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H.B. 25
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INCOME TAX DEDUCTION FOR HEALTH
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CARE INSURANCE
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1999 GENERAL SESSION
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STATE OF UTAH
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Sponsor: Michael R. Styler
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AN ACT RELATING TO THE INDIVIDUAL INCOME TAX ACT; INCREASING THE
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INDIVIDUAL INCOME TAX DEDUCTION FOR AMOUNTS PAID FOR HEALTH CARE
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INSURANCE; MAKING TECHNICAL CHANGES; AND PROVIDING AN EFFECTIVE
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DATE.
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This act affects sections of Utah Code Annotated 1953 as follows:
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AMENDS:
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59-10-114, as last amended by Chapter 56, Laws of Utah 1997
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Be it enacted by the Legislature of the state of Utah:
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Section 1.
Section
59-10-114
is amended to read:
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59-10-114. Additions to and subtractions from federal taxable income of an
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individual.
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(1) There shall be added to federal taxable income of a resident or nonresident individual:
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(a) the amount of any income tax imposed by this or any predecessor Utah individual
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income tax law and the amount of any income tax imposed by the laws of another state, the District
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of Columbia, or a possession of the United States, to the extent deducted from federal adjusted
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gross income, as defined by Section 62, Internal Revenue Code, in determining federal taxable
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income;
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(b) a lump sum distribution allowable as a deduction under Section 402(e)(3), Internal
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Revenue Code, to the extent deductible under Section 62(a)(8), Internal Revenue Code, in
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determining federal adjusted gross income;
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(c) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
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Code;
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(d) a withdrawal from a medical care savings account and any penalty imposed in the
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taxable year if:
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(i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant
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to Section 220, Internal Revenue Code; and
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(ii) the withdrawal is subject to Subsections
31A-32-105
(1) and (2); and
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(e) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education
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Savings Incentive Program, in the year in which the amount is refunded.
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(2) There shall be subtracted from federal taxable income of a resident or nonresident
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individual:
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(a) the interest or dividends on obligations or securities of the United States and its
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possessions or of any authority, commission, or instrumentality of the United States, to the extent
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includable in gross income for federal income tax purposes but exempt from state income taxes
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under the laws of the United States, but the amount subtracted under this subsection shall be
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reduced by any interest on indebtedness incurred or continued to purchase or carry the obligations
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or securities described in this subsection, and by any expenses incurred in the production of
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interest or dividend income described in this subsection to the extent that such expenses, including
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amortizable bond premiums, are deductible in determining federal taxable income;
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(b) 1/2 of the net amount of any income tax paid or payable to the United States after all
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allowable credits, as reported on the United States individual income tax return of the taxpayer for
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the same taxable year;
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(c) the amount of adoption expenses which, for purposes of this subsection, means any
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actual medical and hospital expenses of the mother of the adopted child which are incident to the
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child's birth and any welfare agency, child placement service, legal, and other fees or costs relating
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to the adoption;
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(d) amounts received by taxpayers under age 65 as retirement income which, for purposes
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of this section, means pensions and annuities, paid from an annuity contract purchased by an
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employer under a plan which meets the requirements of Section 404 (a)(2), Internal Revenue Code,
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or purchased by an employee under a plan which meets the requirements of Section 408, Internal
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Revenue Code, or paid by the United States, a state, or political subdivision thereof, or the District
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of Columbia, to the employee involved or the surviving spouse;
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(e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500 personal
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retirement exemption;
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(f) 75% of the amount of the personal exemption, as defined and calculated in the Internal
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Revenue Code, for each dependent child with a disability and adult with a disability who is
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claimed as a dependent on a taxpayer's return;
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(g) any amount included in federal taxable income that was received pursuant to any
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federal law enacted in 1988 to provide reparation payments, as damages for human suffering, to
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United States citizens and resident aliens of Japanese ancestry who were interned during World
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War II;
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(h) subject to the limitations of Subsection (3)(e), [60% of the] amounts [paid by the] a
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taxpayer pays during the taxable year for health care insurance, as defined in Title 31A, Chapter
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1, Insurance Code[,]:
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(i) for:
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(A) the taxpayer[,];
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(B) the taxpayer's spouse[,]; and
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(C) the taxpayer's dependents; and
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(ii) to the extent the taxpayer does not deduct the amounts [paid for health insurance were
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not deductible] under Sections 125, 162, or 213, Internal Revenue Code, in determining federal
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taxable income for the taxable year;
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(i) except as otherwise provided in this subsection, the amount of a contribution made in
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the tax year on behalf of the taxpayer to a medical care savings account and interest earned on a
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contribution to a medical care savings account established pursuant to Title 31A, Chapter 32,
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Medical Care Savings Account Act, to the extent the contribution is accepted by the account
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administrator as provided in the Medical Care Savings Account Act, and if the taxpayer did not
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deduct or include amounts on his federal tax return pursuant to Section 220, Internal Revenue
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Code. A contribution deductible under this subsection may not exceed either of the following:
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(i) the maximum contribution allowed under the Medical Care Savings Account Act for
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the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is covered by
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health care insurance as defined in Section
31A-1-301
or self-funded plan that covers the other
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spouse, and each spouse has a medical care savings account; or
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(ii) the maximum contribution allowed under the Medical Care Savings Account Act for
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the tax year for taxpayers:
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(A) who do not file a joint return; or
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(B) who file a joint return, but do not qualify under Subsection (2)(i)(i); and
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(j) the amount included in federal taxable income that was derived from money paid by
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the taxpayer to the program fund and investment income earned on those payments under Title
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53B, Chapter 8a, Higher Education Savings Incentive Program.
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(3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted for
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taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or $4,800,
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except that:
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(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
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over $32,000, the amount of the retirement income exemption that may be subtracted shall be
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reduced by 50 cents;
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(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
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earned over $16,000, the amount of the retirement income exemption that may be subtracted shall
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be reduced by 50 cents; and
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(iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
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the amount of the retirement income exemption that may be subtracted shall be reduced by 50
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cents.
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(b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
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shall be further reduced according to the following schedule:
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(i) for married taxpayers filing joint returns, for each $1 of adjusted gross income earned
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over $32,000, the amount of the personal retirement exemption shall be reduced by 50 cents;
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(ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
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earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
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cents; and
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(iii) for individual taxpayers, for each $1 of adjusted gross income earned over $25,000,
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the amount of the personal retirement exemption shall be reduced by 50 cents.
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(c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be calculated
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by adding to federal adjusted gross income any interest income not otherwise included in federal
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adjusted gross income.
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(d) For purposes of determining ownership of items of retirement income common law
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doctrine will be applied in all cases even though some items may have originated from service or
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investments in a community property state. Amounts received by the spouse of a living retiree
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because of the retiree's having been employed in a community property state are not deductible as
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retirement income of such spouse.
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(e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
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insurance as defined in Title 31A, Chapter 1, Insurance Code, is not allowed:
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(i) for an amount that is reimbursed or funded in whole or in part by the federal
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government, the state, or an agency or instrumentality of the federal government or the state; and
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(ii) for a taxpayer who is eligible to participate in a health plan maintained and funded in
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whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
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Section 2. Effective date.
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This act takes effect for taxable years beginning on or after January 1, 2000.
Legislative Review Note
as of 12-15-98 12:18 PM
A limited legal review of this legislation raises no obvious constitutional or statutory concerns.