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H0120...............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law relating to income tax to modify the
offset for expenses and interest related to exempt income from Idaho state
and local securities.
01/27 House intro - 1st rdg - to printing
01/29 Rpt prt - to Rev/Tax
02/03 Rpt out - rec d/p - to 2nd rdg
02/04 2nd rdg - to 3rd rdg
02/05 3rd rdg - PASSED - 65-0-5
AYES -- Barraclough, Barrett, Bell, Bieter, Black, Boe, Bruneel,
Callister, Campbell, Chase, Clark, Crow, Cuddy, Deal, Denney,
Ellsworth, Field(13), Field(20), Gagner, Geddes, Gould, Hadley,
Hammond, Hansen(23), Henbest, Hornbeck, Jaquet, Jones, Judd, Kellogg,
Kempton, Kendell, Kjellander, Kunz, Lake, Limbaugh, Linford, Mader,
Marley, McKague, Meyer, Montgomery, Mortensen, Moyle, Pischner,
Pomeroy, Reynolds, Ridinger, Ringo, Robison, Sali, Schaefer, Sellman,
Smith, Stevenson, Stoicheff, Stone, Taylor, Tilman, Tippets, Watson,
Williams, Wood, Zimmermann, Mr Speaker
NAYS -- None
Absent and exlcused -- Alltus, Hansen(29), Loertscher, Trail, Wheeler
Floor Sponsor - Linford
Title apvd - to Senate
02/08 Senate intro - 1st rdg - to Loc Gov
02/11 Rpt out - rec d/p - to 2nd rdg
02/12 2nd rdg - to 3rd rdg
02/15 3rd rdg - PASSED - 28-0-7
AYES--Andreason, Boatright, Branch, Bunderson, Burtenshaw, Cameron,
Crow, Darrington, Davis, Deide, Dunklin, Frasure, Geddes, Hawkins,
Keough, Lee, McLaughlin, Richardson, Riggs, Risch, Sandy, Schroeder,
Sorensen, Stegner, Thorne, Twiggs, Wheeler, Whitworth
NAYS--None
Absent and excused--Danielson, Ingram, Ipsen, King, Noh, Parry,
Stennett
Floor Sponsor - Bunderson
Title apvd - to House
02/16 To enrol
02/17 Rpt enrol - Sp signed
02/18 Pres signed
02/19 To Governor
02/25 Governor signed
Session Law Chapter 28
Effective: 01/01/99
H0120|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fifth Legislature First Regular Session - 1999IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 120 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO INCOME TAXES; AMENDING SECTION 63-3022M, IDAHO CODE, TO MODIFY THE 3 OFFSET FOR EXPENSES AND INTEREST RELATED TO EXEMPT INCOME FROM IDAHO STATE 4 AND LOCAL SECURITIES; DECLARING AN EMERGENCY AND PROVIDING A RETROACTIVE 5 EFFECTIVE DATE. 6 Be It Enacted by the Legislature of the State of Idaho: 7 SECTION 1. That Section 63-3022M, Idaho Code, be, and the same is hereby 8 amended to read as follows: 9 63-3022M. EXPENSES AND INTEREST RELATING TO TAX EXEMPT INCOME. For tax- 10 able years commencing on and after January 1, 19989 : 11 (1) Add interest and dividends received or accrued during the taxable 12 year from foreign securities and from securities issued by states and other 13 political subdivisions exempt from federal income tax under the Internal Reve- 14 nue Code, less applicable amortization. 15 (2) Subtract any expenses and interest not allowed under sections 16 265 and 291 of the Internal Revenue Code in computing taxable income, as 17 defined in section 63-3011B, Idaho Code, for interest on indebtedness incurred 18 or continued to purchase or to carry obligations the interest of which is not 19 subject to the taxes imposed under the Internal Revenue Code. 20 (3) Subtract interest and dividends received or accrued during the 21 taxable year from securities issued: 22 (a) By the federal government and its instrumentalities to the extent 23 included in taxable income and not subject to taxation by this state, and 24 (b) By the state of Idaho, its cities and political subdivisions, exempt 25 from federal income tax under the Internal Revenue Code. 26 (34 ) No deduction shall be allowed for interest 27 on indebtedness incurred or continued to purchase or to carry obligations the 28 interest of which is not subject to the taxes imposed under this chapter. The 29 amount of interest on indebtedness thus incurred or continued shall be an 30 amount which bears the same ratio to the aggregate amount allowable31(determined without regard to this section)to the taxpayer as a deduc- 32 tion for interest for the taxable year as the taxpayer's interest income from 33 the obligations mentioned in the preceding sentence bears to the taxpayer's 34 total income for the taxable year. "Aggregate amount allowable" means 35 the taxpayer's total interest expense deducted in determining taxable income 36 as defined in section 63-3011B, Idaho Code, plus interest expense disallowed 37 under sections 265 and 291 of the Internal Revenue Code, plus interest expense 38 from a pass-through entity, plus the interest expense of a foreign corporation 39 that, pursuant to sections 63-3027 and 63-3027B through 63-3027E, Idaho Code, 40 is included in a combined report with the taxpayer less interest expense of 41 any corporation included with the taxpayer in a consolidated federal return 42 but not a part of the combined report filed with the state tax commission for 43 the same taxable year. The deduction under this subsection shall not exceed 2 1 the amount of interest and dividend income added pursuant to subsection (1) of 2 this section less interest and dividend income from the state of Idaho, its 3 cities and political subdivisions, subtracted pursuant to subsection (3) of 4 this section. 5 (45 ) No deduction shall be allowed for expenses 6 (other than interest) attributable to interest or dividend income which is not 7 subject to the taxes imposed under this chapter. 8(5) A deduction shall be allowed for expenses disallowed under sec-9tions 265 and 291 of the Internal Revenue Code to the extent such expenses10are attributable to interest and dividends received or accrued during the tax-11able year from foreign securities and from securities issued by states and12other political subdivisions exempt from federal income tax under the Internal13Revenue Code and not excluded under subsection (3) or (4) of this section. The14deduction under this subsection shall not exceed the amount of interest and15dividend income added pursuant to subsection (1) of this section less interest16and dividend income from the state of Idaho, its cities and political subdivi-17sions, subtracted pursuant to subsection (2) of this section.18 SECTION 2. An emergency existing therefor, which emergency is hereby 19 declared to exist, this act shall be in full force and effect on and after its 20 passage and approval, and retroactively to January 1, 1999.
STATEMENT OF PURPOSE
RS08387
As presently written, The Idaho Income Tax Act does not give
taxpayers the full benefit of the exemption from Idaho income tax
for income earned on bonds issued by the state of Idaho and its
political subdivisions. (Income from bonds issued by other states
and their local governments that is exempt from federal income
tax is subject to Idaho income tax.) This is because the present
statute overstates the amount of expense disallowed as
attributable to earning tax-exempt income. This bill corrects
that problem.
FISCAL IMPACT
Loss of $10,000 to the general fund.
CONTACT
Name: Dan John/Ted Spangler
Agency: State Tax Commission
Phone: 334-7530
Statement of Purpose/Fiscal Impact H 120