2006 Utah Code - 59-7-703 — Payment or withholding of tax on behalf of nonresident shareholders -- Rate.

     59-7-703.   Payment or withholding of tax on behalf of nonresident shareholders -- Rate.
     (1) As used in this section, "return" means:
     (a) if a nonresident shareholder is required to file a return under this chapter, a return filed under this chapter; or
     (b) if a nonresident shareholder is required to file a return under Chapter 10, Individual Income Tax Act, a return filed under Chapter 10, Individual Income Tax Act.
     (2) (a) Except as provided in Subsection (4), an S corporation shall pay or withhold a tax on behalf of any nonresident shareholder.
     (b) The amount paid or withheld by an S corporation under Subsection (2)(a) shall be determined by:
     (i) calculating the items of income or loss from federal form 1120S, Schedule K;
     (ii) applying the apportionment formula to determine the amount apportioned to Utah;
     (iii) reducing the amount apportioned to Utah by the percentage of ownership attributable to resident shareholders; and
     (iv) applying the rate to the remaining balance.
     (3) (a) For a nonresident shareholder who is required to file a return under this chapter:
     (i) the nonresident shareholder may claim a credit on the nonresident shareholder's return for the amount of tax paid or withheld by the S corporation on behalf of the nonresident shareholder;
     (ii) if the nonresident shareholder has no other Utah source income, the nonresident shareholder may elect:
     (A) not to claim the credit provided under Subsection (3)(a)(i); and
     (B) not to file a return for the taxable year; and
     (iii) if the nonresident shareholder may claim credits other than the credit described in Subsection (3)(a)(i), the nonresident shareholder shall file a return to claim those credits.
     (b) If a nonresident shareholder is required to file a return under Chapter 10, Individual Income Tax Act, the nonresident shareholder is subject to Section 59-10-1103.
     (4) Notwithstanding Subsection (2), the obligation to pay or withhold a tax under Subsection (2) does not apply to an organization that is exempt under Subsection 59-7-102(1)(a) from the taxes imposed by this chapter.
     (5) (a) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the commission shall by rule determine the rate at which an S corporation shall withhold for nonresident shareholders.
     (b) The rate described in Subsection (5)(a) shall be consistent with the composite tax rate paid by partnerships.
     (6) (a) If an S corporation fails to pay or withhold a tax as provided in this section, and thereafter the income subject to payment or withholding is reported and the resulting tax is paid by a nonresident shareholder, any tax required to be paid or withheld may not be collected from the S corporation.
     (b) A nonresident shareholder's payment under Subsection (6)(a) does not relieve the S corporation from liability for penalties or interest associated with failure to pay or withhold a tax as provided in this section.
     (7) Penalties, refunds, assessments, and required records for S corporations shall be governed by:

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     (a) this chapter if a nonresident shareholder is subject to this chapter; or
     (b) Chapter 10, Individual Income Tax Act, if a nonresident shareholder is subject to Chapter 10, Individual Income Tax Act.
     (8) (a) An S corporation shall furnish each nonresident shareholder a statement showing:
     (i) the amount of the nonresident shareholder's share of the corporate earnings from Utah sources; and
     (ii) the amount of the withholding from the nonresident shareholder's share of the corporate earnings from Utah sources.
     (b) An S corporation shall pay the commission the amount withheld under this section:
     (i) by the due date of the corporation's return, not including extensions; and
     (ii) on forms furnished by the commission.

Amended by Chapter 223, 2006 General Session