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H0536...............................................by REVENUE AND TAXATION
INCOME TAX CREDIT - RESEARCH ACTIVITY - Amends existing law to delete the
sunset provisions for state income tax credits for qualified research
expense and for qualified broadband equipment expense.
01/22 House intro - 1st rdg - to printing
01/23 Rpt prt - to Rev/Tax
02/11 Rpt out - rec d/p - to 2nd rdg
02/12 2nd rdg - to 3rd rdg
02/17 3rd rdg - PASSED - 65-0-5
AYES -- Andersen, Barraclough, Barrett, Bauer, Bayer, Bedke, Bell,
Black, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins, Crow,
Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Field(18),
Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet, Jones,
Kellogg(Nonini), Kulczyk, Langford, Langhorst, Martinez, McGeachin,
McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen,
Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts, Robison,
Rydalch, Sali, Sayler, Schaefer, Shepherd, Shirley, Skippen,
Smith(30), Smith(24), Smylie, Snodgrass, Trail, Wills, Wood
NAYS -- None
Absent and excused -- Block, Eskridge, Lake, Stevenson, Mr. Speaker
Floor Sponsor - Crow
Title apvd - to Senate
02/18 Senate intro - 1st rdg - to Loc Gov
02/24 Rpt out - rec d/p - to 2nd rdg
02/25 2nd rdg - to 3rd rdg
03/10 3rd rdg - PASSED - 34-0-1
AYES -- Andreason(Andreason), Bailey, Bunderson, Burkett, Burtenshaw,
Calabretta, 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 -- Brandt
Floor Sponsors - Gannon & McKenzie
Title apvd - to House
03/11 To enrol
03/12 Rpt enrol - Sp signed
03/15 Pres signed
03/16 To Governor
03/26 Governor signed
Session Law Chapter 345
Effective: 07/01/04
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 536
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCOME TAX CREDITS FOR RESEARCH ACTIVITIES CONDUCTED IN IDAHO AND
3 FOR INVESTMENT IN BROADBAND EQUIPMENT; AMENDING SECTION 63-3029G, IDAHO
4 CODE, TO DELETE THE SUNSET PROVISION AND TO DELETE LANGUAGE REGARDING
5 RESEARCH ACTIVITIES BE CONDUCTED DURING ANY CONSECUTIVE FIVE YEAR PERIOD;
6 AND AMENDING SECTION 63-3029I, IDAHO CODE, TO DELETE THE SUNSET PROVISION.
7 Be It Enacted by the Legislature of the State of Idaho:
8 SECTION 1. That Section 63-3029G, Idaho Code, be, and the same is hereby
9 amended to read as follows:
10 63-3029G. CREDITS FOR RESEARCH ACTIVITIES CONDUCTED IN THIS STATE --
11 CARRY FORWARD.
12 (1) (a) Subject to the limitations of this section, for taxable years
13 beginning between after January 1, 2001, and December 31, 2005, inclusive,
14 there shall be allowed to a taxpayer a nonrefundable credit against taxes
15 imposed by sections 63-3024, 63-3025 and 63-3025A, Idaho Code, for
16 increasing research activities in Idaho during any consecutive five (5)
17 year period beginning, at the election of the taxpayer, either:
18 (i) January 1, 2001, or
19 (ii) The first day of the taxpayer's taxable year beginning in 2001.
20 (b) The credit allowed by subsection (1)(a) of this section shall be the
21 sum of:
22 (i) Five percent (5%) of the excess of qualified research expenses
23 for research conducted in Idaho over the base amount; and
24 (ii) Five percent (5%) basic research payments allowable under sub-
25 section (e) of section 41 of the Internal Revenue Code for basic
26 research conducted in Idaho.
27 (c) Subject to the limitation in subsection (3) of this section, a tax-
28 payer making the election permitted by subsection (1)(a)(i) of this sec-
29 tion, credit for research activities occurring prior to the beginning of
30 the taxpayer's taxable year beginning in 2001 shall be claimed on the
31 taxpayer's return for its taxable year 2001 in addition to credit relating
32 to activity in that year.
33 (2) As used in this section:
34 (a) The terms "qualified research expenses," "qualified research," "basic
35 research payments" and "basic research" shall be as defined in section 41
36 of the Internal Revenue Code except that the research must be conducted in
37 Idaho.
38 (b) The term "base amount" shall mean an amount calculated as provided in
39 sections 41(c) and 41(h) of the Internal Revenue Code, except that:
40 (i) The base amount does not include the calculation of the alter-
41 native incremental credit provided for in section 41(c)(4) of the
42 Internal Revenue Code;
43 (ii) A taxpayer's gross receipts include only those gross receipts
2
1 attributable to sources within this state as provided in subsections
2 (q) and (r) of section 63-3027, Idaho Code; and
3 (iii) Notwithstanding section 41(c) of the Internal Revenue Code, for
4 purposes of calculating the base amount, a taxpayer:
5 (A) May elect to be treated as a start-up company as provided
6 in section 41(c)(3)(B) of the Internal Revenue Code, regardless
7 of whether the taxpayer meets the requirements of section
8 41(c)(3)(B)(i)(I) or (II) of the Internal Revenue Code; and
9 (B) May not revoke an election to be treated as a start-up com-
10 pany.
11 (3) The credit allowed by subsection (1)(a) of this section together with
12 any credits carried forward under subsection (5) of this section shall not
13 exceed the amount of tax due under sections 63-3024, 63-3025 and 63-3025A,
14 Idaho Code, after allowance for all other credits permitted by this chapter.
15 When credits earned in more than one (1) taxable year are available, the old-
16 est credits shall be applied first.
17 (4) In the case of a group of corporations filing a combined report under
18 subsection (t) of section 63-3027, Idaho Code, credit earned by one (1) member
19 of the group but not used by that member may be used by another member of the
20 group. For a combined group of corporations, any member of the group may claim
21 credit carried forward unless the member who earned the credit is no longer
22 included in the combined group.
23 (5) The credit allowed by subsection (1)(a) of this section shall be
24 claimed for the taxable year during which the taxpayer qualifies for the
25 credit. If the credit exceeds the limitation under subsection (3) of this sec-
26 tion, the excess amount may be carried forward for a period that does not
27 exceed the next fourteen (14) taxable years.
28 (6) In addition to other needed rules, the state tax commission may pro-
29 mulgate rules prescribing, in the case of S corporations, partnerships, trusts
30 or estates, a method of attributing the credit under this section to the
31 shareholders, partners or beneficiaries in proportion to their share of the
32 income from the S corporation, partnership, trust or estate.
33 SECTION 2. That Section 63-3029I, Idaho Code, be, and the same is hereby
34 amended to read as follows:
35 63-3029I. INCOME TAX CREDIT FOR INVESTMENT IN BROADBAND EQUIPMENT. (1)
36 Subject to the limitations of this section, for taxable years beginning
37 between after January 1, 2001, and December 31, 2005, inclusive, there shall
38 be allowed to a taxpayer a nonrefundable credit against taxes imposed by sec-
39 tions 63-3024, 63-3025 and 63-3025A, Idaho Code, for qualified expenditures in
40 qualified broadband equipment in Idaho.
41 (2) The credit permitted in subsection (1) of this section shall be three
42 percent (3%) of the qualified investment in qualified broadband equipment in
43 Idaho and shall be in addition to the credit for capital investment permitted
44 by section 63-3029B, Idaho Code.
45 (3) As used in this section the term:
46 (a) "Qualified investment" shall be as defined in section 63-3029B, Idaho
47 Code.
48 (b) "Qualified broadband equipment" means equipment that qualifies for
49 the credit for capital investment permitted by section 63-3029B, Idaho
50 Code, and is capable of transmitting signals at a rate of at least two
51 hundred thousand (200,000) bits per second to a subscriber and at least
52 one hundred twenty-five thousand (125,000) bits per second from a sub-
53 scriber, and
3
1 (i) In the case of a telecommunications carrier, such qualifying
2 equipment shall be necessary to the provision of broadband service
3 and an integral part of a broadband network. "Telecommunications car-
4 rier" has the meaning given such term by section 3(44) of the commu-
5 nications act of 1934, as amended, but does not include a commercial
6 mobile service provider.
7 (ii) In the case of a commercial mobile service carrier, such quali-
8 fying equipment shall extend from the subscriber side of the mobile
9 telecommunications switching office to a transmitting/receiving
10 antenna, including such antenna, on the outside of the structure in
11 which the subscriber is located. "Commercial mobile service carrier"
12 means any person authorized to provide commercial mobile radio ser-
13 vice to subscribers as defined in section 20.3 of title 47, Code of
14 Federal Regulations (10-1-99 ed.), as amended.
15 (iii) In the case of a cable or open video system operator, such
16 qualifying equipment shall extend from the subscriber's side of the
17 headend to the outside of the structure in which the subscriber is
18 located. The terms "cable operator" and "open video system operator"
19 have the meanings given such terms by sections 602(5) and 653,
20 respectively, of the communications act of 1934, as amended.
21 (iv) In the case of a satellite carrier or a wireless carrier other
22 than listed above, such qualifying equipment is only that equipment
23 that extends from a transmitting/receiving antenna, including such
24 antenna, which transmits and receives signals to or from multiple
25 subscribers to a transmitting/receiving antenna on the outside of the
26 structure in which the subscriber is located. "Satellite carrier"
27 means any person using the facilities of a satellite or satellite
28 services licensed by the federal communications commission and oper-
29 ating a fixed-satellite service or direct broadcast satellite ser-
30 vices to provide point-to-multipoint distribution of signals. "Other
31 wireless carrier" means any person, other than a telecommunications
32 carrier, commercial mobile service carrier, cable operator, open
33 video operator, or satellite carrier, providing broadband services to
34 subscribers through the radio transmission of energy.
35 (v) In the case of packet switching equipment, such packet equip-
36 ment installed in connection with other qualifying equipment listed
37 in subsections (2)(b)(i) through (2)(b)(iv) of this section, provided
38 it is the last in a series of equipment that transmits signals to a
39 subscriber or the first in a series of equipment that transmits sig-
40 nals from a subscriber. "Packet switching" means controlling or
41 routing the path of a digital transmission signal which is assembled
42 into packets or cells.
43 (vi) In the case of multiplexing and demultiplexing equipment, such
44 equipment only to the extent that it is deployed in connection with
45 providing broadband services in locations between packet switching
46 equipment and the structure in which the subscriber is located.
47 "Multiplexing" means the transmission of two (2) or more signals over
48 a communications circuit without regard to the communications tech-
49 nology.
50 (vii) Any property not primarily used to provide services in Idaho to
51 public subscribers is not qualified broadband equipment.
52 (4) No equipment described in subsections (2)(b)(i) through (2)(b)(vi) of
53 this section shall qualify for the credit provided in subsection (1) of this
54 section until the taxpayer applies to and obtains from the Idaho public utili-
55 ties commission an order confirming that the installed equipment is qualified
4
1 broadband equipment. Applications submitted to the commission shall be gov-
2 erned by the commission's rules of procedure. The commission may issue proce-
3 dural orders necessary to implement this section.
4 (5) The credit allowed by subsection (1) of this section together with
5 any credits carried forward under subsection (7) of this section shall not, in
6 any one (1) taxable year, exceed the lesser of:
7 (a) The amount of tax due under sections 63-3024, 63-3025 and 63-3025A,
8 Idaho Code, after allowance for all other credits permitted by this chap-
9 ter; or
10 (b) Seven hundred fifty thousand dollars ($750,000).
11 When credits earned in more than one (1) taxable year are available, the old-
12 est credits shall be applied first.
13 (6) In the case of a group of corporations filing a combined report under
14 subsection (t) of section 63-3027, Idaho Code, credit earned by one (1) member
15 of the group but not used by that member may be used by another member of the
16 group, subject to the provisions of subsection (7) of this section, instead of
17 carried over. For a combined group of corporations, credit carried forward may
18 be claimed by any member of the group unless the member who earned the credit
19 is no longer included in the combined group.
20 (7) If the credit allowed by subsection (1) of this section exceeds the
21 limitation under subsection (5) of this section, the excess amount may be car-
22 ried forward for a period that does not exceed the next fourteen (14) taxable
23 years.
24 (8) In the event that qualified broadband equipment upon which the credit
25 allowed by this section has been used ceases to qualify for the credit allowed
26 by section 63-3029B, Idaho Code, or is subject to recapture of that credit,
27 the recapture of credit under this section shall be in the same proportion and
28 subject to the same provisions as the amount of credit required to be recap-
29 tured under section 63-3029B, Idaho Code.
30 (9) (a) Subject to the requirements of this subsection, a taxpayer who
31 earns and is entitled to the credit or to an unused portion of the credit
32 allowed by this section may transfer all or a portion of the unused credit
33 to:
34 (i) Another taxpayer required to file a return under this chapter;
35 or
36 (ii) To an intermediary for its use or for resale to a taxpayer
37 required to file a return under this chapter.
38 In the event of either such a transfer, the transferee may claim the
39 credit on the transferee's income tax return originally filed during the
40 calendar year in which the transfer takes place and, in the case of carry-
41 over of the credit, on the transferee's returns for the number of years of
42 carryover available to the transferor at the time of the transfer unless
43 earlier exhausted.
44 (b) Before completing a transfer under this subsection, the transferor
45 shall notify the state tax commission of its intention to transfer the
46 credit and the identity of the transferee. The state tax commission shall
47 provide the transferor with a written statement of the amount of credit
48 available under this section as then appearing in the commission's records
49 and the number of years the credit may be carried over. The transferee
50 shall attach a copy of the statement to any return in regard to which the
51 transferred credit is claimed.
52 (c) In the event that after the transfer the state tax commission deter-
53 mines that the amount of credit properly available under this section is
54 less than the amount claimed by the transferor of the credit or that the
55 credit is subject to recapture, the commission shall assess the amount of
5
1 overstated or recaptured credit as taxes due from the transferor and not
2 the transferee. The assessment shall be made in the manner provided for a
3 deficiency in taxes under this chapter.
4 (10) In addition to other needed rules, the state tax commission may pro-
5 mulgate rules prescribing, in the case of S corporations, partnerships, trusts
6 or estates, a method of attributing the credit under this section to the
7 shareholders, partners or beneficiaries in proportion to their share of the
8 income from the S corporation, partnership, trust or estate.
STATEMENT OF PURPOSE
RS 13583
This bill removes the current sunsets on two income tax credits.
These are the income tax credit for qualified research and
development expense, and the credit for qualified broadband
equipment. With enactment of this bill, both credit provisions
will become permanent. Both credits are currently scheduled to
sunset on December 31, 2005.
FISCAL NOTE
There is no fiscal impact to the General Fund in Fiscal Year
2005.
For taxable years beginning on and after January 1, 2006:
Continuation of Broadband credit: $1.0 Million.
Research and development credit: $1.25 Million.
Contact
Name: Brian Whitlock
Agency: Office of the Governor
Phone: 334-2100
STATEMENT OF PURPOSE/FISCAL NOTE H 536