Print Friendly HOUSE BILL NO. 79 – Income tax, misc. amens
HOUSE BILL NO. 79
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H0079..................................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to provide adjustments to federal taxable
income; to delete credit insurance in the deduction for health insurance
costs; to conform the Idaho income tax to the Internal Revenue Code as it
relates to electing small business trusts, except to provide the maximum Idaho
rate for individuals shall apply to the trusts; to provide that for the new
employee credit a new employee includes an employee subject to Idaho income
tax withholding, whether or not any amounts are required to be withheld; and
to increase the limitation on the new employee credit.
01/15 House intro - 1st rdg - to printing
01/16 Rpt prt - to Rev/Tax
01/21 Rpt out - rec d/p - to 2nd rdg
01/22 2nd rdg - to 3rd rdg
01/23 3rd rdg - PASSED - 54-11-5
AYES -- Barraclough, Barrett, Bauer, Bedke, Bell, Block, Bolz, Bradford,
Campbell, Cannon, Clark, Collins, Crow, Cuddy, Denney, Eberle, Edmunson,
Ellsworth, Eskridge, Field(18), Field(23), Gagner, Garrett, Harwood,
Jones, Kellogg, Kulczyk, Lake, Langford, Langhorst, McGeachin, McKague,
Meyer, Miller, Moyle, Nielsen, Raybould, Ridinger, Ring, Roberts,
Robison, Rydalch, Sali, Shepherd, Shirley, Skippen, Smith(24), Smylie,
Snodgrass, Stevenson, Tilman, Trail, Wills, Mr. Speaker
NAYS -- Andersen, Bieter, Boe, Douglas, Jaquet, Martinez, Mitchell,
Naccarato, Ringo, Sayler, Smith(30)
Absent and excused -- Black, Deal, Henbest, Schaefer, Wood
Floor Sponsor - Field(18)
Title apvd - to Senate
01/24 Senate intro - 1st rdg - to Loc Gov
01/28 Rpt out - rec d/p - to 2nd rdg
01/29 2nd rdg - to 3rd rdg
01/31 3rd rdg - PASSED - 34-0-1
AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
Cameron, Compton, Darrington, Davis, Gannon, Geddes, Goedde, Hill,
Ingram, Kennedy, Keough, Little, Lodge, Malepeai, Marley, McKenzie,
McWilliams, Noble, Noh, Pearce, Richardson, Schroeder, Sorensen,
Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Calabretta
Floor Sponsor - McKenzie
Title apvd - to House
02/03 To enrol
02/04 Rpt enrol - Sp signed
02/05 Pres signed
02/06 To Governor
02/10 Governor signed
Session Law Chapter 10
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-seventh Legislature First Regular Session - 2003
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 79
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO CORRECTIONS TO THE IDAHO INCOME TAX ACT; AMENDING SECTION 63-3022,
3 IDAHO CODE, TO REVISE A CROSS REFERENCE; AMENDING SECTION 63-3022P, IDAHO
4 CODE, TO DELETE A REFERENCE TO CREDIT INSURANCE; AMENDING SECTION 63-3024,
5 IDAHO CODE, TO PROVIDE THAT THE PROVISIONS OF THE INTERNAL REVENUE CODE
6 RELATING TO ELECTING SMALL BUSINESS TRUSTS SHALL APPLY FOR IDAHO INCOME
7 TAX PURPOSES AND TO PROVIDE THAT THE MAXIMUM IDAHO RATE FOR INDIVIDUALS
8 SHALL APPLY TO THOSE TRUSTS; AMENDING SECTION 63-3029E, IDAHO CODE, TO
9 REVISE THE DEFINITION OF "NEW EMPLOYEE"; AMENDING SECTION 63-3029F, IDAHO
10 CODE, TO PROVIDE THAT THE CREDIT SHALL NOT EXCEED FIFTY PERCENT OF THE TAX
11 LIABILITY OF THE TAXPAYER AND TO PROVIDE THAT THE TAX LIABILITY OF THE
12 TAXPAYER SHALL BE THE TAX AFTER DEDUCTING THE CREDIT FOR INCOME TAXES PAID
13 IN OTHER STATES; AMENDING SECTION 63-3042, IDAHO CODE, TO PROVIDE FOR A
14 COPY OF A SUMMONS; DECLARING AN EMERGENCY AND PROVIDING A RETROACTIVE
15 EFFECTIVE DATE.
16 Be It Enacted by the Legislature of the State of Idaho:
17 SECTION 1. That Section 63-3022, Idaho Code, be, and the same is hereby
18 amended to read as follows:
19 63-3022. ADJUSTMENTS TO TAXABLE INCOME. The additions and subtractions
20 set forth in this section, and in sections 63-3022A through 63-3022 MQ, Idaho
21 Code, are to be applied to the extent allowed in computing Idaho taxable
23 (a) Add any state and local taxes, as defined in section 164 of the
24 Internal Revenue Code and, measured by net income, paid or accrued during the
25 taxable year adjusted for state or local tax refunds used in arriving at tax-
26 able income.
27 (b) Add the net operating loss deduction used in arriving at taxable
29 (c) (1) A net operating loss for any taxable year commencing on and after
30 January 1, 2000, shall be a net operating loss carryback not to exceed a
31 total of one hundred thousand dollars ($100,000) to the two (2) immedi-
32 ately preceding taxable years. Any portion of the net operating loss not
33 subtracted in the two (2) preceding years may be subtracted in the next
34 twenty (20) years succeeding the taxable year in which the loss arises in
35 order until exhausted. The sum of the deductions may not exceed the amount
36 of the net operating loss deduction incurred. At the election of the tax-
37 payer, the two (2) year carryback may be foregone and the loss subtracted
38 from income received in taxable years arising in the next twenty (20)
39 years succeeding the taxable year in which the loss arises in order until
40 exhausted. The election shall be made as under section 172(b)(3) of the
41 Internal Revenue Code. An election under this subsection must be in the
42 manner prescribed in the rules of the state tax commission and once made
43 is irrevocable for the year in which it is made. The term "income" as used
1 in this subsection (c) means Idaho taxable income as defined in this chap-
2 ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
3 (2) Net operating losses incurred by a corporation during a year in which
4 such corporation did not transact business in Idaho or was not included in
5 a group of corporations combined under subsection (t) of section 63-3027,
6 Idaho Code, may not be subtracted. However, if at least one (1) corpora-
7 tion within a group of corporations combined under subsection (t) of sec-
8 tion 63-3027, Idaho Code, was transacting business in Idaho during the
9 taxable year in which the loss was incurred, then the net operating loss
10 may be subtracted. Net operating losses incurred by a person, other than a
11 corporation, in activities not taxable by Idaho may not be subtracted.
12 (d) In the case of a corporation, add the amount deducted under the pro-
13 visions of sections 243(a) and (c), 244, 245 and 246A of the Internal Revenue
14 Code (relating to dividends received by corporations) as limited by section
15 246(b)(1) of said code.
16 (e) In the case of a corporation, subtract an amount determined under
17 section 78 of the Internal Revenue Code to be taxable as dividends.
18 (f) Subtract the amount of any income received or accrued during the tax-
19 able year which is exempt from taxation by this state, under the provisions of
20 any other law of this state or a law of the United States, if not previously
21 subtracted in arriving at taxable income.
22 (g) For the purpose of determining the Idaho taxable income of the bene-
23 ficiary of a trust or of an estate:
24 (1) Distributable net income as defined for federal tax purposes shall be
25 corrected for the other adjustments required by this section.
26 (2) Net operating losses attributable to a beneficiary of a trust or
27 estate under section 642 of the Internal Revenue Code shall be a deduction
28 for the beneficiary to the extent that income from the trust or estate
29 would be attributable to this state under the provisions of this chapter.
30 (h) In the case of an individual who is on active duty as a full-time
31 officer, enlistee or draftee, with the armed forces of the United States,
32 which full-time duty is or will be continuous and uninterrupted for one hun-
33 dred twenty (120) consecutive days or more, deduct compensation paid by the
34 armed forces of the United States for services performed outside this state.
35 The deduction is allowed only to the extent such income is included in taxable
36 income, and provided that appropriate adjustments shall be made in determining
37 the deductions and exemptions allowed pursuant to section 63-3026A(4), Idaho
39 (i) In the case of a corporation, including any corporation included in a
40 group of corporations combined under subsection (t) of section 63-3027, Idaho
41 Code, add any capital loss deducted which loss was incurred during any year in
42 which such corporation did not transact business in Idaho. However, do not add
43 any capital loss deducted if a corporation, including any corporation in a
44 group of corporations combined under subsection (t) of section 63-3027, Idaho
45 Code, was transacting business in Idaho during the taxable year in which the
46 loss was incurred. In the case of persons, other than corporations, add any
47 capital loss deducted which was incurred in activities not taxable by Idaho at
48 the time such loss was incurred. In computing the income taxable to an S cor-
49 poration or partnership under this section, deduction shall not be allowed for
50 a carryover or carryback of a net operating loss provided for in subsection
51 (c) of this section or a capital loss provided for in section 1212 of the
52 Internal Revenue Code.
53 (j) In the case of an individual, there shall be allowed as a deduction
54 from gross income either (1) or (2) at the option of the taxpayer:
55 (1) The standard deduction as defined in section 63, Internal Revenue
2 (2) Itemized deductions as defined in section 63 of the Internal Revenue
3 Code except state or local taxes measured by net income and as defined in
4 section 164 of the Internal Revenue Code.
5 (k) Add the taxable amount of any lump sum distribution excluded from
6 gross income for federal income tax purposes under the ten (10) year averaging
7 method. The taxable amount will include the ordinary income portion and the
8 amount eligible for the capital gain election.
9 (l) Deduct any amounts included in gross income under the provisions of
10 section 86 of the Internal Revenue Code relating to certain social security
11 and railroad benefits.
12 (m) In the case of a self-employed individual, deduct the actual cost of
13 premiums paid to secure worker's compensation insurance for coverage in Idaho,
14 if such cost has not been deducted in arriving at taxable income.
15 (n) In the case of an individual, deduct the amount contributed to a col-
16 lege savings program pursuant to chapter 54, title 33, Idaho Code, but not
17 more than four thousand dollars ($4,000) per tax year. If the contribution is
18 made on or before April 15, 2001, it may be deducted for tax year 2000 and an
19 individual can make another contribution and claim the deduction according to
20 the limits provided in this subsection during 2001 for tax year 2001, as long
21 as the contribution is made on or before December 31, 2001.
22 (o) In the case of an individual, add the amount of a nonqualified with-
23 drawal from an individual trust account or savings account established pursu-
24 ant to chapter 54, title 33, Idaho Code.
25 SECTION 2. That Section 63-3022P, Idaho Code, be, and the same is hereby
26 amended to read as follows:
27 63-3022P. HEALTH INSURANCE COSTS. With respect to an individual taxpayer,
28 an amount equal to the amount paid by the taxpayer during the taxable year for
29 insurance which constitutes medical care for the taxpayer, the spouse or
30 dependents of the taxpayer which is not otherwise deducted or accounted for by
31 the taxpayer for Idaho income tax purposes shall be allowed as a deduction for
32 Idaho taxable income. As used in this section, "insurance which constitutes
33 medical care" includes any hospital or medical policy or certificate, any sub-
34 scriber contract, policies or certificates of insurance for specific disease,
35 hospital confinement indemnity, accident-only, credit, dental, vision, single
36 employer self-funded coverage, meaning that portion of health insurance which
37 is the retained risk of the employer, student health benefits only or coverage
38 for medical care or treatment issued as a supplement to liability insurance.
39 Employers shall provide to the employee a statement as to whether an
40 employee's contribution for health insurance has been excluded from taxable
42 SECTION 3. That Section 63-3024, Idaho Code, be, and the same is hereby
43 amended to read as follows:
44 63-3024. INDIVIDUALS' TAX AND TAX ON ESTATES AND TRUSTS. For taxable year
45 2001, and each taxable year thereafter, a tax measured by Idaho taxable income
46 as defined in this chapter is hereby imposed upon every individual, trust, or
47 estate required by this chapter to file a return.
48 (a) The tax imposed upon individuals, trusts and estates shall be com-
49 puted at the following rates:
1 When Idaho taxable income is: The rate is:
2 Less than $1,000 One and six-tenths percent (1.6%)
3 $1,000 but less than $2,000 $16, plus three and six-tenths
4 percent (3.6%) of the amount over $1,000
5 $2,000 but less than $3,000 $52, plus four and one-tenth
6 percent (4.1%) of the amount over $2,000
7 $3,000 but less than $4,000 $93, plus five and one-tenth
8 percent (5.1%) of the amount over $3,000
9 $4,000 but less than $5,000 $144, plus six and one-tenth
10 percent (6.1%) of the amount over $4,000
11 $5,000 but less than $7,500 $205, plus seven and one-tenth
12 percent (7.1%) of the amount over $5,000
13 $7,500 but less than $20,000 $383, plus seven and four-tenths
14 percent (7.4%) of the amount over $7,500
15 Over $20,000 $1,308, plus seven
16 and eight-tenths percent
17 (7.8%) of the amount over $20,000
18 For taxable year 2000 and each year thereafter, the state tax commission
19 shall prescribe a factor which shall be used to compute the Idaho income tax
20 brackets provided in subsection (a) of this section. The factor shall provide
21 an adjustment to the Idaho tax brackets so that inflation will not result in a
22 tax increase. The Idaho tax brackets shall be adjusted as follows: multiply
23 the bracket amounts by the percentage (the consumer price index for the calen-
24 dar year immediately preceding the calendar year to which the adjusted brack-
25 ets will apply divided by the consumer price index for calendar year 1998).
26 For the purpose of this computation, the consumer price index for any calendar
27 year is the average of the consumer price index as of the close of the twelve
28 (12) month period for the immediately preceding calendar year as adopted by
29 the state tax commission. This adoption shall be exempt from the provisions of
30 chapter 52, title 67, Idaho Code. The consumer price index shall mean the con-
31 sumer price index for all U.S. urban consumers published by the United States
32 department of labor. The state tax commission shall annually include the fac-
33 tor as provided in this subsection to multiply against Idaho taxable income in
34 the brackets above to arrive at that year's Idaho taxable income for tax
35 bracket purposes.
36 (b) In case a joint return is filed by husband and wife pursuant to the
37 provisions of section 63-3031, Idaho Code, the tax imposed by this section
38 shall be twice the tax which would be imposed on one-half (1/2) of the aggre-
39 gate Idaho taxable income. For the purposes of this section, a return of a
40 surviving spouse, as defined in section 2(a) of the Internal Revenue Code, and
41 a head of household, as defined in section 2(b) of the Internal Revenue Code,
42 shall be treated as a joint return and the tax imposed shall be twice the tax
43 which would be imposed on one-half (1/2) of the Idaho taxable income.
44 (c) In the case of a trust that is an electing small business trust as
45 defined in section 1361 of the Internal Revenue Code, the special rules for
46 taxation of such trusts contained in section 641 of the Internal Revenue Code
47 shall apply except that the maximum individual rate provided in this section
48 shall apply in computing tax due under this chapter.
49 (d) The state tax commission shall compute and publish Idaho income tax
50 liability for taxpayers at the midpoint of each bracket of Idaho taxable
51 income in fifty dollar ($50.00) steps to fifty thousand dollars ($50,000),
52 rounding such calculations to the nearest dollar. Taxpayers having income
53 within such brackets shall file returns based upon and pay taxes according to
54 the schedule thus established. The state tax commission shall promulgate rules
55 defining the conditions upon which such returns shall be filed.
1 SECTION 4. That Section 63-3029E, Idaho Code, be, and the same is hereby
2 amended to read as follows:
3 63-3029E. DEFINITIONS -- CONSTRUCTION OF TERMS. As used in this section
4 and in section 63-3029F, Idaho Code:
5 (1) (a) "New employee" means a person from whom subject to Idaho income
6 tax has been withholding whether or not any amounts are required to be
7 withheld, employed by the taxpayer, and covered for unemployment insurance
8 purposes under chapter 13, title 72, Idaho Code, during the taxable year
9 for which the credit allowed by section 63-3029F, Idaho Code, is claimed.
10 A person shall be deemed to be so engaged if such person performs duties
12 (i) A regular full-time basis; or
13 (ii) A part-time basis if such person is customarily performing such
14 duties at least twenty (20) hours per week.
15 No credit shall be earned unless the new employee shall have performed
16 such duties for the taxpayer for a minimum of nine (9) months during the
17 taxable year for which the credit is claimed.
18 (b) The provisions of paragraph (a) of this subsection notwithstanding,
19 no credit shall be allowed for employment of persons by a taxpayer who
20 acquires a business from another taxpayer or who operates in a place of
21 business the same or a substantially identical business as operated by
22 another taxpayer within the prior twelve (12) months, except as the prior
23 taxpayer would have qualified under the provisions of paragraph (c) of
24 this subsection. Employees transferred from a related taxpayer shall not
25 be included in the computation of the credit.
26 (c) The number of employees during any taxable year for any taxpayer
27 shall be the mathematical average of the number of employees reported to
28 the Idaho department of labor for employment security purposes during the
29 twelve (12) months of the taxable year which qualified under paragraph (a)
30 of this subsection. In the event the business is in operation for less
31 than the entire taxable year, the number of employees of the business for
32 the year shall be the average number actually employed during the months
33 of operation, providing that the qualifications of paragraph (a) of this
34 subsection are met.
35 (2) "Same or a substantially identical business" means a business in
36 which the products produced or sold, or the activities conducted are the same
37 in character and use and are produced, sold or conducted in the same manner
38 as, or for the same types of customers as, the products or activities pro-
39 duced, sold or conducted in another business.
40 SECTION 5. That Section 63-3029F, Idaho Code, be, and the same is hereby
41 amended to read as follows:
42 63-3029F. SPECIAL CREDIT AVAILABLE -- NEW EMPLOYEES. (1) Any taxpayer
43 shall be allowed a credit, in an amount determined under subsection (2) of
44 this section, against the tax imposed by this chapter, other than the tax
45 imposed by section 63-3082, Idaho Code, for any taxable year during which the
46 taxpayer's employment of new employees, as defined under section 63-3029E(1),
47 Idaho Code, increases above the taxpayer's average employment for either: (a)
48 the prior taxable year, or (b) the average of three (3) prior taxable years,
49 whichever is higher. No credit shall be allowed under this section unless the
50 number of new employees equals or exceeds one (1) person.
51 (2) The credit authorized in subsection (1) of this section shall be five
52 hundred dollars ($500) per new employee, but the total credit allowed shall
1 not exceed three and one-quarter percent (3.25%) of net income from the
2 taxpayer's corporate, proprietorship, partnership, small business corporation
3 or limited liability company revenue-producing enterprise in which the employ-
4 ment occurred. Additionally, the total amount of this and all other credits
5 allowed under this chapter except for the credits allowed under section s
6 63-3024A, 63-3025D and 63-3029, Idaho Code, taken during any taxable year
7 shall not exceed forty-five fifty percent ( 450%) of the tax otherwise imposed
8 on liability of the taxpayer. for the taxable year for which such The tax lia-
9 bility of the taxpayer shall be the tax after deducting the credit is allowed
10 by section 63-3029, Idaho Code.
11 (3) If the sum of the credit carryovers from the credit allowed by sub-
12 section (2) of this section and the amount of credit for the taxable year from
13 the credit allowed by subsection (2) of this section exceed the limitation
14 imposed by subsection (2) of this section for the current taxable year, the
15 excess attributable to the current taxable year's credit shall be a credit
16 carryover to the three (3) succeeding taxable years. The entire amount of
17 unused credit shall be carried forward to the earliest of the succeeding
18 years, wherein the oldest available unused credit shall be used first, so long
19 as the employment level for which the credit was granted is still maintained.
20 SECTION 6. That Section 63-3042, Idaho Code, be, and the same is hereby
21 amended to read as follows:
22 63-3042. EXAMINATION OF BOOKS AND WITNESSES. For the purpose of ascer-
23 taining the correctness of any return, making a return where none has been
24 made, determining the liability of any person for any tax payable under this
25 act or the liability at law or in equity of any person in respect to any tax
26 provided in this act or collecting any such liability, the state tax commis-
27 sion or its duly authorized deputy is authorized--
28 (a) To examine any books, papers, records, or other data which may be
29 relevant or material to such inquiry;
30 (b) To summon the person liable for tax or required to perform the act,
31 or any officer or employee of such person, or any person having possession,
32 custody or care of books of account containing entries relating to the busi-
33 ness of the person liable for tax or required to perform the act, or any
34 other person the commission or its deputy may deem proper, to appear before
35 the commission or its delegate at a time and place named in the summons and to
36 produce such books, papers, records or other data and/or give such testimony,
37 under oath, as may be relevant or material to such inquiry; and taxpayers
38 whose pertinent records are kept outside of the state must bring such records
39 to Idaho for examination by the state tax commission upon request by it or a
40 deputy, or, by agreement with the state tax commission, permit an auditor des-
41 ignated by the state tax commission to visit the place where the records are
42 kept and there audit such records; and
43 (c) To take such testimony of the person concerned or summoned, under
44 oath, as may be relevant or material to such inquiry.
45 A summons issued under the provisions of this section may be served by the
46 state tax commission or its deputy or by any other person authorized to serve
47 process under the laws of this state by an attested a copy delivered in and to
48 a person to whom it is directed; and the certificate of service signed by the
49 person serving the summons shall be evidence of the facts it states on the
50 hearing of an application for the enforcement of the summons. When the summons
51 requires the production of books, papers, records, or other data, it shall be
52 sufficient if such books, papers, records, or other data are described with
53 reasonable certainty.
1 The time and place of examination pursuant to the provisions of this sec-
2 tion shall be such time and place as may be fixed by the state tax commission
3 or its deputy and as are reasonable under the circumstances, provided that in
4 the case of a summons the date fixed for appearance before the state tax com-
5 mission or its deputy shall not be less than twenty (20) days from the time of
6 service of the summons.
7 No taxpayer shall be subjected to unreasonable or unnecessary examinations
8 or investigations.
9 SECTION 7. An emergency existing therefor, which emergency is hereby
10 declared to exist, this act shall be in full force and effect on and after its
11 passage and approval, and retroactively to January 1, 2003.
STATEMENT OF PURPOSE
This bill makes the following corrections and updates to the Idaho
Income Tax Act:
Updates a cross-reference in the section providing Idaho
adjustments to federal taxable income.
Deletes an extraneous word in the section relating to the Idaho
deduction for health insurance costs.
Conforms the Idaho income tax as it relates to electing small
business trusts to the Internal Revenue Code except to provide that
the maximum Idaho rate for individuals shall apply to such trusts.
Makes two changes to the provisions relating to special credit
available for new employees. The first is to provide that a new
employee includes an employee subject to Idaho income tax
withholding whether or not any amounts are required to be withheld.
The second is to restore amendments inadvertently omitted in prior
legislation to increase the limitation on the credit and to
coordinate the credit with other credits.
Reduces General Fund revenue by $50,000.
Name: Dan John / Ted Spangler
Agency: State Tax Commission
Statement of Purpose/Fiscal Impact H79