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H0498...............................................................by HART INCOME TAX - Adds to and amends existing law relating to income tax to provide a definition of "income"; to revise the definition of "Idaho taxable income"; to revise the definition of "employee"; and to provide a definition of "trade or business" for purposes of the State Income Tax Law. 01/27 House intro - 1st rdg - to printing 01/30 Rpt prt - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature Second Regular Session - 2006IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 498 BY HART 1 AN ACT 2 RELATING TO THE STATE INCOME TAX; AMENDING CHAPTER 30, TITLE 63, IDAHO CODE, 3 BY THE ADDITION OF A NEW SECTION 63-3010A, IDAHO CODE, TO PROVIDE A DEFI- 4 NITION OF "INCOME"; AMENDING SECTION 63-3011C, IDAHO CODE, TO REVISE THE 5 DEFINITION OF "IDAHO TAXABLE INCOME"; AMENDING SECTION 63-3018, IDAHO 6 CODE, TO REVISE THE DEFINITION OF "EMPLOYEE"; AMENDING CHAPTER 30, TITLE 7 63, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 63-3019, IDAHO CODE, TO 8 PROVIDE A DEFINITION OF "TRADE OR BUSINESS"; DECLARING AN EMERGENCY AND 9 PROVIDING RETROACTIVE APPLICATION. 10 Be It Enacted by the Legislature of the State of Idaho: 11 SECTION 1. That Chapter 30, Title 63, Idaho Code, be, and the same is 12 hereby amended by the addition thereto of a NEW SECTION, to be known and des- 13 ignated as Section 63-3010A, Idaho Code, and to read as follows: 14 63-3010A. INCOME DEFINED. "Income" is the annual gain derived from capi- 15 tal, from the employment of another's labor, or from both combined. Income is 16 annual profit severed from an underlying investment. Income is generated from 17 a privileged economic activity, which is managed with skill and organized for 18 profit. Indirect taxes on income diminish only net income while the underlying 19 capital investment remains whole. Net income is that which is calculated using 20 generally accepted accounting principles. 21 SECTION 2. That Section 63-3011C, Idaho Code, be, and the same is hereby 22 amended to read as follows: 23 63-3011C. IDAHO TAXABLE INCOME. The term "Idaho taxable income" means 24taxableincome as defined in section 63-3010A, Idaho Code, and as modified 25 pursuant to the Idaho adjustments specifically provided in this chapter. 26 SECTION 3. That Section 63-3018, Idaho Code, be, and the same is hereby 27 amended to read as follows: 28 63-3018. EMPLOYEE.TheFor the purposes of this chapter, the term 29 "employee" means"employee" as defined in the Internal Revenue Codean offi- 30 cer, employee or elected official of the United States, a Federal State, or 31 any political subdivision thereof, or the District of Columbia or any agency 32 or instrumentality of any one (1) or more of the foregoing. The term 33 "employee" also means an officer of a corporation effectively connected with 34 the foregoing. 35 SECTION 4. That Chapter 30, Title 63, Idaho Code, be, and the same is 36 hereby amended by the addition thereto of a NEW SECTION, to be known and des- 37 ignated as Section 63-3019, Idaho Code, and to read as follows: 2 1 63-3019. TRADE OR BUSINESS. The term "trade or business" means the per- 2 formance of the functions of a public office. 3 SECTION 5. An emergency existing therefor, which emergency is hereby 4 declared to exist, this act shall be in full force and effect on and after its 5 passage and approval, and retroactively to January 1, 2006.
STATEMENT OF PURPOSE RS15821C1 The purpose of the proposed language is to clarify the definition of four terms such that the income tax, as it is imposed by the state of Idaho, conforms to the original intent of the Sixteenth Amendment to the Federal Constitution. As the Idaho Code has adopted the provisions of the Federal Internal Revenue Code, this legislation will insure that the interpretation of the Idaho statutes levying an income tax do not have their provisions, by implication, extended beyond the clear import of the language used, nor enlarged their operations so as to embrace matters not specifically pointed out. The proposed language will insure that the Idaho Code, where it levies an income tax, will be strictly construed. FISCAL NOTE Enactment of this proposed legislation will clarify that taxes on wages and salaries of persons working for a private enterprise or for a state, county, city government or subdivision thereof constitute capitation taxes and are not, therefore, taxable as income under the Idaho Code. The legislation will also further clarify that the taxable income of natural persons must be income effectively connected with a government granted privilege. It can be expected that enactment of this legislation will reduce the state s personal income tax revenue by $650 million. Contact Name: Representative Phil Hart Phone: 332-1000 STATEMENT OF PURPOSE / FISCAL NOTE H498