2R865-9I-13. Pass-Through Entity Withholding Pursuant to Utah Code Ann. Sections 59-
310-116, 59-10-117, 59-10-118, 59-10-1403.2, and 59-10-1405.
4 (1) A pass-through entity must withhold and pay over to the state a tax on:
5 (a) the business income of the pass-through entity to the extent the business income is
6derived from Utah sources in accordance with Section 59-10-116; and
7 (b) the nonbusiness income of the pass-through entity derived from or connected with
9 (i) ”Nonbusiness income of the pass-through entity derived from or connected with Utah
10sources” does not include [passive investment]portfolio income if the income would not be
11reportable to Utah on the pass-through entity taxpayer’s Utah state tax return or the Utah state
12tax return of any downstream pass-through entity taxpayer.
13 (ii) “Downstream pass-through entity taxpayer” means a pass-through entity taxpayer that
14is a pass-through entity taxpayer of any entity that is itself a pass-through entity taxpayer.
15 (2) A schedule shall be included with the return listing all of the following information for
16each nonresident pass-through entity taxpayer:
17 (a) name;
18 (b) address;
19 (c) social security number;
20 (d) percentage of ownership in pass-through entity;
21 (e) Utah income attributable to that pass-through entity taxpayer; and
22 (f) amount of Utah tax withheld on behalf of that pass-through entity taxpayer.
23 (3) The income of a pass-through entity that is an S corporation shall be calculated by:
24 (a) adding back to the line on the federal Schedule K labeled “Income/loss reconciliation"
25the amount included on that schedule for:
26 (i) charitable contributions;
27 (ii) total foreign taxes paid or accrued; and
28 (iii) recapture of a benefit derived from a deduction under Section 179, Internal Revenue
30 (b) if the pass-through entity that is an S corporation was not required to complete the
31line labeled “Income/loss reconciliation" on the federal Schedule K, a pro forma calculation of
32the amounts for charitable contributions and foreign taxes paid or accrued, and of the amount
33that would have been entered on the Income/loss reconciliation" line shall be used for purposes
34of this rule.
35 (4) A pass-through entity shall calculate the tax it is required to withhold on behalf of pass-
36through entity taxpayers by:
37 (a) multiplying the income of the pass-through entity computed in Subsection (1) by the tax
38rate in effect under Section 59-10-104; and
39 (b) subtracting from the amount calculated in Subsection (4)(a) any amounts withheld from
40the pass-through entity under Section 59-6-102 that are attributable to pass-through entity taxpayers
41for whom the pass-through entity is required to withhold.
42 (5)(a) A pass-through entity is not required to withhold a tax on behalf of a pass-through
43entity taxpayer of that pass-through entity if the pass-through entity taxpayer is:
44 (i) exempt from taxation under Section 59-7-102 and the income from the pass-through
45entity is not unrelated business income to the pass-through entity taxpayer;
46 (ii) an individual retirement account as defined under Section 408(a), Internal Revenue
47Code and the income from the pass-through entity is not unrelated business income to the pass-
48through entity taxpayer;
49 (iii) a real estate investment trust if all of the earnings of the real estate investment trust
50are distributed to the owners of the real estate investment trust; or
51 (iv) a person exempt from state income tax under Section 59-10-104.1.
52 (6)(a) Subject to Subsection (6)(b), and for purposes of Subsection 59-10-1403.2(5), a
53pass-through entity shall apply to the commission for a waiver of penalty or interest, on an
54amount the pass-through entity fails to pay or withhold and for which the pass-through entity
55taxpayer files and pays in a timely manner, by checking the box on the tax return requesting the
56waiver for required withholding.
57 (b) The provisions of Subsection (6)(a) shall be effective for taxable years beginning on
58or after January 1, 2010.
59 (7) An entity that is disregarded for federal tax purposes is disregarded for purposes of
60pass-through entity withholding.
61 (8) The pass-through entity’s federal identification number shall be used on the form TC-65
62in place of a social security number.
63 (9) Examples.
64 (a) Partnership A has two partners, both of whom are nonresident individuals exempt
65from state income tax under Section 59-10-104.1. Partnership A is not required to withhold Utah
66tax for these partners.
67 (b) For tax year 2010, Partnership C has two partners, Partnerships D and E. Partnership
68D has two partners, both Utah resident individuals. Partnership E has three nonresident partners,
69all of whom are subject to Utah state tax. Partnership C’s responsibility for withholding is based
70on Partnerships D and E, not the partners of Partnerships D and E. Accordingly, Partnership C
71must withhold tax on behalf of Partnerships D and E. If, however, both Partnership D and the
72partners of Partnership D file returns and pay any tax due by the filing due date for Partnership
73C, including extensions, Partnership C may elect to not withhold those amounts and may apply
74to the Tax Commission, by checking the box on the tax return requesting the waiver for required
75withholding, for a waiver of tax, penalty, and interest on amounts Partnership C should have
76collected and remitted for Partnership D, but did not.
78KEY: historic preservation, income tax, tax returns, enterprise zones
79Date of Enactment or Last Substantive Amendment: April 8, 2010
80Notice of Continuation: March 20, 2007
81Authorizing, and Implemented or Interpreted Law: 31A-32A-106; 53B-8a-112; 59-1-1301
82through 59-1-1309; 59-2-1201 through 59-2-1220; 59-6-102; 59-7-3; 59-10; 59-10-103; 59-10-
83108 through 59-10-122; 59-10-108.5; 59-10-114; 59-10-124; 59-10-127; 59-10-128; 59-10-129;
8459-10-130; 59-10-207; 59-10-210; 59-10-303; 59-10-401 through 59-10-403; 59-10-405.5; 59-10-
85406 through 59-10-408; 59-10-501; 59-10-503; 59-10-504; 59-10-507; 59-10-512; 58-10-514; 59-
8610-516; 59-10-517; 59-10-522; 59-10-533; 59-10-536; 59-10-602; 59-10-603; 59-10-1003; 59-10-
871006; 59-10-1014; 59-10-1017; 59-10-1021; 59-10-1023; 59-10-1106; 59-10-1403; 59-10-1403.2;
8859-10-1405; 59-13-202; 59-13-302; 63M-1-401 through 63M-1-414