01-1359
Income Tax
Signed: 2/25/02
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONERS, ) ORDER
)
Petitioners, ) Appeal No. 01-1359
)
v. ) Account No. #####
)
AUDITING DIVISION OF ) Tax Type:
Income Tax
THE UTAH STATE TAX )
COMMISSION, ) Tax Year: 1999
)
Respondent. ) Judge: Davis
_____________________________________
Presiding:
G. Blaine Davis,
Administrative Law Judge
Appearances:
For Petitioner: PETITIONER 1
PETITIONER REP
For Respondent: Ms. Becky McKenzie, from the Auditing
Division
Ms. Stacy Brown, from the Auditing
Division
STATEMENT
OF THE CASE
This matter came before
the Utah State Tax Commission for an Initial Hearing pursuant to the provisions
of Utah Code Ann. '59-1-502.5 February 6,
2002.
Petitioner, PETITIONER,
is a retired federal civil service employee.
When he retired, he retained his mail handlers health care insurance on
which he pays an annual premium of slightly over $$$$$ per year. In addition, the federal government pays an
additional amount as part of his retirement benefit.
Prior to filing his 1999
Utah State Income Tax Return, Petitioner e-mailed the Tax Commission and asked
whether he could deduct the health insurance premium paid. He received back a response by e-mail
telling him he could take 60% of the premiums he paid, which were not
reimbursed or refunded. Based upon that
representation, Petitioner deducted an amount of $$$$$ on his 1999 Utah State
Income Tax Return, although the method of calculating that amount was not
clarified.
Respondent made an
adjustment to the return and disallowed the $$$$$ deduction based upon Utah
Code Ann. §59-10-114(3)(e).
Petitioner has
challenged that audit made by Respondent.
Petitioner maintains that the instructions issued by the Tax Commission
for that year denied the deduction if the health insurance plan was partially
funded by the employer or former employer, but the statute in question only
denies the deduction for those who's plan is funded in whole or in part by the
"taxpayer's employer" or the "taxpayer's spouse's
employer".
APPLICABLE
LAW
Utah Code Ann.
§59-10-114(2)(h) provides as follows:
(h) Subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
(i) a deduction is allowed for the following:
(A) the
taxpayer;
(B) the
taxpayer's spouse; and
(C) the
taxpayer's dependent's; and
(ii) to the
extent the taxpayer does not deduct the amounts under Section 125, 162, or 213,
Internal Revenue Code, in determining federal taxable income for the taxable
year;
Utah Code Ann. §59-10-114(3)(e)
states the circumstances under which health insurance premiums may not be
deducted as follows:
(e) for purposes of Subsection (2)(h), a subtraction for an
amount paid for health care insurance as defined in Title 31A, Chapter 1,
General Provisions, is not allowed:
(i) for an amount
that is reimbursed or funded in whole or in part by the federal government, the
state, or an agency or instrumentality of the federal government or the state;
and
(ii) for a
taxpayer who is eligible to participate in a health plan maintained and funded
in whole or in part by the taxpayer's employer or the taxpayer's spouse's
employer.
Utah Code Ann. §59-10-401(2)
defines employer as follows:
(2) "Employer" means a person or organization transacting
business in or deriving any income from sources within the State of Utah for
whom an individual performs or performed any services of whatever
nature, and who has control of the payment of wages for such services, or is
the officer, agent, or employee of the person or organization having control of
the payment of wages. It includes any
officer or department of state or federal government, or any political
subdivision or agency of the federal or state government, or any city organized
under a Charter, or any political body not a subdivision or agency of the
state.
DISCUSSION
In
this matter, Petitioner did make one argument that he was entitled to the
deduction because he was employed by one federal agency, but his retirement pay
is being paid by a different federal agency.
However, the Commission determines that the federal government was his
employer, and the funds paying the portion of the premium not paid by
Petitioner are paid by the federal government.
Therefore, the portion of the health insurance premiums is being paid by
his former employer.
In
reviewing the definition of employer above, it includes an organization for
whom an individual performs "or performed any services of whatever
nature. . . ." Accordingly, the
Commission determines that when Utah Code Ann. §59-10-114(3)(e) denies the
deduction for health care insurance to taxpayers who are "eligible to
participate in a health plan maintained and funded in whole or in part by the
taxpayer's employer or the taxpayer's spouse's employer" that the statute
is applicable to the situation of Petitioner.
Here, Petitioner did perform services for the federal government, who is
paying a portion of the health insurance premiums.
Therefore,
Petitioner is not entitled to deduct, on his Utah Individual Income Tax Return,
the amount of health insurance premiums or any portions thereof paid by him.
DECISION
AND ORDER
Based upon the
foregoing, the Commission determines Petitioner may not deduct the health
insurance premiums because a portion of the health plan is maintained and
funded by his former employer, which is his employer under the terms of the
statute. Accordingly, the audit
determination is hereby sustained, and the Petition for Redetermination is
hereby denied. It is so ordered.
This decision does not
limit a party's right to a Formal Hearing.
However, this Decision and Order will become the Final Decision and
Order of the Commission unless any party to this case files a written request
within thirty (30) days of the date of this decision to proceed to a Formal
Hearing. Such a request shall be mailed
to the address listed below and must include the Petitioner's name, address,
and appeal number:
Utah
State Tax Commission
Appeals
Division
210
North 1950 West
Salt
Lake City, Utah 84134
Failure to request a
Formal Hearing will preclude any further appeal rights in this matter.
DATED this 25th day of February
, 2002.
____________________________________
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH STATE TAX
COMMISSION.
The Commission has
reviewed this case and the undersigned concur in this decision.
DATED this 25th day of February
, 2002.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner