SB 116 Utah Senate · 2026 General Session

Income Tax Rate Modifications

SB 116 modifies Utah's individual income tax rates based on actual state revenue performance. It directly affects Utah taxpayers by setting a formula that lowers the tax rate by 0.01% for every $22.2 million (or more) the state collects in revenue above its forecasted amount. The bill requires the State Tax Commission to annually calculate and publish the adjusted rate, using specific revenue thresholds and cost-per-0.01% figures for fiscal years 2027-2036. This mechanism applies to tax years beginning in 2027 through 2038, with rates initially set at 4.5% for 2027-2028 and then adjusted annually based on revenue outcomes.

Issues: ✓ Budget & Taxes

Bill status in committee 1 of 4 stages cleared

Introduction

Jan 2026

Committee Review

Floor Vote

Governor

Introduced Jan 20, 2026 Last action Mar 7, 2026

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What changed between versions

Introduced → Substitute #1 · 5 edits

MODERATE

This bill establishes a new, dynamic income tax system for Utah that automatically adjusts rates based on actual state revenue performance. It introduces a new revenue forecast and a formula to lower the tax rate by 0.01 percentage points for every $22.2 million (in 2027) that actual revenue exceeds the forecast, ensuring taxpayers benefit from economic growth. The bill also updates the repeal date for the temporary 4.5% tax rate to 2038 and clarifies definitions for various tax credits.

Scope change

The bill expands the scope of the income tax by adding a new chapter (59-1-1901 and 59-1-1902) that creates a permanent mechanism for rate adjustments, while modifying existing definitions to align with this new system.

REQUIREMENT

Created a new revenue forecast for fiscal years 2027 through 2036 to serve as a baseline for calculating tax rate reductions.

Established a formula where the income tax rate decreases by 0.01 percentage points for every $22.2 million (in 2027) that actual revenue exceeds the forecast, with specific cost estimates provided for each year.

DEFINITION

Updated the definition of 'State revenue' to include payments to the Transportation Fund and clarified that 'Unrestricted revenue' is not statutorily dedicated.

TIMELINE

Changed the window for determining tax rate adjustments from July 1-September 1 to July 1-October 1 to allow more time for revenue analysis.

Corrected the repeal date for the temporary 4.5% tax rate from 'on or before January 1, 2028' to 'before January 1, 2028' to ensure the new dynamic rate applies correctly.

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Full legislative history

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Key actions

Committee

Jan 29, 2026

Upper · Passed

Senate/ comm rpt/ substituted [Senate Revenue and Taxation Committee]

upper

Jan 28, 2026

Upper · Passed

Senate Comm - Favorable Recommendation [Senate Revenue and Taxation Committee]

upper

Jan 20, 2026

Committee

Senate/ to standing committee [Senate Revenue and Taxation Committee]

upper

Jan 20, 2026

Introduced

Senate/ 1st reading (Introduced)

upper

1 primary · 0 co-sponsors