On March 25, 2025, Utah Governor Spencer Cox signed into law SB 219, which modifies the apportionment formula used by financial institutions to determine their Utah-source income for corporate franchise and income tax purposes.

Effective for tax years beginning on or after January 1, 2026, the law excludes sales from "investment activities or assets or trading activities or assets" from the numerator of a financial institution's sales factor but leaves them in the denominator.

The law defines "sales from investment activities and assets and trading activities and assets" as "receipts from interest, dividends, a net gain, but not less than zero, or other income from an investment security, a trading account asset, federal funds, a security purchased and sold under an agreement to resell or repurchase, an option, a future contract, a forward contract, equities, a foreign currency transaction, or a notional principal contract, such as swaps." Examples of these sales include the amount by which:

• Interest from federal funds sold and securities purchased under resale agreements exceed interest expense on federal funds purchased and securities sold under repurchase agreements
• Interest, dividends, gains and other income from foreign currency transactions and trading assets and activities exceed amounts paid in lieu of interest or dividends and losses from trading assets and activities

These sales do not include:

• Receipts from the lease of real property
• Receipts from the lease of tangible personal property
• Interest from a loan secured by, or not secured by, real property
• Net gain from the sale of a loan
• Receipts from a credit card receivable
• Net gain from the sale of a credit card receivable
• Credit card issuer's reimbursement fees
• Receipts from a merchant discount
• Loan servicing fees
• Receipts from a service
• Other receipts not addressed previously

The law requires the Tax Commission to promulgate rules establishing the sales to be included in the of a financial institution's sales-factor fraction.

Implications

Under prior law, which is in effect through December 31, 2025, receipts from investment assets and activities and trading assets and activities were included in the numerator of the sales factor, as directed by Utah Adm. Code R865-6F-32(3)(m). Under the revised law, which takes effect for tax years beginning on and after January 1, 2026, financial institutions will not be able to source such receipts to Utah. The change also prevents any controversy over what portion of such receipts, if any, should be sourced to Utah.