CORPORATE TAX CREDITS
The tables in this chapter report tax credits for 1998 and 1999. The first table for each year indicates the raw data reported on the return, and the second table for each year corrects some amounts that are reported but not used because the tax liability was not large enough to allow the full credit. Several of the credits have been combined in an "other credits" (see table footnotes) category to prevent disclosure problems since so few taxpayers use them. The category may have different members from year to year. (Some of them are very new, however.)
Readers may note that the return numbers do not add up. This is because a return may include several credits; in fact most do because of the prepayment credit.
Prepayments of corporate taxes and the withholding of taxes on mineral production royalties are claimed on the Utah form as refundable credits. To the purist, it may even seem strange to call these credits against the tax since they are actually payments of the tax. In 1998 prepayments totaled nearly $198 million and in 1999 over $195 million. Actual taxes due for those periods were $150 million and $147 million. It appears the prepayment requirements are working well to collect taxes, and that firms, in aggregate, are cautious in meeting prepayment requirements, overpaying taxes. This can of course create problems when there is a downturn and large amounts of prepayments must be returned with interest.
Refundable credits - those which will be returned to the taxpayer if they exceed the tax liability - include the "Off-Highway Agricultural Gas Tax Credit" in addition to the above prepayments. Their inclusion on the corporate form is a convenient way to refund gasoline taxes paid which the Legislature has exempted. In 1998 they were $38,000 and in 1999 $41,000.
Incentive-based credits are small
Nonrefundable credits are generally
designed to induce corporations to engage in a socially or economically desired behavior, such as investing in underdeveloped areas or exporting coal, or at least to reward them for doing so. Since they are nonrefundable, the full value of the credit may often not be used. The nonrefundable total, on the accompanying allowed table, reports on those credits that can actually be used to reduce taxes, and the balance is reported on the line "excess credit." In rounded terms, about 150 taxpayers benefited in 1998 and 1999. The amount used was near $3.0 million in each year. In 1998 only about a $1.8 million dollars was not usable, but in 1999 under $1.0 million was unused. Depending on the nature of the credit, they may be used in future years. Also there may be more unused available since some forms only report credits that are usable.
Some of the salient observations about credits follow:
! The Municipal Bond credit, which is a break for holders of municipal bonds was the largest credit, and was almost all usable.
! The Enterprise Zone credit, which is to encourage location in depressed areas, was the next largest in dollar terms. Twenty firms received benefits in 1999 and 14 in 1998. But large amounts of unusable credits to be used in future years were accumulated.
! In the "other" category , low income housing was the largest in dollar terms and the most any credit was used in any year was only six times.
! Each year, around 40 firms benefited from credit schemes other than the municipal bond credit, receiving only over $1,200,000 on average for the two years. Althought this is a small amount, it may be important to an individual corporation.
In sum, it does not appear that the state is having large or widespread impacts through the incentive-based corporate tax credits.