2003 Legislation
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HOUSE BILL NO. 317 – Income tax credit, capital investmt

HOUSE BILL NO. 317

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H0317aaS............................................by REVENUE AND TAXATION
INCOME TAX CREDIT - CAPITAL INVESTMENT - Amends existing law to provide
that for qualified investments placed into service in taxable years
beginning in 2003 and thereafter, the taxpayer may elect, in lieu of the
credit provided by this section, a two year exemption from all taxes on
personal property on the qualified investment; to provide procedures; to
provide for cooperation between the State Tax Commission and the county
assessors; and to provide penalties.
                                                                        
03/03    House intro - 1st rdg - to printing
03/04    Rpt prt - to Rev/Tax
03/13    Rpt out - rec d/p - to 2nd rdg
03/14    2nd rdg - to 3rd rdg
03/17    3rd rdg - PASSED - 54-16-0
      AYES -- Andersen, Barraclough, Barrett, Bauer, Bedke, Bell, Black,
      Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins, Crow,
      Cuddy, Deal, Eberle, Edmunson, Ellsworth, Eskridge, Field(18),
      Field(23), Gagner, Garrett, Harwood, Jaquet, Jones, Kellogg, Lake,
      Langford, McKague, Meyer, Miller, Moyle, Nielsen, Raybould, Ring,
      Rydalch, Sali, Schaefer, Shepherd, Shirley, Skippen, Smylie,
      Snodgrass, Stevenson, Tilman, Trail, Wills, Wood, Mr. Speaker
      NAYS -- Bieter, Douglas, Henbest, Kulczyk, Langhorst, Martinez,
      McGeachin, Mitchell, Naccarato, Ridinger, Ringo, Roberts, Robison,
      Sayler, Smith(30), Smith(24)
      Absent and excused -- None
    Floor Sponsor - Mr. Speaker
    Title apvd - to Senate
03/19    Senate intro - 1st rdg - to Loc Gov
03/25    Rpt out - rec d/p - to 2nd rdg
03/26    2nd rdg - to 3rd rdg
04/22    To 14th Ord
04/25    Rpt out amen - to 1st rdg as amen
    1st rdg - to 2nd rdg as amen
    Rls susp - PASSED - 23-11-1
      AYES -- Andreason, Bailey, Brandt, Bunderson, Cameron, Compton,
      Darrington, Davis, Gannon, Geddes, Goedde, Hill, Ingram, Little,
      Lodge, McKenzie, Noh, Pearce, Richardson, Sorensen, Stegner, Sweet,
      Williams
      NAYS -- Burkett, Calabretta, Kennedy, Keough, Malepeai, Marley,
      McWilliams, Noble, Schroeder, Stennett, Werk
      Absent and excused -- Burtenshaw
    Floor Sponsor - McKenzie
    Title apvd - to House
04/28    House did not concur in Senate amens
    Filed w/Office of the Chief Clerk

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 317
                                                                        
                             BY REVENUE AND TAXATION COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE INCOME TAX CREDIT FOR  CAPITAL  INVESTMENT;  AMENDING  SECTION
  3        63-3029B,  IDAHO CODE, TO PROVIDE THAT FOR QUALIFIED INVESTMENTS PLACED IN
  4        SERVICE IN TAXABLE YEARS BEGINNING IN 2003 AND  THEREAFTER,  THE  TAXPAYER
  5        MAY  ELECT,  IN LIEU OF THE INCOME TAX CREDIT PROVIDED FOR CAPITAL INVEST-
  6        MENT, A TWO YEAR EXEMPTION FROM ALL TAXES  ON  PERSONAL  PROPERTY  ON  THE
  7        QUALIFIED  INVESTMENT,  TO  PROVIDE PROCEDURES, TO PROVIDE FOR COOPERATION
  8        BETWEEN THE STATE TAX COMMISSION AND COUNTY ASSESSORS AND TO PROVIDE  PEN-
  9        ALTIES; DECLARING AN EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.
                                                                        
 10    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 11        SECTION  1.  That Section 63-3029B, Idaho Code, be, and the same is hereby
 12    amended to read as follows:
                                                                        
 13        63-3029B.  INCOME TAX CREDIT FOR CAPITAL INVESTMENT. (1) At  the  election
 14    of  the taxpayer there shall be allowed, subject to the applicable limitations
 15    provided herein as a credit against the income  tax  imposed  by  chapter  30,
 16    title 63, Idaho Code, an amount equal to the sum of:
 17        (a)  The tax credit carryovers; and
 18        (b)  The tax credit for the taxable year.
 19        (2)  The  maximum  allowable  amount of the credit for the current taxable
 20    year shall be three percent (3%) of the amount of qualified  investments  made
 21    during the taxable year.
 22        (3)  As  used  in this section "qualified investment" means certain depre-
 23    ciable property which:
 24        (a)  (i)  Is eligible for the federal investment tax credit, as defined in
 25             sections 46(c) and 48 of the Internal Revenue  Code  subject  to  the
 26             limitations provided for certain regulated companies in section 46(f)
 27             of  the  Internal Revenue Code and is not a motor vehicle under eight
 28             thousand (8,000) pounds gross weight; or
 29             (ii) Is qualified broadband equipment as defined in section 63-3029I,
 30             Idaho Code; and
 31        (b)  Is acquired, constructed, reconstructed, erected or placed into  ser-
 32        vice after December 31, 1981; and
 33        (c)  Has a situs in Idaho.
 34        (4)  (a) For  qualified  investments  placed  in  service in taxable years
 35        beginning in 2003 and thereafter, the taxpayer may elect, in lieu  of  the
 36        credit  provided  by this section, a two (2) year exemption from all taxes
 37        on personal property on the qualified investment. The exemption from  per-
 38        sonal  property  tax shall apply to the year the election is filed as pro-
 39        vided in this section and the immediately  following  year.  The  election
 40        provided  by  this  paragraph  is available only to a taxpayer whose Idaho
 41        taxable income in the second preceding taxable year in which  the  invest-
 42        ment is placed in service is negative.
 43        (b)  The  election  shall  be made in the form prescribed by the state tax
                                                                        
                                           2
                                                                        
  1        commission and shall include a specific description and  location  of  all
  2        qualified  investments placed into service and located in the jurisdiction
  3        of the assessing authority, a designation of the specific assets for which
  4        the exemption is claimed, and such other information as the state tax com-
  5        mission may require. The election must be made by including  the  election
  6        form  with  the  listing  of personal property required by section 63-302,
  7        Idaho Code, or, in the case of operating property assessed  under  chapter
  8        4, title 63, Idaho Code, with the operator's statement required by section
  9        63-404,  Idaho  Code, for the calendar year immediately following the tax-
 10        able year in which the property was placed  in  service.   Once  made  the
 11        election  is  irrevocable.  If  no  election  is made, the election is not
 12        otherwise available. A copy of the election form must also be attached  to
 13        the original income tax return due for the taxable year in which the claim
 14        was made.
 15        (c)  The  state tax commission and the various county assessors are autho-
 16        rized to exchange information as  necessary  to  properly  coordinate  the
 17        exemption provided in this subsection.
 18        (d)  In the event that an investment in regard to which the election under
 19        this  section was made is determined by the state tax commission to not be
 20        a qualified investment or ceases to qualify during the  recapture  period,
 21        the  taxpayer  shall  be  subject  to a penalty equal to the amount of the
 22        claimed investment times the average urban property tax levy of the  state
 23        as determined by the state tax commission times two (2).
 24        (5)  Notwithstanding  the  provisions  of  subsections (1) and (2) of this
 25    section, the amount of the credit allowed shall not exceed fifty percent (50%)
 26    of the tax liability of the taxpayer. The tax liability of the taxpayer  shall
 27    be the tax after deducting the credit allowed by section 63-3029, Idaho Code.
 28        (56)  If  the  sum of credit carryovers from the credit allowed by subsec-
 29    tion (2) of this section and the amount of credit for the  taxable  year  from
 30    the  credit  allowed  by  subsection (2) of this section exceed the limitation
 31    imposed by subsection (45) of this section for the current taxable  year,  the
 32    excess  attributable  to the current taxable year's credit shall be an invest-
 33    ment credit carryover to the fourteen (14) succeeding taxable  years.  In  the
 34    case  of  a  group  of  corporations  filing  a  combined report under section
 35    63-3027, Idaho Code, or sections 63-3027B through 63-3027E, Idaho Code, credit
 36    earned by one (1) member of the group but not used by that member may be  used
 37    by  another  member of the group, subject to the provisions of subsection (45)
 38    of this section, instead of carried over. The entire amount of  unused  credit
 39    shall  be carried forward to the earliest of the succeeding years, wherein the
 40    oldest available unused credit shall be used first, so long as  the  qualified
 41    investment  property  for  which the unused credit was granted still maintains
 42    Idaho situs. For a combined group of corporations, credit carried forward  may
 43    be  claimed by any member of the group unless the member who earned the credit
 44    is no longer included in the combined group.
 45        (67)  Any recapture of the credit allowed by subsection (2) of  this  sec-
 46    tion  on property disposed of or ceasing to qualify, prior to the close of the
 47    recapture period, shall be determined according to  the  applicable  recapture
 48    provisions  of  the  Internal  Revenue Code. In the case of a unitary group of
 49    corporations, the increase in tax due  to  the  recapture  of  investment  tax
 50    credit  must  be  reported  by  the  member of the group who earned the credit
 51    regardless of which member claimed the credit against tax.
 52        (78)  For the purpose of determining whether property placed in service is
 53    a "qualified investment" as defined in subsection (3)  of  this  section,  the
 54    provisions of section 49 of the Internal Revenue Code shall be disregarded.
 55        (89)  For purposes of this section, property has a situs in Idaho during a
                                                                        
                                           3
                                                                        
  1    taxable year if it is used in Idaho at any time during the taxable year. Prop-
  2    erty not used in Idaho during a taxable year does not have a situs in Idaho in
  3    the taxable year during which the property is not used in Idaho or in any sub-
  4    sequent taxable year. No credit or carryover of credit is permitted under this
  5    section  if  the  credit or carryover relates to property that does not have a
  6    situs in Idaho during the taxable year for which the credit  or  carryover  is
  7    claimed. The Idaho situs of property must be established by records maintained
  8    by the taxpayer which are created reasonably contemporaneously with the use of
  9    the property.
 10        (910) In  the  case  of  property used both in and outside Idaho, the tax-
 11    payer, electing to claim the credit provided in this section,  must  elect  to
 12    compute  the  qualified  investment  in property with a situs in Idaho for all
 13    such investments first qualifying during that year in one (1),  but  only  one
 14    (1), of the following ways:
 15        (a)  The  amount of each qualified investment in a specific asset shall be
 16        separately computed based on the percentage of the actual use of the prop-
 17        erty in Idaho by using a measure of the use, such as total miles or  total
 18        machine hours, that most accurately reflects the beneficial use during the
 19        taxable  year  in  which it is first acquired, constructed, reconstructed,
 20        erected or placed into service; provided, that the asset is placed in ser-
 21        vice more than ninety (90) days before the end of the taxable year. In the
 22        case of assets acquired, constructed,  reconstructed,  erected  or  placed
 23        into  service within ninety (90) days prior to the end of the taxable year
 24        in which the investment first qualifies, the measure of the  use  of  that
 25        asset within Idaho for that year shall be based upon the percentage of use
 26        in Idaho during the first ninety (90) days of use of the asset;
 27        (b)  The  investment  in  qualified  property used both inside and outside
 28        Idaho during the taxable year in which it is first acquired,  constructed,
 29        reconstructed,  erected  or placed into service shall be multiplied by the
 30        percent of the investment that would be included in the numerator  of  the
 31        Idaho  property factor determined pursuant to section 63-3027, Idaho Code,
 32        for the same year.
 33        (101) Only for the purposes of subsections (3)(a) and (78)  of  this  sec-
 34    tion,  references to sections of the "Internal Revenue Code" mean the sections
 35    referred to as they existed in the Internal Revenue  Code  of  1986  prior  to
 36    November 5, 1990.
                                                                        
 37        SECTION  2.  An  emergency  existing  therefor,  which emergency is hereby
 38    declared to exist, this act shall be in full force and effect on and after its
 39    passage and approval, and retroactively to January 1, 2003.

Amendment


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                                                     Moved by    Bunderson           
                                                                        
                                                     Seconded by Davis               
                                                                        
                                                                        
                                       IN THE SENATE
                              SENATE AMENDMENT TO H.B. NO. 317
                                                                        
                                                                        
  1                                AMENDMENT TO THE BILL
  2        On page 3 of the printed bill, delete lines 37 through 39 and insert:
  3        "SECTION 2.  That Section 63-2501, Idaho Code, be, and the same is  hereby
  4    amended to read as follows:
                                                                        
  5        63-2501.  PURPOSE.  It  is  the  intent and purpose of this act chapter to
  6    levy a tax on all cigarettes sold, used, or consumed, handled  or  distributed
  7    within  this  state, other than certain cigarettes sold on Indian reservations
  8    for consumption by tribal members, and to precollect the tax from  the  person
  9    who  first  sells,  uses, consumes receives, handles, or distributes the ciga-
 10    rettes. It is also the intent of this chapter to eliminate unfair  competitive
 11    business advantages now enjoyed by Indian tobacco retailers in direct competi-
 12    tion with non-Indian businesses. This advantage arises because the legislature
 13    of  the  state  of Idaho in the past has not exercised its full constitutional
 14    authority to require that Indian enterprises collect and remit state cigarette
 15    taxes in regard to sales made to non-Indian customers. The legislature  hereby
 16    intends  to  exercise  the  full extent of the state's constitutional power to
 17    require that cigarettes sold to non-Indian purchasers on an Indian reservation
 18    must have an Idaho cigarette tax stamp affixed, even if sold by an  Indian  or
 19    an Indian enterprise.
                                                                        
 20        SECTION  3.  That  Section 63-2506, Idaho Code, be, and the same is hereby
 21    amended to read as follows:
                                                                        
 22        63-2506.  IMPOSITION OF TAX. (1) A tax upon the purchase,  storage,  ciga-
 23    rettes  purchased at retail for use, or consumption, handling, distribution or
 24    wholesale sale of cigarettes is hereby imposed at the rate of  one  and  four-
 25    tenths  cent (1.4) for each cigarette or twenty-eight cents (28) per package
 26    of twenty (20) cigarettes, which tax shall be precollected  and  paid  by  the
 27    wholesaler,  and collected by remitted to the state tax commission. Five cents
 28    (5) of the tax collected per package of twenty (20) cigarettes shall be  sub-
 29    ject  to  appropriation  to  the  public  school income fund to be utilized to
 30    facilitate and provide substance abuse programs in the public  school  system.
 31    Five  cents  (5)  of  the tax collected per package of twenty (20) cigarettes
 32    shall be subject to appropriation to the department  of  juvenile  corrections
 33    for  distribution to the counties to be utilized for county juvenile probation
 34    services. Appropriated funds shall be distributed quarterly  to  the  counties
 35    based upon the percentage the population of the county bears to the population
 36    of  the  state as a whole. The remaining moneys collected and those moneys not
 37    appropriated under the provisions of this  section  shall  be  distributed  as
 38    specified in section 63-2520, Idaho Code.
 39        (2)  The tax imposed by this section shall not apply to cigarettes sold by
 40    a  wholesaler  pursuant  to  an authorization by the commission as provided by
                                                                        
                                          2
                                                                        
  1    this section to an Indian retailer solely for resale within the boundaries  of
  2    an Indian reservation located in Idaho to members of the reservation's govern-
  3    ing  tribe.  Any  cigarettes  that  are  nontaxable  under this subsection are
  4    required to have affixed the cigarette stamps required by this chapter.
  5        (3)  Wholesalers making sales of cigarettes to Indian retailers located on
  6    an Indian reservation located in Idaho may apply  to  the  commission  for  an
  7    authorization  to  deduct  on  its cigarette tax return cigarettes sold by the
  8    Indian retailers to members of the reservation's governing  tribe.  The  claim
  9    for any such deduction must be made by the wholesaler and approved by the com-
 10    mission  before  the  wholesaler sells the cigarettes to a retailer. If not so
 11    claimed, the deduction shall be lost.
 12        (4)  The total number of deductible cigarettes allowed by  the  commission
 13    to  wholesalers  claiming a deduction under subsection (3) of this section for
 14    any reporting period shall not exceed the allocated number of  cigarettes  for
 15    the  federally  recognized Indian reservation in Idaho to which the cigarettes
 16    are destined. The allocated number of cigarettes for each federally recognized
 17    Indian reservation in Idaho shall be determined by the commission by multiply-
 18    ing the tribal service area population as determined by the bureau  of  Indian
 19    affairs of the United States department of interior by the greater of:
 20        (a)  The  national  cigarette  consumption per capita average, as compiled
 21        for the most recently completed  calendar  or  fiscal  year  by  the  U.S.
 22        department  of  health and human services or other reliable source of data
 23        as determined by the state tax commission; or
 24        (b)  The cigarette consumption per capita average for that tribe  as  com-
 25        piled for the most recently completed calendar year.
 26        (5)  A  wholesaler may seek, and the commission may allow, a larger number
 27    of deductible cigarettes upon documentary proof satisfactory to the commission
 28    that actual sales to members of a reservation's governing tribe  exceeded  the
 29    amounts  computed  in accordance with subsection (4) of this section, provided
 30    that the deduction may not exceed the amount of the documented actual sales.
 31        (6)  No deduction shall be allowed to a wholesaler, unless the  wholesaler
 32    certifies  to  the  commission  that the economic benefit of the deduction has
 33    been passed on to the retailers to whom the sales were made. The economic ben-
 34    efit of the deduction shall be presumed to have been passed on to  the  Indian
 35    retailer  when  the  average price of cigarettes sold by the wholesaler to all
 36    retailers other than Indian retailers during the reporting period exceeds,  by
 37    an amount equal to the tax imposed in this chapter, the average price of ciga-
 38    rettes sold to Indian retailers during the same reporting period.
 39        (7)  The following definitions apply to terms used in this section:
 40        (a)  "Indian  reservation"  means  lands  in  the  state of Idaho lawfully
 41        reserved, as of the date of the cigarette sale, for a federally recognized
 42        Indian tribe by treaty with the United States, by federal statute,  execu-
 43        tive order or regulation.
 44        (b)  "Indian retailer" means only a business or enterprise which is wholly
 45        owned and operated by an Idaho Indian tribe identified in section 67-4001,
 46        Idaho Code, or a business or enterprise which is wholly owned and operated
 47        by one (1) or more members of that tribe.
 48        (c)  "Reporting  period" means the period for which a cigarette tax return
 49        is due under section 63-2510, Idaho Code.
                                                                        
 50        SECTION 4.  SEVERABILITY.  The provisions of this act are hereby  declared
 51    to  be  severable  and if any provision of this act or the application of such
 52    provision to any person or circumstance is declared invalid  for  any  reason,
 53    such  declaration  shall  not affect the validity of the remaining portions of
 54    this act.
                                                                        
                                          3
                                                                        
  1        SECTION 5.  An emergency existing  therefor,  which  emergency  is  hereby
  2    declared  to  exist,  Sections  1 and 4 of this act shall be in full force and
  3    effect on and after passage and approval,  and  retroactively  to  January  1,
  4    2003;  Sections  2  and 3 of this act shall be in full force and effect on and
  5    after July 1, 2003.".
                                                                        
  6                                 CORRECTIONS TO TITLE
  7        On page 1, delete line 2, and insert: "RELATING TO TAXATION; AMENDING SEC-
  8    TION"; and delete line 9 and insert: "ALTIES; AMENDING SECTION 63-2501,  IDAHO
  9    CODE,  TO  APPLY THE CIGARETTE TAX TO USE OR CONSUMPTION OTHER THAN CIGARETTES
 10    SOLD ON INDIAN RESERVATIONS FOR CONSUMPTION BY TRIBAL MEMBERS;  AMENDING  SEC-
 11    TION  63-2506,  IDAHO  CODE, TO APPLY THE CIGARETTE TAX TO ALL SALES EXCEPT TO
 12    MEMBERS OF THE RESERVATION'S GOVERNING TRIBE  ON  AN  INDIAN  RESERVATION,  TO
 13    ESTABLISH  A DEDUCTION METHOD AGAINST CIGARETTE TAXES FOR THE EXEMPTION AND TO
 14    MAKE A TECHNICAL CORRECTION; PROVIDING FOR SEVERABILITY;  DECLARING  AN  EMER-
 15    GENCY, PROVIDING RETROACTIVE APPLICATION AND PROVIDING AN EFFECTIVE DATE.".

Statement of Purpose / Fiscal Impact


       REPRINT          REPRINT         REPRINT     REPRINT

                       STATEMENT OF PURPOSE
                             RS 13084

This bill allows taxpayers who make new personal property
investments in Idaho, on and after January 1, 2003, the
opportunity to forego the income tax investment tax credit (ITC)
by electing an exemption from personal tax on the property for
two years.

Taxpayers who are in a loss situation are not able to claim the
ITC because they have no tax liability to offset.  This bill will
allow taxpayers who have suffered losses to elect to be exempt
from property tax on personal property on new personal property
acquisitions/investments for two years in lieu of the ITC.

The average rural property tax rate is 1.2%.  The average urban
property tax rate is 1.7%.  Two years of property tax exemption
closely approximates the amount of ITC that would have been
earned.                          

                          FISCAL IMPACT

No fiscal cost to the General Fund.  The cost to the counties in
Idaho is zero, as a tax shift occurs.  It is estimated that the
tax shift will be in the $6 - $8 million range in the first year,
which equates to about 5% of total property tax on personal
property paid last year.  The cost to schools is also zero in the
first year and about $1.8 million in year two.




Contact:
Name:     Speaker Bruce Newcomb 
          Rep. Lawerence Denney
          Rep. Mike Moyle
          Rep. Julie Ellsworth
Phone:    (208) 332-1000









STATEMENT OF PURPOSE/FISCAL NOTE              Bill No. 317