly or indirectly by a member of the same unitary group to the extent of the interest the foreign operating company holds in the partnership.

 

KEY: taxation, franchises, historic preservation, trucking industries

Date of Enactment or Last Substantive Amendment: [December 15, 2010]2011

Notice of Continuation: March 8, 2007

Authorizing, and Implemented or Interpreted Law: 59-7-101; 59-7-104 through 59-7-106