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H0440...............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to clarify that net operating losses and
capital losses incurred in activities not taxable in this state are not
deductible for state income tax purposes even if the activity is not a
business activity.
01/16 House intro - 1st rdg - to printing
01/17 Rpt prt - to Rev/Tax
01/24 Rpt out - rec d/p - to 2nd rdg
01/25 2nd rdg - to 3rd rdg
01/28 3rd rdg - PASSED - 69-0-1
AYES -- Aikele, Barraclough, Barrett, Bedke, Bell, Bieter, Black,
Block, Boe, Bolz, Bradford, Bruneel, Callister, Campbell, Clark,
Collins, Crow, Cuddy, Deal, Denney, Ellis, Ellsworth, Eskridge,
Field(13), Field(20), Gagner, Gould, Hadley, Hammond, Harwood,
Henbest, Higgins, Hornbeck, Jaquet, Jones, Kellogg, Kendell, Kunz,
Lake, Langford, Loertscher, Mader, Martinez, McKague, Meyer,
Montgomery, Mortensen, Moyle, Pearce, Pischner, Pomeroy, Raybould,
Ridinger, Roberts, Robison, Sali, Schaefer, Sellman, Shepherd,
Smith(33), Smith(23), Smylie, Stevenson, Stone, Tilman, Trail,
Wheeler, Young, Mr. Speaker
NAYS -- None
Absent and excused -- Wood
Floor Sponsor - Ridinger
Title apvd - to Senate
01/29 Senate intro - 1st rdg - to Loc Gov
02/07 Rpt out - rec d/p - to 2nd rdg
02/08 2nd rdg - to 3rd rdg
02/12 3rd rdg - PASSED - 33-0-2
AYES -- Andreason, Boatright, Branch(Bartlett), Brandt, Bunderson,
Burtenshaw, Cameron, Darrington, Davis, Deide, Dunklin, Frasure,
Goedde, Hawkins, Hill, Ingram, Ipsen, Keough, King-Barrutia, Little,
Lodge, Marley, Noh, Risch, Sandy, Schroeder, Sims, Sorensen, Stegner,
Stennett, Thorne, Wheeler, Williams
NAYS -- None
Absent and excused -- Geddes, Richardson
Floor Sponsor - Stegner
Title apvd - to House
02/13 To enrol
02/14 Rpt enrol - Sp signed
02/15 Pres signed
02/18 To Governor
02/19 Governor signed
Session Law Chapter 33
Effective: 01/01/02
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 440
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCOME TAXES; AMENDING SECTION 63-3022, IDAHO CODE, TO CLARIFY
3 THAT NET OPERATING LOSSES AND CAPITAL LOSSES INCURRED IN ACTIVITIES NOT
4 TAXABLE IN THIS STATE ARE NOT DEDUCTIBLE EVEN IF THE ACTIVITY IS NOT A
5 BUSINESS ACTIVITY; DECLARING AN EMERGENCY AND PROVIDING A RETROACTIVE
6 EFFECTIVE DATE.
7 Be It Enacted by the Legislature of the State of Idaho:
8 SECTION 1. That Section 63-3022, Idaho Code, be, and the same is hereby
9 amended to read as follows:
10 63-3022. ADJUSTMENTS TO TAXABLE INCOME. The additions and subtractions
11 set forth in this section, and in sections 63-3022A through 63-3022M, Idaho
12 Code, are to be applied to the extent allowed in computing Idaho taxable
13 income:
14 (a) Add any state and local taxes, as defined in section 164 of the
15 Internal Revenue Code and, measured by net income, paid or accrued during the
16 taxable year adjusted for state or local tax refunds used in arriving at tax-
17 able income.
18 (b) Add the net operating loss deduction used in arriving at taxable
19 income.
20 (c) (1) A net operating loss for any taxable year commencing on and after
21 January 1, 2000, shall be a net operating loss carryback not to exceed a
22 total of one hundred thousand dollars ($100,000) to the two (2) immedi-
23 ately preceding taxable years. Any portion of the net operating loss not
24 subtracted in the two (2) preceding years may be subtracted in the next
25 twenty (20) years succeeding the taxable year in which the loss arises in
26 order until exhausted. The sum of the deductions may not exceed the amount
27 of the net operating loss deduction incurred. At the election of the tax-
28 payer, the two (2) year carryback may be foregone and the loss subtracted
29 from income received in taxable years arising in the next twenty (20)
30 years succeeding the taxable year in which the loss arises in order until
31 exhausted. The election shall be made as under section 172(b)(3) of the
32 Internal Revenue Code. An election under this subsection must be in the
33 manner prescribed in the rules of the state tax commission and once made
34 is irrevocable for the year in which it is made. The term "income" as used
35 in this subsection (c) means Idaho taxable income as defined in this chap-
36 ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
37 (2) Net operating losses incurred by a corporation during a year in which
38 such corporation did not transact business in Idaho or was not included in
39 a group of corporations combined under subsection (t) of section 63-3027,
40 Idaho Code, may not be subtracted. However, if at least one (1) corpora-
41 tion within a group of corporations combined under subsection (t) of sec-
42 tion 63-3027, Idaho Code, was transacting business in Idaho during the
43 taxable year in which the loss was incurred, then the net operating loss
2
1 may be subtracted. Net operating losses incurred by a person, other than a
2 corporation, in business activities not taxable by Idaho may not be sub-
3 tracted.
4 (d) In the case of a corporation, add the amount deducted under the pro-
5 visions of sections 243(a) and (c), 244, 245 and 246A of the Internal Revenue
6 Code (relating to dividends received by corporations) as limited by section
7 246(b)(1) of said code.
8 (e) In the case of a corporation, subtract an amount determined under
9 section 78 of the Internal Revenue Code to be taxable as dividends.
10 (f) Subtract the amount of any income received or accrued during the tax-
11 able year which is exempt from taxation by this state, under the provisions of
12 any other law of this state or a law of the United States, if not previously
13 subtracted in arriving at taxable income.
14 (g) For the purpose of determining the Idaho taxable income of the bene-
15 ficiary of a trust or of an estate:
16 (1) Distributable net income as defined for federal tax purposes shall be
17 corrected for the other adjustments required by this section.
18 (2) Net operating losses attributable to a beneficiary of a trust or
19 estate under section 642 of the Internal Revenue Code shall be a deduction
20 for the beneficiary to the extent that income from the trust or estate
21 would be attributable to this state under the provisions of this chapter.
22 (h) In the case of an individual who is on active duty as a full-time
23 officer, enlistee or draftee, with the armed forces of the United States,
24 which full-time duty is or will be continuous and uninterrupted for one hun-
25 dred twenty (120) consecutive days or more, deduct compensation paid by the
26 armed forces of the United States for services performed outside this state.
27 The deduction is allowed only to the extent such income is included in taxable
28 income, and provided that appropriate adjustments shall be made in determining
29 the deductions and exemptions allowed pursuant to section 63-3026A(4), Idaho
30 Code.
31 (i) In the case of a corporation, including any corporation included in a
32 group of corporations combined under subsection (t) of section 63-3027, Idaho
33 Code, add any capital loss deducted which loss was incurred during any year in
34 which such corporation did not transact business in Idaho. However, do not add
35 any capital loss deducted if a corporation, including any corporation in a
36 group of corporations combined under subsection (t) of section 63-3027, Idaho
37 Code, was transacting business in Idaho during the taxable year in which the
38 loss was incurred. In the case of persons, other than corporations, add any
39 capital loss deducted which was incurred in business activities not taxable by
40 Idaho at the time such loss was incurred. In computing the income taxable to
41 an S corporation or partnership under this section, deduction shall not be
42 allowed for a carryover or carryback of a net operating loss provided for in
43 subsection (c) of this section or a capital loss provided for in section 1212
44 of the Internal Revenue Code.
45 (j) In the case of an individual, there shall be allowed as a deduction
46 from gross income either (1) or (2) at the option of the taxpayer:
47 (1) The standard deduction as defined in section 63, Internal Revenue
48 Code.
49 (2) Itemized deductions as defined in section 63 of the Internal Revenue
50 Code except state or local taxes measured by net income and as defined in
51 section 164 of the Internal Revenue Code.
52 (k) Add the taxable amount of any lump sum distribution excluded from
53 gross income for federal income tax purposes under the ten (10) year averaging
54 method. The taxable amount will include the ordinary income portion and the
55 amount eligible for the capital gain election.
3
1 (l) Deduct any amounts included in gross income under the provisions of
2 section 86 of the Internal Revenue Code relating to certain social security
3 and railroad benefits.
4 (m) In the case of a self-employed individual, deduct the actual cost of
5 premiums paid to secure worker's compensation insurance for coverage in Idaho,
6 if such cost has not been deducted in arriving at taxable income.
7 (n) In the case of an individual, deduct the amount contributed to a col-
8 lege savings program pursuant to chapter 54, title 33, Idaho Code, but not
9 more than four thousand dollars ($4,000) per tax year. If the contribution is
10 made on or before April 15, 2001, it may be deducted for tax year 2000 and an
11 individual can make another contribution and claim the deduction according to
12 the limits provided in this subsection during 2001 for tax year 2001, as long
13 as the contribution is made on or before December 31, 2001.
14 (o) In the case of an individual, add the amount of a nonqualified with-
15 drawal from an individual trust account or savings account established pursu-
16 ant to chapter 54, title 33, Idaho Code.
17 SECTION 2. An emergency existing therefor, which emergency is hereby
18 declared to exist, this act shall be in full force and effect on and after its
19 passage and approval, and retroactively to January 1, 2002.
STATEMENT OF PURPOSE
RS 11470
This bill amends section 63-3022, Idaho Code, relating Idaho a
djustments to federal taxable income. It clarifies the existing
disallowance of deductions for net operating losses and capital
losses incurred in activities not taxable in Idaho. The bill strikes
the word "business" from the phrase "in business activities not
taxable by Idaho" so it reads: "in activities not taxable in Idaho."
The purpose is to clarify that the limitation applies to personal
investments losses that are not part of a "trade or business" as the
Internal Revenue Code defines that term.
FISCAL IMPACT
None.
CONTACT
Name: Dan John / Ted Spangler
Agency: Revenue and Taxation(Idaho State Tax Commission)
Phone: 334-7530
Statement of Purpose/Fiscal Impact H 440