Income/Franchise Tax Utah: New law revises definition of "foreign operating company" & various related provisions

S.B. 23, signed by gov. 3/26/10. Effective for taxable years beginning on or after January 1, 2011, new law modifies the definition of "foreign operating company (FOC)" to provide additional requirements relating to property and payroll located outside the United States, and addresses certain related provisions concerning subtractions from unadjusted income. Specifically, a FOC is defined as a corporation that:

- Is incorporated in the United States;
- Has at least 80% of the corporation's business activity conducted outside the United States;
- Has at least $1,000,000 of payroll located outside the United States; and
- Has at least $2,000,000 of property located outside the United States.

The new law also revises the previously allowed subtraction from unadjusted income of 50% of the adjusted income of a foreign operating company (FOC) to prohibit a deduction from unadjusted income for income generated from intangible property or a capital gain, dividend, interest, rent, royalty, or other similar item that is generated from an asset held for investment and not from a regular business trading activity.

Taxpayers filing worldwide combined reports continue to be prohibited from taking this deduction.