DAR File No. 43814

Governor, Economic Development

Rule R357-15

Enterprise Zone Tax Credit

Notice of Proposed Rule

(Amendment)

DAR File No.: 43814
Filed: 06/14/2019 04:15:01 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule filing is to clarify the requirements for a business entity to qualify for an enterprise zone tax credit.

Summary of the rule or change:

Section R357-15-2 creates and updates definitions that are used to administer the program. Section R357-15-4 is updated to more accurately reflect the documentation and verification requirement for participation in the program. Section R357-15-5 is updated to more accurately reflect the application review and authorization process to receive an enterprise zone tax credit.

Statutory or constitutional authorization for this rule:

• Subsection 63N-2-213(6)

Anticipated cost or savings to:

the state budget:

There is no aggregate anticipated cost or savings to the state budget. These changes merely codify the procedures the Office of Economic Development (Office) under the Governor's office has historically used.

local governments:

There is no aggregate anticipated cost or savings to local governments. These changes merely codify the procedures the Office has historically used.

small businesses:

There is no aggregate anticipated cost or savings to small businesses. These changes merely codify the procedures the Office has historically used.

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

There is no aggregate anticipated cost or savings to persons other than small businesses, businesses, or local government entities. These changes merely codify the procedures the Office has historically used.

Compliance costs for affected persons:

There are no compliance costs for affected persons. These changes merely codify the procedures the Office has historically used.

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

These rule changes will not result in fiscal impact to businesses. These changes merely codify the procedures the Office has historically used to administer the program.

Val Hale, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Governor
Economic Development
60 E SOUTH TEMPLE 3RD FLR
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Dane Ishihara at the above address, by phone at 801-538-8865, by FAX at , or by Internet E-mail at dishihara@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:

07/31/2019

This rule may become effective on:

08/07/2019

Authorized by:

Val Hale, Executive Director

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2020	FY 2021	FY 2022
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Person	$0	$0	$0
Total Fiscal Costs:	$0	$0	$0
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$0	$0	$0
Net Fiscal Benefits:	$0	$0	$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

There is no regulatory impact creating financial cost to small businesses or non-small businesses or other persons. These proposed rule changes are to clarify the standards for participation in the Utah Works Program (Program). There are no general regulations being promulgated by this rule because the Program is voluntary and does not require non-participants to do anything. There is no impact to businesses or persons general because this rule only applies to those who chose to participate in this Program in order to receive a grant.

 

The head of the Governor's Office of Economic Development, Val Hale, has reviewed and approved this fiscal analysis.

 

 

R357. Governor, Economic Development.

R357-15. Enterprise Zone Tax Credit.

R357-15-2. Definitions.

[(1)] The definitions below are in addition to or serve to clarify the definitions found in [Utah Code ]Section 63N-2-20[1]2, [Utah Code ]Section 59-7-614.10, and Section 59-10-103[6]7[, and Section 63N-2-202].

(1) "Annual investment", "Investment" or "Qualifying investment" means the purchase of most types of tangible property (except land) such as buildings, machinery, vehicles, furniture, and equipment that:

(a) qualifies for depreciation under the Internal Revenue Service's Form 4562; and

(b) is put into service at an operating address, of the business entity, that is within an enterprise zone designated by the office for the applicable tax year.

(2) "Baseline" means[: The highest total number of employees employed by the applicant for the previous three years. This number will be the baseline to determine all new incremental full-time employee positions] the highest count of employment positions that existed within the business entity during the previous three taxable years.

[(3) "Qualifying investment in plant, equipment, or other depreciable property" means an investment in most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment that qualifies for depreciation under the Internal Revenue Service's Form 4562 in the amount of acquisition cost less trade-in allowance.

(4) "Software purchases" means tangible physical property, cloud services, or software as a service.]

([5]3) "Qualified business use vehicle" means an automobile, light truck, heavy truck, van, utility vehicle, or motorcycle[vehicles registered in the name of the business entity and used more than 50% of the time for the business entity].

(4) "New full-time employee position" means a position that has been newly created in addition to the baseline filled by an employee working at least 30 hours per week:

(a) for a period of at least six consecutive months; and

(b) where the period ends in the tax year for which the credit is claimed.

([6]5) "Payment documentation" means a;

(a) bank statement[,];

(b) cleared check[, loan, or];

(c) signed and executed financing agreement; and[which identifies the business entity, date and amount paid.]

(d) signed statement from the seller confirming the payer, payee, date paid, and amount paid for cash payments.

([7]6) "Purchase documentation" means a bill of sale, contract of sale, receipt, invoice, or other documentation which identifies the buyer, seller, purchase price, item(s) purchased, and the date of purchase[property tax notice which identifies the business entity and date issued].

([8]7) "Value-added business entity" means a company that creates a change in the physical state or form of a product in a manner that enhances its value, thus expanding the customer base of the product. Examples include milling wheat into flour or making strawberries into jam.

 

R357-15-4. Required Documentation and Verification Information.

(1) To claim any of the tax credits available under 63N-2-201 et. seq. the following basic information must be provided to the Office[.]:

(a) [B]business entity's[or Individual's] name that is claiming a tax credit on a Utah Tax filing submission;

(b) [A ]contact name, email, phone number, mailing address and relevant title(s);

(c) [T]the physical operating address where the business entity[or individual] is located including a screenshot of the address pinpoint within the Enterprise Zone as found on locate.utah.gov.

[i. A tax credit shall not be issued if the only connection to an enterprise zone is a P.O. Box;]

(d) [T]the business entity's[or individual's] tax identification number whether a federally provided Employer Identification Number (EIN) or a Social Security Number (SSN); and

(e) [additional ]information as required under Section R357-15-3[in the Application].

(2) To qualify for any of the Employment tax credits pursuant to Subsections 63N-2-213(7)(a)[-] through (d) the following documentation and information is required:

(a) [A ]current total of all [full time ]employees including the total of employees as reported to the Department of Workforce Services for the last three years[.];

(b) [T]the number of [N]new [Incremental]full-time [E]employee [P]positions created above the baseline.

(i )[.] For each [New Incremental Employee Position]new full-time employee position above the baseline the applicant must provide:

[1.](A) Employee Name;

[2.](B) Employee wages paid[Hourly Wage and/or Annual Salary];

[3.](C) Employee hours worked[Average Hours worked per week];

[4.](D) Employee Hire date and termination date id applicable;

[5.](E) If applicable, proof of employer-sponsored health insurance program if the employer pays at least 50% of the premium cost;

[6.](F) If applicable, evidence that the business entity adds value to agricultural commodities through manufacturing or processing[.], including a list of sample products or processes.

[a. List of sample products or processes.

7. Other documentation requested by the Office on the tax credit application.]

(3) To qualify for the private capital investment tax credit under Subsections 63N-2-213(7)(e) and (f) the following documentation and information is required:

(a) If the private capital investment is for the rehabilitation of a building in an Enterprise Zone the applicant must provide:

(i)[.] The rehabilitated building's physical address

(ii)[.] Documents showing the current owner such as the deed or mortgage documents;

(iii)[.] The date the building was last occupied;

(iv)[.] A current occupancy permit or certificate;

(v)[.] Purchase documentation[Receipts and paid invoices] of all rehabilitation expenses totaling the amount the tax credit is calculated from;[ and]

[1. The Office may request further documentation to verify receipts and paid invoices including accompanying bank statements.]

(vi) One or more forms of payment documentation validating any rehabilitation expense with an amount claimed equal to or greater than the amount established by the office is paid in entirety; and

vii. Any other documentation requested by the Office including a sworn affidavit confirming the rehabilitation costs from the owner of the building if applicant is not the owner of the building.

(b) If the private capital investment is a qualifying investment in plant, equipment, or other depreciable property in an Enterprise Zone the applicant must provide:

[i. receipts and/or loan documentation showing the entire purchase price and amount paid by the applicant;]

(i)[i.] an itemized list of qualified investments being claimed for the credit on a template provided by the office;

(ii)[i.] purchase documentation for all investment claimed; and[one or more forms of payment documentation validating item is paid in entirety for each item equal or greater than an amount established by the office];

(iii) one or more forms of payment documentation validating an investment with an amount claimed that is equal to or greater than an amount established by the office is paid in entirety;

(iv)[.] property and real estate investments[transactions] also require;[the contract of sale,]

(A) a settlement statement[,]; and

(B) property tax notice with building and land values separated from total property value.[, and financing agreement; and]

(V)[.] qualified business use vehicle and other motor vehicle investments also require[purchases shall also include Utah Bill of Sale TC-843,] business use percentage[use and financing agreement or payment documentation].

 

R357-15-5. Application Review and Authorization Process for an Enterprise Zone Tax Credit.

(1) The Office shall review all submitted applications within a reasonable amount of time and approve or deny the application

(a) The Office shall review all tax credits claimed and documentation provided.

(b) The Office may request additional documentation or information if the Office determines that further verification is required.

i. Failure to comply with a request for additional documentation may result in a denial of the application.

(2) The Office will issue tax credit certificates for all tax credits for which an applicant has applied, qualified and been approved by the Office.

(a) This Office may issue a partial approval if only parts of the application are determined to qualify.

(3) The Office must provide written notice that includes its reasoning when denying any or a portion of a tax credit application.

(4) If approved in whole or in part, the Office shall provide any necessary documents and instructions, approved by the Utah Tax Commission, for claiming the tax credit.

(5)(a) When a business entity is seeking to receive a tax credit for the purchase of a qualified business use vehicle, in conformity with Subsection 63N-2-213(7)(f), the office shall not grant a tax credit for the trade-in value of a qualified business use vehicle that the business entity traded into the purchase of the vehicle for which the tax credit is being sought.

(b) The amount claimed towards investment in a qualified business use vehicle or a motor vehicle described in subsection R357-15-4(3)(b)(v)is determined as acquisition cost, less any trade in value in accordance with subsection R357-15-5(5), multiplied by the business use percentage.

(6) The trade in value in a purchase may be claimed towards a state tax credit for private capital investment that is qualifying investment in plant, equipment, or other depreciable property when, in the purchase that qualifies as investment by the business entity, there was traded in:

(a) plant, equipment, or other depreciable property that qualifies for depreciation on IRS Form 4562 and is not a qualified business use vehicle;

(b) a qualified business use vehicle that was traded in by an individual who is an owner or officer of the applying business entity; or

(c) a building, property, or other real estate investment that qualifies for depreciation on IRS Form 4562.

(6) The Office may deny claims of investment for[Qualified Investments being claimed as] software purchases that are cloud services or software as a service.

(7) The Office may deny claims for investment[applications with Qualified Investments] purchased prior to the three previous taxable years[more than three calendar years ago].

(8) The Office may deny claims for [Qualified ]Investments purchased from another entity with the same ownership.

(9) The Office may deny claims if the only connection to an enterprise zone for a business entity is a P.O. Box.

(10) The Office may deny claims for investment that was transferred from personal use to business use unless the original investment and personal use occurred within the same taxable year the asset was placed into service by the applying business entity.

(11) The Office may deny claims for state tax credits under Subsections 63N-2-213(7)(a)-(f) if 51% of a business entity's employees that are employed at facilities, that are within a designated enterprise zone, of a business entity do not reside within the county in which the enterprise zone is located or an enterprise zone that is immediately adjacent or contiguous to the county in which the enterprise zone is located as per section 63N-2-212.

 

KEY: enterprise zones, tax credits

Date of Enactment or Last Substantive Amendment: [December 24, 2018]2019

Authorizing, and Implemented or Interpreted Law: 63N-2-213(6)