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Utah House passes bill narrowing when intangible assets are taxed
Summary
The House approved House Bill 370 on Feb. 25, 1998, clarifying that intangible property capable of separate ownership is exempt from ad valorem property tax and limiting how intangible attributes attached to tangible property are treated; the bill passed 68–0 and will go to the Senate.
Representative John L. Valentine, sponsor of House Bill 370, told the House the measure draws a bright line between intangible property that can be owned separately and the intangible attributes that may attach to tangible property. "What House Bill 370 attempts to do is attempts to define a bright line between intangible property, which is capable of separate ownership, and tangible property," Valentine said during floor debate.
Valentine told colleagues the bill does not overturn earlier case law but limits its scope. He said the change preserves the state's basic tax structure while reducing litigation risk. "It limits the scope of the litigation," Valentine said, adding the bill would allow goodwill to remain part of a formula attached to tangible property while excluding separately ownable intangibles from ad valorem taxation.
Several members questioned how the bill would work in practice. Representative Carlson asked the sponsor to explain how assessors would separate goodwill from a business's real property in a locally owned franchise, saying, "If you tax the property that the building is a whole lot different than the McDonald's the value; explain to me how you separate those." Valentine responded with an overview of local assessment methodologies and unitary valuation issues for multistate companies, saying the bill's two-part test would reduce—but not eliminate—litigation.
Supporters said the measure strikes a pragmatic balance. Representative (unnamed) and others urged the House to adopt the committee's compromise language to reduce tax shifts and legal uncertainty pending ongoing court cases. Opponents were not recorded in strong opposition on the floor.
After amendment and discussion, the House closed voting on HB370. The clerk recorded 68 yes votes and 0 no votes; HB370 passed the House and will be transmitted to the Senate for further action.
The sponsor said the bill is intended as a measured solution: it narrows the tax base where property is truly a separately ownable intangible while keeping tangible assets with intangible attributes taxable. The bill now goes to the Senate for consideration.
