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HOUSE BILL NO. 481
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H0481...............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to make various changes to the Idaho
Income Tax Act; to clarify the exclusion for certain dividends payable to a
mutual insurance stock holding company or intermediate holding company; to
provide a correct reference to the Internal Revenue Code; to provide
changes in retirement age under the Social Security Act; to provide a
definition of disabled; to clarify that to qualify for the deduction for
certain expenses for household and dependent care, services must be paid by
the individual maintaining the household; and to update the income tax
withholding rate applicable to lottery winnings.
01/20 House intro - 1st rdg - to printing
01/21 Rpt prt - to Rev/Tax
02/03 Rpt out - rec d/p - to 2nd rdg
02/04 2nd rdg - to 3rd rdg
02/09 3rd rdg - PASSED - 68-0-2
AYES -- Andersen, Barraclough, Barrett, Bauer, Bayer, Bedke, Bell,
Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
Crow, Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth,
Eskridge, Field(18), Field(23), Gagner, Garrett, Harwood, Henbest,
Jaquet, Jones, Kellogg, Kulczyk, Lake, Langford, Langhorst, Martinez,
McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen,
Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts, Robison,
Rydalch, Sali, Sayler, Schaefer, Shepherd, Shirley, Skippen,
Smith(30), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr.
NAYS -- None
Absent and excused -- McGeachin, Smith(24)
Floor Sponsor - Barrett
Title apvd - to Senate
02/10 Senate intro - 1st rdg - to Loc Gov
02/12 Rpt out - rec d/p - to 2nd rdg
02/13 2nd rdg - to 3rd rdg
03/02 3rd rdg - PASSED - 31-0-4
AYES -- Andreason, Bailey, Brandt, Burkett, Burtenshaw, Calabretta,
Cameron, Compton(Duncan), Darrington, Davis, Gannon, Geddes, Goedde,
Hill, Ingram, Kennedy, Keough, Little, Lodge, Malepeai, Marley,
McKenzie, Noble(Anderson), Noh, Pearce, Schroeder, Sorensen,
Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Bunderson, McWilliams, Richardson, Stegner
Floor Sponsor - McKenzie
Title apvd - to House
03/03 To enrol
03/04 Rpt enrol - Sp signed
03/05 Pres signed
03/08 To Governor
03/10 Governor signed
Session Law Chapter 30
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 481
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO THE IDAHO INCOME TAX ACT; AMENDING SECTION 41-3821, IDAHO CODE, TO
3 CLARIFY THE EXCLUSION FOR CERTAIN DIVIDENDS PAYABLE TO A MUTUAL INSURANCE
4 STOCK HOLDING COMPANY OR INTERMEDIATE HOLDING COMPANY; AMENDING SECTION
5 63-3022, IDAHO CODE, TO PROVIDE A CORRECT REFERENCE TO THE INTERNAL REVE-
6 NUE CODE; AMENDING SECTION 63-3022A, IDAHO CODE, TO PROVIDE CHANGES IN
7 RETIREMENT AGE UNDER THE SOCIAL SECURITY ACT AND TO PROVIDE A DEFINITION
8 OF DISABLED; AMENDING SECTION 63-3022D, IDAHO CODE, TO CLARIFY THAT TO
9 QUALIFY FOR THE DEDUCTION FOR CERTAIN EXPENSES FOR HOUSEHOLD AND DEPENDENT
10 CARE, SERVICES MUST BE PAID BY THE INDIVIDUAL MAINTAINING THE HOUSEHOLD;
11 AMENDING SECTION 63-3022N, IDAHO CODE, TO PROVIDE A CORRECT CITATION;
12 AMENDING SECTION 63-3035A, IDAHO CODE, TO UPDATE THE INCOME TAX WITHHOLD-
13 ING RATE APPLICABLE TO LOTTERY WINNINGS; AND DECLARING AN EMERGENCY AND
14 PROVIDING A RETROACTIVE EFFECTIVE DATE.
15 Be It Enacted by the Legislature of the State of Idaho:
16 SECTION 1. That Section 41-3821, Idaho Code, be, and the same is hereby
17 amended to read as follows:
18 41-3821. MUTUAL INSURANCE HOLDING COMPANIES.
19 (1) (a) A domestic mutual insurer, upon approval of the director, may
20 reorganize by forming an insurance holding company system, "the mutual
21 insurance holding company," based upon a mutual plan and continuing the
22 corporate existence of the reorganizing insurer as a stock insurer. The
23 director, after a public hearing as provided in section 41-3805, Idaho
24 Code, if satisfied that the interests of the policyholders are properly
25 protected and that the plan of reorganization is fair and equitable to the
26 policyholders, may approve the proposed plan of reorganization and may
27 require as a condition of approval such modifications of the proposed plan
28 of reorganization as the director finds necessary for the protection of
29 the policyholders' interests. The director may retain consultants as pro-
30 vided in section 41-3805(4), Idaho Code. A reorganization pursuant to this
31 subsection is subject to sections 41-3802 and 41-3803, Idaho Code. The
32 director shall retain jurisdiction over a mutual insurance holding company
33 organized pursuant to this section to assure that policyholder interests
34 are protected.
35 (b) All of the initial shares of the capital stock of the reorganized
36 insurer shall be issued to the mutual insurance holding company. The mem-
37 bership interests of the policyholders of the reorganized insurer shall
38 become membership interests in the mutual insurance holding company. Poli-
39 cyholders of the reorganized insurer shall be members of the mutual insur-
40 ance holding company in accordance with the articles of incorporation and
41 bylaws of the mutual insurance holding company. The mutual insurance hold-
42 ing company shall at all times own a majority of the voting shares of the
43 capital stock of the reorganized insurer.
1 (2) (a) A domestic mutual insurer, upon the approval of the director, may
2 reorganize by merging its policyholders' membership interests into a
3 mutual insurance holding company formed pursuant to subsection (1) of this
4 section and continuing the corporate existence of the reorganizing insurer
5 as a stock insurer subsidiary of the mutual insurance holding company. The
6 director, after a public hearing as provided in section 41-3805, Idaho
7 Code, if satisfied that the interests of the policyholders are properly
8 protected and that the merger is fair and equitable to the policyholders,
9 may approve the proposed merger and may require as a condition of approval
10 such modifications of the proposed merger as the director finds necessary
11 for the protection of the policyholders' interests. The director may
12 retain consultants as provided in section 41-3805(4), Idaho Code. A merger
13 pursuant to this subsection is subject to sections 41-3802 and 41-3803,
14 Idaho Code. The director shall retain jurisdiction over the mutual insur-
15 ance holding company organized pursuant to this section to assure that
16 policyholder interests are protected.
17 (b) All of the initial shares of the capital stock of the reorganized
18 insurer shall be issued to the mutual insurance holding company. The mem-
19 bership interests of the policyholders of the reorganized insurance com-
20 pany shall become membership interests in the mutual insurance holding
21 company. Policyholders of the reorganized insurer shall be members of the
22 mutual insurance holding company in accordance with the articles of incor-
23 poration and bylaws of the mutual insurance holding company. The mutual
24 insurance holding company shall at all times own a majority of the voting
25 shares of the capital stock of the reorganized insurer. A merger of poli-
26 cyholders' membership interests in a mutual insurer into a mutual insur-
27 ance holding company shall be deemed to be a merger of insurance companies
28 pursuant to section 41-2857, Idaho Code, and section 41-2857, Idaho Code,
29 is also applicable.
30 (c) A foreign mutual insurer, which if a domestic corporation would be
31 organized under chapter 3, title 41, Idaho Code, may reorganize upon the
32 approval of the director and in compliance with the requirements of any
33 law or rule which is applicable to the foreign mutual insurer by merging
34 its policyholders' membership interests into a mutual insurance holding
35 company formed pursuant to subsection (1) of this section and continuing
36 the corporate existence of the reorganizing foreign mutual insurer as a
37 foreign stock insurer subsidiary of the mutual insurance holding company.
38 The director, after a public hearing as provided in section 41-3805, Idaho
39 Code, may approve the proposed merger. The director may retain consultants
40 as provided in section 41-3805(4), Idaho Code. A merger pursuant to this
41 paragraph is subject to sections 41-3802 and 41-3803, Idaho Code. The
42 reorganizing foreign mutual insurer may remain a foreign company or for-
43 eign corporation after the merger, and may be admitted to do business in
44 this state. A foreign mutual insurer which is a party to the merger may at
45 the same time redomesticate in this state by complying with the applicable
46 requirements of this state and its state of domicile. The provisions of
47 subsection (2)(b) shall apply to a merger authorized under this paragraph.
48 (3) A mutual insurance holding company resulting from the reorganization
49 of a domestic mutual insurer organized under chapter 1, title 30, Idaho Code,
50 shall be incorporated pursuant to chapter 1, title 30, Idaho Code. This
51 requirement shall supersede any conflicting provisions of chapter 1, title 30,
52 Idaho Code. The articles of incorporation and any amendments to such articles
53 of the mutual insurance holding company shall be subject to approval of the
54 director in the same manner as those of an insurance company.
55 (4) A mutual insurance holding company is deemed to be an insurer subject
1 to chapter 33, title 41, Idaho Code, and shall automatically be a party to any
2 proceeding under chapter 33, title 41, Idaho Code, involving an insurer which
3 as a result of a reorganization pursuant to subsection (1) or (2) of this sec-
4 tion is a subsidiary of the mutual insurance holding company. In any proceed-
5 ing under chapter 33, title 41, Idaho Code, involving the reorganized
6 insurer, the assets of the mutual insurance holding company are deemed to be
7 assets of the estate of the reorganized insurer for purposes of satisfying the
8 claims of the reorganized insurer's policyholders. A mutual insurance holding
9 company shall not dissolve or liquidate without the approval of the director
10 or as ordered by the district court pursuant to chapter 33, title 41, Idaho
12 (5) (a) Section 41-2855, Idaho Code, is not applicable to a reorganiza-
13 tion or merger pursuant to this section.
14 (b) Section 41-2855, Idaho Code, is applicable to demutualization of a
15 mutual insurance holding company which resulted from the reorganization of
16 a domestic mutual insurer organized under chapter 3, title 41, Idaho Code,
17 as if it were a mutual life insurer.
18 (6) A membership interest in a domestic mutual insurance holding company
19 shall not constitute a security as defined in section 30-1402(12), Idaho Code.
20 (7) The majority of the voting shares of the capital stock of the reorga-
21 nized insurer, which is required by this section to be at all times owned by a
22 mutual insurance holding company, shall not be conveyed, transferred,
23 assigned, pledged, subject to a security interest or lien, encumbered, or
24 otherwise hypothecated or alienated by the mutual insurance holding company or
25 intermediate holding company. Any conveyance, transfer, assignment, pledge,
26 security interest, lien, encumbrance, or hypothecation or alienation of, in or
27 on the majority of the voting shares of the reorganized insurer which is
28 required by this section to be at all times owned by a mutual insurance hold-
29 ing company, is in violation of this section and shall be void in inverse
30 chronological order of the date of such conveyance, transfer, assignment,
31 pledge, security interest, lien, encumbrance, or hypothecation or alienation,
32 as to the shares necessary to constitute a majority of such voting shares. The
33 majority of the voting shares of the capital stock of the reorganized insurer
34 which is required by this section to be at all times owned by a mutual insur-
35 ance holding company shall not be subject to execution and levy as provided in
36 title 11, Idaho Code. The shares of the capital stock of the surviving or new
37 company resulting from a merger or consolidation of two (2) or more reorga-
38 nized insurers or two (2) or more intermediate holding companies which were
39 subsidiaries of the same mutual insurance holding company are subject to the
40 same requirements, restrictions, and limitations as provided in this section
41 to which the shares of the merging or consolidating reorganized insurers or
42 intermediate holding companies were subject by this section prior to the
43 merger or consolidation.
44 As used in this section, "majority of the voting shares of the capital
45 stock of the reorganized insurer" means shares of the capital stock of the
46 reorganized insurer which carry the right to cast a majority of the votes
47 entitled to be cast by all of the outstanding shares of the capital stock of
48 the reorganized insurer for the election of directors and on all other matters
49 submitted to a vote of the shareholders of the reorganized insurer. The owner-
50 ship of a majority of the voting shares of the capital stock of the reorga-
51 nized insurer which are required by this section to be at all times owned by a
52 parent mutual insurance holding company includes indirect ownership through
53 one (1) or more intermediate holding companies in a corporate structure
54 approved by the director. However, indirect ownership through one (1) or more
55 intermediate holding companies shall not result in the mutual insurance hold-
1 ing company owning less than the equivalent of a majority of the voting shares
2 of the capital stock of the reorganized insurer. The director shall have
3 jurisdiction over an intermediate holding company as if it were a mutual
4 insurance holding company.
5 As used in this section, "intermediate holding company" means a holding
6 company which is a subsidiary of a mutual insurance holding company, and
7 which either directly or through a subsidiary intermediate holding company has
8 one (1) or more subsidiary reorganized insurers of which a majority of the
9 voting shares of the capital stock would otherwise have been required by this
10 section to be at all times owned by the mutual insurance holding company.
11 (8) It is the intent of the legislature that the formation of a mutual
12 insurance holding company should not increase the Idaho tax burden of the
13 mutual insurance holding company system and that a stock insurance subsidiary
14 shall continue to be subject to Idaho insurance premium taxation in lieu of
15 all other taxes except real property taxes as provided in section 41-405,
16 Idaho Code. Subject to approval by the director as required under Idaho law, a
17 stock insurance subsidiary may issue dividends or distributions to the mutual
18 insurance holding company or any intermediate holding company, and such divi-
19 dends or distributions shall be excluded from the Idaho taxable income of the
20 recipients; provided however, that such exclusion shall not apply to the
21 extent that if, in the year preceding the year in which the dividends or dis-
22 tributions were made, the subsidiary insurer's liability for Idaho premium tax
23 was less than the amount of Idaho income tax, computed after allowance for
24 income tax credits, for which the insurer would have been liable in such year
25 had the insurer been subject to Idaho income taxation rather than premium tax-
27 SECTION 2. That Section 63-3022, Idaho Code, be, and the same is hereby
28 amended to read as follows:
29 63-3022. ADJUSTMENTS TO TAXABLE INCOME. The additions and subtractions
30 set forth in this section, and in sections 63-3022A through 63-3022Q, Idaho
31 Code, are to be applied to the extent allowed in computing Idaho taxable
33 (a) Add any state and local taxes, as defined in section 164 of the
34 Internal Revenue Code and, measured by net income, paid or accrued during the
35 taxable year adjusted for state or local tax refunds used in arriving at tax-
36 able income.
37 (b) Add the net operating loss deduction used in arriving at taxable
39 (c) (1) A net operating loss for any taxable year commencing on and after
40 January 1, 2000, shall be a net operating loss carryback not to exceed a
41 total of one hundred thousand dollars ($100,000) to the two (2) immedi-
42 ately preceding taxable years. Any portion of the net operating loss not
43 subtracted in the two (2) preceding years may be subtracted in the next
44 twenty (20) years succeeding the taxable year in which the loss arises in
45 order until exhausted. The sum of the deductions may not exceed the amount
46 of the net operating loss deduction incurred. At the election of the tax-
47 payer, the two (2) year carryback may be foregone and the loss subtracted
48 from income received in taxable years arising in the next twenty (20)
49 years succeeding the taxable year in which the loss arises in order until
50 exhausted. The election shall be made as under section 172(b)(3) of the
51 Internal Revenue Code. An election under this subsection must be in the
52 manner prescribed in the rules of the state tax commission and once made
53 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, less any amount of such nonqualified
25 withdrawal included in the individual's federal gross income pursuant to 26
26 U.S.C. section 529 of the Internal Revenue Code.
27 SECTION 3. That Section 63-3022A, Idaho Code, be, and the same is hereby
28 amended to read as follows:
29 63-3022A. DEDUCTION OF CERTAIN RETIREMENT BENEFITS. (a) An amount speci-
30 fied by subsection (b) of this section of the following retirement benefits
31 may be deducted by an individual from taxable income if such individual has
32 either attained age sixty-five (65) years, or has attained age sixty-two (62)
33 years and is classified as disabled:
34 (1) Retirement annuities paid by the United States of America to a
35 retired civil service employee or the unremarried widow of a retired civil
36 service employee.
37 (2) Retirement benefits paid from the firemen's retirement fund of the
38 state of Idaho to a retired fireman or the unremarried widow of a retired
40 (3) Retirement benefits paid from the policemen's retirement fund of a
41 city within this state to a retired policeman or the unremarried widow of
42 a retired policeman.
43 (4) Retirement benefits paid by the United States of America to a retired
44 member of the military services of the United States or the unremarried
45 widow of such member.
46 (b) The amount of retirement benefits that may be deducted from taxable
47 income shall be an amount not in excess of maximum retirement benefits under
48 the social security act, as amended, on the date on which this act is passed
49 and approved, including adjustments to be made based upon consumer price index
50 adjustments provided in section 215 of the social security act. The state tax
51 commission shall ascertain benefit changes made in accordance with the social
52 security act and publish the appropriate deduction amounts provided by this
53 section reflecting such changes annually. Maximum retirement benefits under
1 the social security act shall mean:
2 (1) In the case of a taxpayer who files a joint return with his spouse
3 for the tax year, an amount equal to the maximum social security benefits
4 payable for the tax year to a man person attaining full retirement age
5 sixty-five (65) years in the tax year who has earned the maximum earnings
6 creditable under social security for the years used in the computation of
7 his benefits, and whose spouse has no social security benefits except
8 those payable on his record of earnings.
9 (2) In the case of a taxpayer who is not married, an amount equal to max-
10 imum social security benefits payable for the tax year to a person attain-
11 ing full retirement age sixty-five (65) years in the tax year who has
12 earned the maximum earnings creditable under social security for the years
13 used in the computation of his benefits.
14 (3) In the case of an unremarried widow, an amount equal to the maximum
15 social security benefits payable for the tax year to a widow attaining
16 full retirement age sixty-five (65) years in the tax year who has no
17 social security benefits except those to which she is entitled on her
18 deceased husband's record and whose husband had received no reduced
19 retirement benefits prior to his death and whose husband had earned the
20 maximum earnings creditable under social security for the years used in
21 the computation of his benefits under social security.
22 (4) Maximum retirement benefits shall, in every case, take into consider-
23 ation and be adjusted to reflect adjustments that would be made to such
24 amounts had they been received as social security benefits as the result
25 of the receipt of earnings in excess of earnings limitations. The terms in
26 this paragraph are those defined in the social security act.
27 (5) Taxpayers not described in paragraphs (1), (2), (3) and (4) of this
28 subsection may not deduct any amount of retirement benefits under this
30 (c) The total deduction under this section may not exceed the total
31 amount of retirement benefits or annuities which are described in subsection
32 (a) of this section and which are included in the taxpayer's gross income in
33 the tax year. If the taxpayer or the taxpayer's spouse receives retirement
34 benefits under the federal railroad retirement act or the federal social secu-
35 rity act in the tax year, then the amount of any retirement annuities computed
36 under subsection (b) of this section shall be reduced by the amount of such
37 federal railroad retirement act and federal social security act retirement
38 benefits received by either the taxpayer or the taxpayer's spouse, and the
39 lesser of the amount so computed or the total amount of retirement benefits or
40 annuities which are described in subsection (a) of this section and which are
41 included in the taxpayer's gross income shall constitute the allowable deduc-
42 tion. Furthermore, the allowable deduction as calculated under this section
43 may be subject to additional limitations under section 63-3026A(6), Idaho
44 Code, and the rules promulgated thereunder.
45 (d) As used in this section, the word "widow" shall include a widower.
46 (e) As used in this section, the word "disabled" shall mean an individual
47 who is a disabled person described in section 63-701, Idaho Code.
48 SECTION 4. That Section 63-3022D, Idaho Code, be, and the same is hereby
49 amended to read as follows:
50 63-3022D. DEDUCTION OF EXPENSES FOR HOUSEHOLD AND DEPENDENT CARE SER-
51 VICES. Allowance of Deduction. In the case of an individual who maintains a
52 household which includes as a member one (1) or more qualifying individuals
53 (as defined in section 21(b)(1), Internal Revenue Code), there shall be
1 allowed as a deduction the employment-related expenses (as defined in section
2 21(b)(2), Internal Revenue Code, and as further specified and limited by sec-
3 tion 21(c), (d), and (e), Internal Revenue Code) paid by such individual dur-
4 ing the taxable year.
5 SECTION 5. That Section 63-3022N, Idaho Code, be, and the same is hereby
6 amended to read as follows:
7 63-3022N. MARRIAGE PENALTY ADJUSTMENT. (1) To eliminate from the calcula-
8 tion of Idaho taxable income any marriage penalty that may exist in the basic
9 standard deductions provided in the Internal Revenue Code, basic federal stan-
10 dard deductions shall be adjusted as provided in this section.
11 (2) As used in this section, "the marriage penalty" means the difference
12 obtained by subtracting:
13 (a) The basic standard deduction for joint returns, from
14 (b) Two (2) times the basic standard deduction for an individual who is
15 not married and who is not a surviving spouse or head of household.
16 (3) For each taxable year beginning on and after January 1, 2000, the
17 standard deduction in section 63-3022( kj)(1), Idaho Code, shall be: on a joint
18 return, the basic federal joint standard deduction plus the marriage penalty,
19 rounded to the nearest dollar, plus the amount of any additional standard
20 deduction for the aged or blind for which a taxpayer may qualify under section
21 63 of the Internal Revenue Code.
22 (4) The basic federal standard deduction for an individual for whom a
23 deduction under section 151 of the Internal Revenue Code is allowable to
24 another taxpayer shall not be reduced below the minimum adjusted basic stan-
25 dard deduction provided by section 63 of the Internal Revenue Code.
26 SECTION 6. That Section 63-3035A, Idaho Code, be, and the same is hereby
27 amended to read as follows:
28 63-3035A. STATE INCOME TAX WITHHOLDING TAX ON LOTTERY WINNINGS. (1) When-
29 ever the Idaho state lottery is required by the Internal Revenue Code to with-
30 hold, collect and pay over income tax on any prize, proceeds or winnings it
31 shall, at the time of payment of such prize, proceeds or winnings to the
32 recipient, withhold from the payment an amount equal to eight and two-tenths
33 percent (8.2%) the maximum percentage applicable to individuals under section
34 63-3024, Idaho Code, of the prize, proceeds or winnings to be applied to Idaho
35 income taxes due from the recipient.
36 (2) The state tax commission shall accept amounts withheld according to
37 this section as payment by the recipient of the amount so withheld of income
38 taxes imposed on the recipient for the taxable year in which the prize, pro-
39 ceeds or winnings are includable in the recipient's Idaho taxable income.
40 (3) When the total amount withheld (along with other credits due, with-
41 holding or payments attributable to the taxpayer) exceeds the taxes due from
42 the recipient, the state tax commission shall, after examining the state
43 income tax return filed by the recipient, refund the amount of the excess
44 withheld in the manner provided for refunds of withholding under section
45 63-3035, Idaho Code.
46 (4) The Idaho state lottery shall remit the amounts withheld to the state
47 tax commission on or before the date similar payments and reports are due to
48 the internal revenue service.
49 (5) The Idaho state lottery shall furnish to the recipient, not later
50 than thirty (30) days after the end of the calendar year, a record of the tax
51 withheld during that year and shall, not later than the last day of the fol-
1 lowing February, file a copy of the record with the state tax commission.
2 (6) The Idaho state lottery and the state tax commission may agree to
3 different times and procedures for making the remittances or reports required
4 in this section.
5 (7) Nothing in this section relieves any taxpayer from an obligation to
6 file a return or pay taxes at the time and in the manner required by this
8 SECTION 7. An emergency existing therefor, which emergency is hereby
9 declared to exist, this act shall be in full force and effect on and after its
10 passage and approval, and retroactively to January 1, 2004.
STATEMENT OF PURPOSE
This bill makes some needed updates and technical changes to
the Idaho Income Tax Act.
Section 1 clarifies the limitation on the exclusion for
certain dividends payable to a mutual insurance stock holding
company or intermediate holding company. The exclusion is not
available if the prior year's insurance premium taxes were less
than the amount of income tax the subsidiary would have paid.
The amendment clarifies that the amount of income tax is
determined after allowance for credits.
Section 2 corrects a cross-reference to the Internal Revenue
Section 3 reflects changes to the federal Social Security
Act increasing the full retirement age and adds a definition of
Section 4 clarifies that the deduction for certain expenses
for household and dependent care services must be paid by the
individual maintaining the household, thus conforming to the
Internal Revenue Code.
Section 5 corrects a cross-reference.
Section 6 requires that the Lottery Commission withhold
Idaho income tax on prizes in excess of the maximum current
income tax rate (currently 7.8%) rather than at 8.2%.
The bill is effective January 1, 2004.
No fiscal effect.
Name: Dan John / Ted Spangler
Agency: State Tax Commission
STATEMENT OF PURPOSE/FISCAL NOTE H 481