§ 59-10-1405 — Nonresident pass-through entity taxpayer's share of an addition, subtraction, or adjustment that relates to an item of income, gain, loss, deduction, or credit of a pass-through entity -- In determining source of nonresident pass-through entity taxpayer's income certain provisions of pass-through entity agreement may not be considered -- Rulemaking authority.

(1) (1)(a) Except as provided in Subsection (3), in determining the taxable income of a nonresident pass-through entity taxpayer, an addition, subtraction, or adjustment that relates to an item of income, gain, loss, deduction, or credit of a pass-through entity shall be made in accordance with this Subsection (1).
(1)(b) For a nonresident pass-through entity taxpayer of a pass-through entity except for a pass-through entity that is an S corporation, the nonresident pass-through entity taxpayer's share of an addition, subtraction, or adjustment that relates to an item of income, gain, loss, deduction, or credit is:
(1)(b)(i) if the item of income, gain, loss, deduction, or credit is required to be taken into account separately for federal income tax purposes, the nonresident pass-through entity taxpayer's distributive share of the item of income, gain, loss, deduction, or credit:

(1)(b)(i)(A) for federal income tax purposes;
(1)(b)(i)(B) determined under Section 704 et seq., Internal Revenue Code; and
(1)(b)(i)(C) derived from or connected with Utah sources; or
(1)(b)(ii) if the item of income, gain, loss, deduction, or credit is not required to be taken into account separately for federal income tax purposes, determined in accordance with the nonresident pass-through entity taxpayer's distributive share of income, gain, loss, deduction, or credit:

(1)(b)(ii)(A) relating to the pass-through entity generally;
(1)(b)(ii)(B) for federal income tax purposes;
(1)(b)(ii)(C) under Section 704 et seq., Internal Revenue Code; and
(1)(b)(ii)(D) derived from or connected with Utah sources.
(1)(c) For a nonresident pass-through entity taxpayer of a pass-through entity that is an S corporation, the nonresident pass-through entity taxpayer's share of an addition, subtraction, or adjustment that relates to an item of income, gain, loss, deduction, or credit is:
(1)(c)(i) if the item of income, gain, loss, deduction, or credit is required to be taken into account separately for federal income tax purposes, the nonresident pass-through entity taxpayer's pro rata share of the item of income, gain, loss, deduction, or credit:

(1)(c)(i)(A) for federal income tax purposes;
(1)(c)(i)(B) determined under Section 1366 et seq., Internal Revenue Code; and
(1)(c)(i)(C) derived from or connected with Utah sources; or
(1)(c)(ii) if the item of income, gain, loss, deduction, or credit is not required to be taken into account separately for federal income tax purposes, determined in accordance with the nonresident pass-through entity taxpayer's pro rata share of the item of income, gain, loss, deduction, or credit:

(1)(c)(ii)(A) relating to the pass-through entity generally;
(1)(c)(ii)(B) for federal income tax purposes;
(1)(c)(ii)(C) under Section 1366 et seq., Internal Revenue Code; and
(1)(c)(ii)(D) derived from or connected with Utah sources.
(2) In determining the source of a nonresident pass-through entity taxpayer's income, the following provisions in a pass-through entity agreement may not be considered:

(2)(a) a provision that allocates to the nonresident pass-through entity taxpayer, as income, gain, or credit from a source outside this state, a greater proportion of the nonresident pass-through entity taxpayer's share of income, gain, or credit of the pass-through entity than the ratio of income, gain, or credit of the pass-through entity from sources outside this state to income, gain, or credit of the pass-through entity from all sources; or
(2)(b) a provision that allocates to the nonresident pass-through entity taxpayer a greater proportion of an item of loss or deduction of the pass-through entity derived from or connected with Utah sources than the taxpayer's share of loss or deduction generally:
(2)(b)(i) relating to the pass-through entity; and
(2)(b)(ii) for federal income tax purposes.
(3) The commission may by rule, made in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, authorize the use of a calculation other than the calculation provided in Subsection (1), for determining a nonresident pass-through entity taxpayer's share of an addition, subtraction, or adjustment that relates to an item of income, gain, loss, deduction, or credit of a pass-through entity derived from or connected with Utah sources if:

(3)(a) the nonresident pass-through entity taxpayer applies to the commission; and
(3)(b) the commission finds that the use of the calculation is appropriate and equitable.

Legislative History

Amended by Chapter 312, 2009 General Session