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H.B. 173
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STATE INCOME TAX - ELIMINATION OF
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MARRIAGE TAX PENALTIES
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1999 GENERAL SESSION
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STATE OF UTAH
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Sponsor: Wayne A. Harper
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AN ACT RELATING TO THE INDIVIDUAL INCOME TAX ACT; MODIFYING THE
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ADJUSTED GROSS INCOME AMOUNTS AT WHICH THE RETIREMENT INCOME
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DEDUCTION AND THE PERSONAL RETIREMENT EXEMPTION ARE REDUCED;
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CLARIFYING THE AMOUNTS THAT MAY BE DEDUCTED UNDER THE RETIREMENT
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INCOME DEDUCTION; MAKING TECHNICAL CHANGES; AND PROVIDING AN
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EFFECTIVE 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) subject to the provisions of Subsection (3), for a taxpayer who is under 65 on the last
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day of the taxpayer's taxable year, or for the taxpayer's surviving spouse who is under 65 on the
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last day of the surviving spouse's taxable year, amounts received [by taxpayers under age 65] as
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retirement income [which, for purposes of this section, means pensions and annuities, paid from
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an annuity contract purchased by an employer under a plan which meets the requirements of
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Section 404 (a)(2), Internal Revenue Code, or purchased by an employee under a plan which meets
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the requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
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political subdivision thereof, or the District of Columbia, to the employee involved or the
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surviving spouse] as defined in Subsection (3);
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(e) subject to the provisions of Subsection (3), for each taxpayer who is age 65 or over on
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or before the [close] last day of the taxpayer's taxable year, a $7,500 personal retirement
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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 taxpayer
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during the taxable year for health care insurance, as defined in Title 31A, Chapter 1, Insurance
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Code, for the taxpayer, the taxpayer's spouse, and the taxpayer's dependents to the extent the
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amounts paid for health insurance were not deductible under Sections 125, 162, or 213, Internal
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Revenue Code, in determining federal taxable income;
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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) and this Subsection (3)(a),
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(i) "Governmental entity" means:
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(A) the United States;
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(B) a state;
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(C) a political subdivision of a state; or
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(D) the District of Columbia.
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(ii) "Retirement income" means amounts paid to a taxpayer or the taxpayer's surviving
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spouse:
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(A) from an annuity contract purchased by an employer under a plan that meets the
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requirements of Section 404(a)(2), Internal Revenue Code;
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(B) from a pension plan, an annuity plan, or both:
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(I) purchased by an employee; and
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(II) paid from an individual retirement account that meets the requirements of Section 408,
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Internal Revenue Code;
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(C) from a pension plan, an annuity plan, or both, established and maintained by a
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governmental entity for employees of the governmental entity; or
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(D) under a combination of the contracts or plans described in Subsections (3)(a)(ii)(A)
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through (C).
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(b) Subject to the limitations provided in Subsection (3)(c), for purposes of Subsection
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(2)(d), the amount of retirement income subtracted for [taxpayers] a taxpayer who is under age 65
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on the last day of the taxpayer's taxable year or for the taxpayer's surviving spouse who is under
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age 65 on the last day of the surviving spouse's taxable year shall be the lesser of:
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(i) the amount of retirement income included [in federal taxable income,] as income on
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the taxpayer's or the taxpayer's surviving spouse's federal individual income tax return for the
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taxable year; or
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(ii) $4,800[, except that:].
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(c) (i) For married taxpayers filing joint returns, for each $1 of adjusted gross income
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earned over [$32,000] $40,000, the amount of the retirement income exemption that may be
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subtracted 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] $20,000, the amount of the retirement income exemption that may be
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subtracted shall 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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$20,000, the amount of the retirement income exemption that may be subtracted shall be reduced
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by 50 cents.
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[(b)] (d) For purposes of Subsection (2)(e), the amount of the personal retirement
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exemption 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] $40,000, the amount of the personal retirement exemption shall be reduced by 50
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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] $20,000, the amount of the personal retirement exemption shall be reduced
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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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$20,000, the amount of the personal retirement exemption shall be reduced by 50 cents.
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[(c)] (e) For purposes of Subsections (3)[(a)](c) and [(b)] (d), adjusted gross income shall
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be calculated by adding to federal adjusted gross income any interest income not otherwise
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included in federal adjusted gross income.
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[(d)] (f) For purposes of determining ownership of items of retirement income common
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law doctrine will be applied in all cases even though some items may have originated from service
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or 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)] (g) 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 on January 1, 2000.
Legislative Review Note
as of 11-19-98 12:15 PM
A limited legal review of this legislation raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
Committee Note
The Revenue and Taxation Interim Committee recommended this bill.
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