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Idaho Statutes
Idaho Statutes are updated to the website July 1 following the legislative session.
REVENUE AND TAXATION
CHAPTER 30
INCOME TAX
63-3027. Computing Idaho taxable income of multistate or unitary corporations. The Idaho taxable income of any multistate or unitary corporation transacting business both within and without this state shall be computed in accordance with the provisions of this section:
(1) As used in this section, unless the context otherwise requires:
(a) "Apportionable income" means income arising from transactions and activity in the regular course of the taxpayer’s trade or business and includes income arising from tangible and intangible property if the acquisition, management, employment, development, or disposition of the property constitutes integral or necessary parts of the taxpayer’s trade or business operations.
(b) "Broadcast customer" means a person, corporation, partnership, limited liability company, or other entity that has a direct connection or contractual relationship with the broadcaster under which revenue is derived by the broadcaster, such as an advertiser or a platform distribution company.
(c) "Broadcaster" means a taxpayer that is a television broadcast network, a cable program network, or a television distribution company.
(d) "Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.
(e) "Communications company" means any person or any related person described in section 267 of the Internal Revenue Code, whether individually or in the aggregate, that:
(i) Is:
1. A telecommunications carrier as defined in section 62-610B, Idaho Code;
2. A communications company that provides the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point or between or among points and includes such transmission, conveyance, or routing in which computer processing applications are used to act on the form, code, or protocol of the content for purposes of transmission, conveyance, or routing without regard to whether such service is referred to as a voice over internet protocol service or is classified by the federal communications commission as enhanced or value added. The company may also provide video programming provided by or generally considered comparable to programming provided by a television broadcast station, regardless of the medium, including the furnishing of transmission, conveyance, and routing of such services by the programming service provider. Video programming includes but is not limited to cable service as defined in 47 U.S.C. 522 and video programming services delivered by providers of commercial mobile radio service as defined in 47 CFR 20.3; or
3. A broadcast company that provides an over-the-air broadcast radio station or over-the-air broadcast television station; and
(ii) Owns, operates, manages, or controls any plant or equipment used to furnish telecommunications service, communication services, broadband services, internet service, or broadcast services directly or indirectly to the general public at large and derives at least seventy percent (70%) of its gross sales for the current taxable year from the provision of these services. For purposes of the seventy percent (70%) test, "gross sales" does not include interest, dividends, rents, royalties, capital gains, or ordinary gains from asset dispositions, other than in the normal course of business.
(f) "Compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services.
(g) "Film programming" means one (1) or more performances, events, or productions, or segments of performances, events, or productions, intended to be distributed for visual and auditory perception, including but not limited to news, entertainment, sporting events, plays, stories, or other literary, commercial, educational, or artistic works.
(h) "Nonapportionable income" means all income other than apportionable income.
(i) "Sales" or "receipts" means all gross receipts of the taxpayer not allocated under this section and that are received from transactions and activities in the regular course of the taxpayer’s trade or business or otherwise required to be included as apportionable income.
(j) "State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.
(2) Any taxpayer having income from business activity that is taxable both within and without this state shall allocate and apportion such net income as provided in this section.
(3) In any case in which the provisions of section 63-3701, Idaho Code, are inconsistent with the provisions of this section, the provisions of this section shall control.
(4) For purposes of allocation and apportionment of income under this section, a taxpayer is taxable in another state if:
(a) In that state he is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax; or
(b) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.
(5) Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute nonapportionable income, shall be allocated as provided in subsections (6) through (9) of this section. Allocable nonapportionable income shall be limited to the total nonapportionable income received in excess of any related expenses that have been allowed as a deduction during the taxable year. In the case of allocable nonapportionable interest or dividends, related expenses include interest on indebtedness incurred or continued to purchase or carry assets on which the interest or dividends are nonapportionable income.
(6)(a) Net rents and royalties from real property located in this state are allocable to this state.
(b) Net rents and royalties from tangible personal property are allocable to this state:
(i) If and to the extent that the property is utilized in this state; or
(ii) In their entirety if the taxpayer’s commercial domicile is in this state and the taxpayer is not organized under the laws of or taxable in the state in which the property is utilized.
(c) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.
(7)(a) Capital gains and losses from sales of real property located in this state are allocable to this state.
(b) Capital gains and losses from sales of tangible personal property are allocable to this state if:
(i) The property had a situs in this state at the time of the sale; or
(ii) The taxpayer’s commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs.
(c) Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer’s commercial domicile is in this state, unless such gains and losses constitute apportionable income as defined in this section.
(8) Interest and dividends are allocable to this state if the taxpayer’s commercial domicile is in this state, unless such interest or dividends constitute apportionable income as defined in this section.
(9)(a) Patent and copyright royalties are allocable to this state:
(i) If and to the extent that the patent or copyright is utilized by the payer in this state; or
(ii) If and to the extent that the patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer’s commercial domicile is in this state.
(b) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patent product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer’s commercial domicile is located.
(c) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer’s commercial domicile is located.
(10)(a) All apportionable income shall be apportioned to this state under subsection (11) of this section by multiplying the income by a fraction, the numerator of which is the total sales of the taxpayer in Idaho during the tax period and the denominator of which is the total sales of the taxpayer everywhere during the tax period.
(b) An electrical corporation as defined in section 61-119, Idaho Code, a telephone corporation as defined in section 62-603, Idaho Code, a communications company as defined in this section, or a taxpayer subject to a special industry regulation pursuant to subsection (18) of this section may elect to apportion all apportionable income of the taxpayer to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three (3). Where a taxpayer makes an election to use a special industry regulation under this paragraph, if the property, payroll, or sales factors are defined in a special industry regulation pursuant to subsection (18) of this section, those definitions or terms will be controlling to the extent they are in conflict with the definitions provided in subsections (12) through (16) of this section.
(11)(a) In the case of a corporation or group of corporations combined under subsection (22) of this section, Idaho taxable income or loss of the corporation or combined group shall be determined as follows:
(i) From the income or loss of the corporation or combined group of corporations, subtract any nonapportionable income and subtract any nonapportionable loss included in the total; and
(ii) Multiply the amounts determined under subparagraph (i) of this paragraph by the Idaho apportionment percentage defined in subsection (10) of this section, taking into account, where applicable, the property, payroll, and sales of all corporations, wherever incorporated, that are included in the combined group. The resulting product shall be the amount of income or loss apportioned to Idaho.
(b) To the amount determined as apportionable income or loss under paragraph (a)(ii) of this subsection, add nonapportionable income allocable entirely to Idaho under the provisions of this section or subtract nonapportionable loss allocable entirely to Idaho under this section. The resulting sum is the Idaho taxable income or loss of the corporation.
(c) In the case of a corporation not subject to subsection (22) of this section, the income or loss referred to in paragraph (a)(i) of this subsection shall be the taxable income of the corporation after making appropriate adjustments under the provisions of section 63-3022, Idaho Code.
(12) Sales of tangible personal property, including gross receipts from leases and other uses of tangible personal property, are in this state if:
(a) The property is delivered or shipped to a purchaser, other than the United States government, within this state, regardless of the free on board (f.o.b.) point or other conditions of the sale; or
(b) The property is shipped from an office, store, warehouse, factory, or other place of storage in this state; and
(i) The purchaser is the United States government; or
(ii) The taxpayer is not taxable in the state of the purchaser.
(13) Sales, other than sales of tangible property, are in this state if the taxpayer’s market for the sales is in this state. The taxpayer’s market for sales is in this state:
(a) In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this state;
(b) In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this state;
(c) In the case of a service, if and to the extent the service is delivered to a location in this state;
(d) In the case of intangible property that is:
(i) Rented, leased, or licensed, if and to the extent the property is used in this state, provided that intangible property utilized in marketing a good or service to a consumer is "used in this state" if that good or service is purchased by a consumer who is in this state; and
(ii) Sold, if and to the extent the property is used in this state, provided that:
1. A contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is "used in this state" if the geographic area includes all or part of this state; and
2. Receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of such intangible property under subparagraph (i) of this paragraph; and
(e) In the case of sales of a broadcaster from advertising or licensing income that arises from the broadcast or other distribution of film programming by any means, if the commercial domicile of the broadcast customer, as defined in this section, is in this state. Other sales of a broadcaster shall be apportioned in a manner consistent with the rules that apply to such sales.
(14) If the state or states of assignment under subsection (13) of this section cannot be determined, the state or states of assignment shall be reasonably approximated.
(15) A communications company, as defined in this section, may elect to use this subsection for purposes of sourcing sales other than the sales of tangible personal property. If such an election is made, sales other than sales of tangible personal property are in this state if:
(a) All the income-producing activity is performed in this state; or
(b) The income-producing activity is performed both in and outside this state and a greater proportion of the income-producing activity is performed in this state than in any other state, based on costs of performance.
(16) If a taxpayer makes the election in subsection (10)(b) of this section or is using an alternative method pursuant to subsection (17) of this section that requires the use of a property or payroll factor, the property and payroll factor definitions in this subsection apply.
(a) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in this state during the tax period, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used during the tax period.
(b) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight (8) times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals.
(c) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period, but the state tax commission may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer’s property.
(d) The payroll factor is a fraction, the numerator of which is the total amount paid in this state during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period.
(e) Compensation is paid in this state if:
(i) The individual’s service is performed entirely within the state; or
(ii) The individual’s service is performed both within and without the state, but the service performed without the state is incidental to the individual’s service within the state; or
(iii) Some of the service is performed in the state and:
1. The base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the state; or
2. The base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual’s residence is in this state.
(17) If the allocation and apportionment provisions of this section do not fairly represent the extent of the taxpayer’s business activity in this state, the taxpayer may petition for or the state tax commission may require, in respect to all or any part of the taxpayer’s business activity, if reasonable:
(a) Separate accounting;
(b) The exclusion of any one (1) or more of the factors;
(c) The inclusion of one (1) or more additional factors that will fairly represent the taxpayer’s business activity in this state; or
(d) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer’s income.
(18) If the allocation and apportionment provisions of this section do not fairly represent the extent of business activity in Idaho of taxpayers engaged in a particular industry or in a particular transaction or activity, the state tax commission may, in addition to the authority in subsection (17) of this section, establish appropriate rules for determining alternative allocation and apportionment methods for such taxpayers. A rule adopted pursuant to this subsection shall be applied uniformly, except that, with respect to any taxpayer to whom such rule applies, the taxpayer may petition for, or the state tax commission may require, adjustment pursuant to subsection (17) of this section.
(19)(a) The party petitioning for, or the state tax commission requiring, the use of any method to effectuate an equitable allocation or apportionment of the taxpayer’s income pursuant to subsection (17) of this section must prove by a preponderance of the evidence:
(i) That the allocation and apportionment provisions of this section do not fairly represent the extent of the taxpayer’s business activity in Idaho; and
(ii) That the alternative to such provision is reasonable.
(b) The same burden of proof shall apply, whether the taxpayer is petitioning for, or the state tax commission is requiring, the use of any reasonable method to effectuate an equitable allocation and apportionment of the taxpayer’s income. However, if the state tax commission can show that in any two (2) of the prior five (5) years the taxpayer had used an allocation or apportionment method at variance with its allocation or apportionment method or methods used for such other tax years, then the state tax commission shall not bear the burden of proof in imposing a different method pursuant to subsection (17) of this section.
(20) If the state tax commission requires any method to effectuate an equitable allocation and apportionment of the taxpayer’s income, the state tax commission cannot impose any civil or criminal penalty with reference to the tax due that is attributable to the taxpayer’s reasonable reliance solely on the allocation and apportionment provisions of this section.
(21) A taxpayer that has received written permission from the state tax commission to use a reasonable method to effectuate an equitable allocation and apportionment of the taxpayer’s income shall not have that permission revoked with respect to transactions and activities that have already occurred unless there has been a material change in, or a material misrepresentation of, the facts provided by the taxpayer upon which the state tax commission reasonably relied.
(22) For purposes of this section and sections 63-3027B through 63-3027E, Idaho Code, the income of two (2) or more corporations, wherever incorporated, the voting stock of which is more than fifty percent (50%) owned directly or indirectly by a common owner or owners, when necessary to accurately reflect income, shall be allocated or apportioned as if the group of corporations were a single corporation, in which event:
(a) The Idaho taxable income of any corporation subject to taxation in this state shall be determined by use of a combined report that includes the income, determined under paragraph (b) of this subsection, of all corporations that are members of a unitary business, allocated and apportioned using apportionment factors for all corporations included in the combined report and methods set out in this section. The use of a combined report does not disregard the separate corporate identities of the members of the unitary group. Each corporation transacting business in this state is responsible for its apportioned share of the combined apportionable income plus its nonapportionable income or loss allocated to Idaho, minus its net operating loss carryover or carryback.
(b) The income of a corporation to be included in a combined report shall be determined as follows:
(i) For a corporation incorporated in the United States or included in a consolidated federal corporation income tax return, the income to be included in the combined report shall be the taxable income for the corporation after making appropriate adjustments under the provisions of section 63-3022, Idaho Code;
(ii) For a corporation incorporated outside the United States but not included in subparagraph (i) of this paragraph, the income to be included in the combined report shall be the net income before income taxes of such corporation stated on the profit and loss statements of such corporation which are included within the consolidated profit and loss statement prepared for the group of related corporations of which the corporation is a member, which statement is prepared for filing with the United States securities and exchange commission. If the group of related companies is not required to file such profit and loss statement with the United States securities and exchange commission, the profit and loss statement prepared for reporting to shareholders and subject to review by an independent auditor may be used to obtain net income before income taxes. In the alternative, and subject to reasonable substantiation and consistent application by the group of related companies, adjustments may be made to the profit and loss statements of the corporation incorporated outside the United States, if necessary, to conform such statements to tax accounting standards as required by the Internal Revenue Code as if such corporation were incorporated in the United States and required to file a federal income tax return, subject to appropriate adjustments under the provisions of section 63-3022, Idaho Code;
(iii) If the income computation for a group under subparagraphs (i) and (ii) of this paragraph results in a loss, such loss shall be taken into account in other years, subject to the provisions of subsections (b) and (c) of section 63-3022, Idaho Code; and
(iv) When one (1) or more corporations included in a combined report have excess inclusion income for a tax year that is taxable to those corporations pursuant to section 63-3011B, Idaho Code, the amount of such excess inclusion income shall be reported as the taxable income for those members of the combined group as provided by section 63-3011B, Idaho Code, and any net operating loss for that tax year or carried forward from an earlier tax year may be taken as deductions in other tax years, subject to the provisions of subsections (b) and (c) of section 63-3022, Idaho Code. In computing the net operating loss that may be used in another tax year for that corporation or other member of the combined return group, the excess inclusion income recognized as taxable income shall be deducted from gross income, as provided by treasury regulation 1.860E-1(a)(1).
(23) If compensation is paid in the form of a reasonable cash fee for the performance of management services directly for the United States government at the Idaho national laboratory or any successor organization, separate accounting for that part of the business activity without regard to other activity of the taxpayer in the state of Idaho or elsewhere shall be required; provided that only that portion of general expenses clearly identifiable with Idaho business operations of that activity shall be allowed as a deduction.
(24) The state tax commission shall promulgate rules as necessary or appropriate to carry out the purposes of this section.
History:
[63-3027, added 1959, ch. 299, sec. 27, p. 613; am. 1961, ch. 328, sec. 10, p. 622; am. 1965, ch. 254, sec. 1, p. 639; am. 1969, ch. 319, sec. 9, p. 982; am. 1972, ch. 398, sec. 5, p. 1149; am. 1975, ch. 32, sec. 1, p. 52; am. 1979, ch. 250, sec. 1, p. 654; am. 1985, ch. 114, sec. 2, p. 233; am. 1993, ch. 284, sec. 3, p. 964; am. 1994, ch. 247, sec. 2, p. 782; am. 1994, ch. 301, sec. 1, p. 948; am. 1995, ch. 111, sec. 27, p. 366; am. 1998, ch. 42, sec. 5, p. 182; am. 2007, ch. 10, sec. 2, p. 10; am. 2014, ch. 74, sec. 2, p. 192; am. 2022, ch. 52, sec. 1, p. 157.]