Tax Commission, Auditing

Section R865-6F-14

Extent to Which Federal Income Tax Provisions Are Followed for Corporation Franchise Tax Purposes Pursuant to Utah Code Ann. Sections 59-7-106, 59-7-108, 59-7-501, and 59-7-502

Notice of Proposed Rule

(Amendment)

DAR File No.: 35144
Filed: 08/11/2011 02:10:30 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The proposed amendment deletes outdated and unnecessary language and adds language to match current practice.

Summary of the rule or change:

The proposed amendment deletes references to rules that are no longer effective, deletes outdated language, adds new items that require different treatment under the state and federal statutes, and makes technical changes.

State statutory or constitutional authorization for this rule:

• Section 59-7-106
• Section 59-7-501
• Section 59-7-502
• Section 59-7-108

Anticipated cost or savings to:

the state budget:

None--The amendments all reflect current practice.

local governments:

None--The amendments all reflect current practice.

small businesses:

None--The amendments all reflect current practice.

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

None--The amendments all reflect current practice.

Compliance costs for affected persons:

None--The amendments all reflect current practice.

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

This amendment will create no fiscal impact as it does not change current practice.

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:

10/03/2011

This rule may become effective on:

10/10/2011

Authorized by:

Michael Cragun, Tax Commissioner

R865. Tax Commission, Auditing.

R865-6F. Franchise Tax.

R865-6F-14. Extent to Which Federal Income Tax Provisions Are Followed for Corporation Franchise Tax Purposes Pursuant to Utah Code Ann. Sections 59-7-106, 59-7-108, 59-7-501, and 59-7-502.

[A.](1) It is the policy of the [Tax Commission]commission, in matters involving the determination of [net] income for Utah corporation franchise tax purposes, to follow as closely as possible federal requirements with respect to the same matters. In some instances[, of course,] the federal and state statutes differ[; and due to such conflict], and as a result the federal rulings, regulations, and decisions [cannot]may not be followed. Furthermore, in some instances, the [Tax Commission]commission may disagree with the federal determinations and does not consider them controlling for Utah corporation franchise tax purposes.

[1.](2) The items of major importance ordinarily allowed in conformity with federal requirements are:

[a.](a) depreciation[ (see rule R865-6F-9)],

[b.](b) depletion,

[c.](c) exploration and development expenses,

[d.](d) intangible drilling costs,

[e.](e) accounting methods and periods[ (see rule R865-6F-2)], and

[f.](f) Subpart F income.

[2.](3) The following are the major items [which]that require different treatment under the state and federal statutes:

[a.](a) [installment sales (see rule R865-6F-15)]combined reporting,

[b.](b) consolidated returns[ (see rule R865-6F-4)],

[c.](c) [liquidating dividends]dividends received deduction,

[d.](d) municipal bond interest,

[e.](e) capital loss deduction,

[f.](f) loss carry-overs and carry-backs, and

[g.](g) gross-up on foreign dividends.

[ Note: The only reserves permitted in determining net-income for Utah corporation franchise tax purposes are depreciation, depletion, and bad debts.

]

KEY: taxation, franchises, historic preservation, trucking industries

Date of Enactment or Last Substantive Amendment: [June 23, ]2011

Notice of Continuation: March 8, 2007

Authorizing, and Implemented or Interpreted Law: 9-2-401 through 9-2-415; 16-10a-1501 through 16-10a-1533; 53B-8a-112; 59-1-1301 through 59-1-1309; 59-6-102; 59-7; 59-7-101; 59-7-102; 59-7-104 through 59-7-106; 59-7-108; 59-7-109; 59-7-110; 59-7-112; 59-7-302 through 59-7-321; 59-7-402; 59-7-403; 59-7-501; 59-7-502; 59-7-505; 59-7-601 through 59-7-614; 59-7-608; 59-7-701; 59-7-703; 59-10-603; 59-13-202; 59-13-301; 63M-1; 63M-1-401 through 63M-1-416