UC §59-10-114(2)(c)

If you reported a state tax refund on your federal form 1040, line 10, you may subtract that income on your Utah return.  The state tax refund reported on your federal return resulted from itemizing your deductions on your prior year federal form 1040, Schedule A, and claiming a deduction for state or local income taxes on line 5 of that schedule.

Note: If you did not itemize your deductions on your 2010 federal return, this subtraction does not apply.

If you received a state tax refund in 2011 from any year prior to 2010, and you had itemized your deductions which included state and local income taxes paid on your federal Schedule A, you may also deduct that refund amount if it was included on your 2011 federal form 1040, line 10.

If you received a refund of state or local income tax from a year in which you did not itemize your deductions, you should have no entry on your 2011 federal form 1040, line 10 for the refund and, consequently, no state tax refund subtraction on your Utah return.

The state or local taxing jurisdiction may have issued you a form 1099-G reporting the tax refund. In some cases, not all of the refund is taxable on your federal return. See IRS instructions for form 1040 for more information.

Enter the allowable subtraction on Utah TC-40, line 7.

Keep all records and documentation to support this subtraction.