Committee opens bill file after legal warning; reviews credits including sheltered‑workshop, capital‑gains and EITC

The committee reviewed four individual income‑tax credits as part of its statutory five‑year review cycle and took one formal step: it voted to open a committee bill file to remove the "tax paid to another state" credit from the committee's review process.

Gus Harb, associate general counsel at the Utah State Tax Commission, warned the committee that restricting or reducing the credit would likely violate the U.S. Constitution's Commerce Clause as interpreted by the U.S. Supreme Court. Harb cited the court's 2015 decision examining Maryland's two‑pronged tax system and said Utah's full‑credit approach is consistent with that ruling. "Any sort of limitation... less than the full credit amount for taxes paid in another state would likely be found to violate the Commerce Clause," he said.

Representative Steve Shepherd moved to open a committee bill file to remove the tax‑paid‑to‑another‑state credit from the review process; the motion passed with vocal 'ayes' and senators on the line confirming their votes. No recorded no votes were announced.

Other credits reviewed (high‑level):

- Sheltered workshop donation credit: Individuals, estates or trusts receive a nonrefundable credit equal to 50% of cash contributions to qualifying nonprofit sheltered‑workshop facilities, capped at $200 per taxpayer. The tax commission reported steady but low usage (roughly 80–100 claimants recently) and recurring errors caused by donors listing nonqualified facilities. The $200 cap has not been indexed to inflation since enactment in 1982.

- Capital gains reinvestment credit: Taxpayers who take at least 70% of gross proceeds from a capital gain transaction and within one year invest them in qualifying stock of a Utah small business corporation may claim a nonrefundable credit equal to Utah's income tax rate (4.5%) times the capital gain amount. The tax commission said the credit is self‑reported, legally complex and sees errors when claimants purchase stock that does not meet the statutory definition.

- Utah earned income tax credit (EITC): The state credit equals 20% of the federal EITC claimed by eligible filers and is nonrefundable. The credit is new enough that the commission has limited error data and usage history; the presenters said it remains to be seen whether it is meeting objectives.

Committee staff reminded members that SB 43 (passed in the prior session) lengthened the review cycle for credits from three to five years and left an avenue to refer any credit to the Legislative Auditor General for deeper review. No referral to the auditor general was made at this meeting beyond opening the bill file for the tax‑paid‑to‑another‑state credit.