howardnlby Howard Stephenson
Trust Law Amendments Will Establish Utah as Financial Services Center

While Utah banks and credit unions continue to fight over credit union tax exemptions and field of membership issues, there is one thing they agree on: Passage of HB 299 – Trust Law Amendments – at the recent legislative session was the right thing to do. The bill essentially repeals the state income tax on irrevocable trusts organized in Utah or transferred to Utah after January 1, 2004.

Supporters claim the amendments will bring thousands of well paying, non polluting jobs to Utah. Governor Leavitt has described the financial services industry as an “economic ecosystem” comparable to Hill Air Force Base in terms of its significance to our state.

Under 299 Tax Revenues Will Increase, Not Decrease

One of the most articulate supporters of HB 299 is George Sutton, former Utah Commissioner of Financial Institutions. Mr. Sutton pointed out to those who worried that SB 299 would reduce tax revenues in a state that already faces budget shortfalls, that taxable trusts are simply not currently being organized in Utah. He noted that a settler of a trust can already do everything that HB 299 allows by simply using a trust company in another state such as Delaware, Alaska or Nevada. Attorneys and financial planners in Utah and other states fulfill their fiduciary responsibilities by organizing trusts in states that do not tax the trust’s income. Utah is now one of those states. Utah trust companies will now have the ability to compete with trust companies in other states, which will produce greater economic activity, and therefore more tax revenues.

Mr. Sutton noted that over the past several years, Utah has developed into a national financial services center. This is part of a trend in the financial services industry to consolidate operations in a few states. Up to now this consolidation in Utah has mostly involved credit cards and other products utilizing computer networks. This was encouraged by changes in Utah laws including removing limits on credit card fees. In the future, Sutton says, one of the biggest growth areas is likely to be financial planning. He said one study reports that in the next twenty years in the U.S. $10 trillion will pass from one generation to the next as the baby boom generation reaches retirement. Trusts will be an integral part of many financial plans and the demand for trust services will increase. Like credit cards, the companies providing these services will be concentrated in a few states that provide the greatest flexibility to conduct that type of business.

What Does HB 299 Mean for Utah?

– National Companies

During the last legislative session, three large national financial services companies with banks in Utah met with Governor Leavitt and legislators and said they have a high level of interest in locating national trust operation in Utah if HB 299 passed. One of those companies already has the largest trust operation in Utah administering tax-free retirement trusts for individuals across the nation. It will soon begin offering trust services to independent financial planners nationwide. The other two companies already have nationwide trust operations based in states with laws that unduly restrain trust options. Both of those companies were already planning to relocate those operations when they became aware of the potential opportunity to locate in Utah. This will also create opportunities for regional banks to move trust operations here and for local banks and credit unions to develop or continue to offer trust services to local residents.

Industrial banks headquartered in Utah currently hold over $100 billion in assets. While these banks do most of their business outside of Utah, they currently employ between 13,000 and 15,000 Utah residents. Passage of HB 299 is expected to dramatically increase the numbers of financial services jobs in Utah. In addition to jobs and taxes, industrial banks are committed to invest a minimum of 1% of assets in community development investments in Utah, targeting low to moderate income residents and neighborhoods and small businesses in Utah.

– Regional Banks

Regional banks such as Zions, Wells Fargo, Key, Bank One and U.S. Bank will also benefit from the trust legislation. Under the previous law, all of these banks except Zions have located trust operations outside Utah. Zions was ready to move its trust operations to Nevada if HB 299 had not passed. These banks will now have the ability to locate trust operations in Utah, which has the added advantage of a better location and better workforce.

– Credit Unions and Community Banks

HB 299 will also enable local credit unions and community banks to offer trust services competitive with those offered by any other provider. These institutions would have found it difficult to offer trust services under current laws.

Find Out More!

Want to learn more about HB 299? Attend the Utah Taxes Now Conference on the morning of Thursday, April 24 and the Little America Hotel in Salt Lake City. Crawford Cragun, President of Franklin Templeton Bank & Trust will describe how HB 299 works and what it will mean to Utah’s economy. For details, contact the Utah Taxpayers Association at 801 972-8814 or at