2006 Legislation
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HOUSE BILL NO. 498 – Income tax, employees, certain

HOUSE BILL NO. 498

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Bill Status



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

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                              IN 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
 24    taxable  income  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.  The  For  the  purposes  of  this  chapter,  the term
 29    "employee" means "employee" as defined in the Internal Revenue Code  an  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 / Fiscal Impact


                                   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