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H0537...............................................by REVENUE AND TAXATION
INCOME TAX WITHHOLDING - Amends existing law to provide that an employer's
failure to make a payment as required may be treated as a failure to file a
return; to provide that the State Tax Commission may take authorized
administrative and judicial actions for such failure; to provide that the
withholding tax return shall be filed annually unless a shorter period is
prescribed; and to specify when the return is due.
01/22 House intro - 1st rdg - to printing
01/23 Rpt prt - to Rev/Tax
02/10 Rpt out - rec d/p - to 2nd rdg
02/11 2nd rdg - to 3rd rdg
02/16 3rd rdg - PASSED - 70-0-0
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(Nonini), Kulczyk, Lake, 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, Stevenson, Trail,
Wills, Wood, Mr. Speaker
NAYS -- None
Absent and excused -- None
Floor Sponsor - Raybould
Title apvd - to Senate
02/17 Senate intro - 1st rdg - to Loc Gov
02/26 Rpt out - rec d/p - to 2nd rdg
02/27 2nd rdg - to 3rd rdg
03/10 3rd rdg - PASSED - 35-0-0
AYES -- Andreason(Andreason), Bailey, Brandt, 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 -- None
Floor Sponsor - Hill
Title apvd - to House
03/11 To enrol
03/12 Rpt enrol - Sp signed
03/15 Pres signed
03/16 To Governor
03/19 Governor signed
Session Law Chapter 103
Effective: 01/01/04 Section 1;
07/01/05 Section 2
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 537
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCOME TAX WITHHOLDING; AMENDING SECTION 63-3035, IDAHO CODE, TO
3 PROVIDE THAT WHEN AN EMPLOYER FAILS TO MAKE A PAYMENT AS REQUIRED THE
4 STATE TAX COMMISSION MAY TREAT SUCH FAILURE AS A FAILURE TO FILE A RETURN
5 AND MAY TAKE AUTHORIZED ADMINISTRATIVE AND JUDICIAL ACTIONS, TO PROVIDE
6 CLARIFYING LANGUAGE, TO PROVIDE THAT THE WITHHOLDING TAX RETURN SHALL BE
7 FILED ANNUALLY UNLESS A SHORTER FILING PERIOD AND DUE DATE ARE PRESCRIBED
8 BY THE STATE TAX COMMISSION AND TO SPECIFY WHEN THE RETURN IS DUE; AMEND-
9 ING SECTION 63-3035, IDAHO CODE, AS AMENDED IN SECTION 1, CHAPTER 296,
10 LAWS OF 2003, TO PROVIDE THAT WHEN AN EMPLOYER FAILS TO MAKE A PAYMENT AS
11 REQUIRED THE STATE TAX COMMISSION MAY TREAT SUCH FAILURE AS A FAILURE TO
12 FILE A RETURN AND MAY TAKE AUTHORIZED ADMINISTRATIVE AND JUDICIAL ACTIONS,
13 TO PROVIDE CLARIFYING LANGUAGE, TO PROVIDE THAT THE WITHHOLDING TAX RETURN
14 SHALL BE FILED ANNUALLY UNLESS A SHORTER FILING PERIOD AND DUE DATE ARE
15 PRESCRIBED BY THE STATE TAX COMMISSION AND TO SPECIFY WHEN THE RETURN IS
16 DUE; AND DECLARING AN EMERGENCY, PROVIDING FOR RETROACTIVITY AND PROVIDING
17 AN EFFECTIVE DATE.
18 Be It Enacted by the Legislature of the State of Idaho:
19 SECTION 1. That Section 63-3035, Idaho Code, be, and the same is hereby
20 amended to read as follows:
21 63-3035. STATE WITHHOLDING TAX ON PERCENTAGE BASIS -- WITHHOLDING, COL-
22 LECTION AND PAYMENT OF TAX. (a) Every employer who is required under the pro-
23 visions of the Internal Revenue Code to withhold, collect and pay income tax
24 on wages or salaries paid by such employer to any employee (other than employ-
25 ees specified in Internal Revenue Code section 3401(a)(2)) shall, at the time
26 of such payment of wages, salary, bonus or other emolument to such employee,
27 deduct and retain therefrom an amount substantially equivalent to the tax rea-
28 sonably calculated by the state tax commission to be due from the employee
29 under this chapter. The state tax commission shall prepare tables showing
30 amounts to be withheld, and shall supply same to each employer subject to this
31 section. In the event that an employer can demonstrate administrative inconve-
32 nience in complying with the exact requirements set forth in these tables, he
33 may, with the consent of the state tax commission and upon application to it,
34 use a different method which will produce substantially the same amount of
35 taxes withheld. Every employer making payments of wages or salaries earned in
36 Idaho, regardless of the place where such payment is made:
37 (1) shall be liable to the state of Idaho for the payment of the tax
38 required to be deducted and withheld under this section and shall not be
39 liable to any individual for the amount deducted from his wages and paid
40 over in compliance or intended compliance with this section;
41 (2) must pay to the state tax commission monthly on or before the 20th
42 day of the succeeding month, or at such other times as the state tax com-
43 mission may allow, an amount of tax which, under the provisions of this
2
1 chapter, he is required to deduct and withhold;
2 (3) shall register with the state tax commission, in the manner pre-
3 scribed by it, to establish an employer's withholding account number. The
4 account number will be used to report all amounts withheld, for the annual
5 reconciliation required in this section, and for such other purposes
6 relating to withholding as the state tax commission may require; and
7 (4) must, notwithstanding the provisions of paragraphs (1) and (2) of
8 this subsection, if the amount of withholding of such employer for the
9 preceding twelve (12) month period equals or exceeds sixty thousand dol-
10 lars ($60,000) per annum or an average of five thousand dollars ($5,000)
11 per month per annum, pay to the state tax commission on the basis of with-
12 holding periods which begin on the 16th day of the month and end on the
13 15th day of the following month, and payment shall be made not later than
14 five (5) days after the end of the withholding period.
15 (5) If the a payments made required pursuant to subsections (a)(2) and or
16 (a)(4) of this section are is not made or is made delinquently or if made
17 is not equal to the withholding required under this section shown or
18 required to be shown on the return required by subsection (b)(1) of this
19 section, no penalty shall apply to the underpayment for the period between
20 the due date of the payment and the due date of the return the state tax
21 commission may treat the failure as a failure to file a return and may
22 take administrative and judicial actions as authorized by this chapter in
23 the case of a failure to file a return. Interest, at the rate provided by
24 section 63-3045, Idaho Code, shall apply to any such underpayment.
25 (6) Commencing in 1994, the state tax commission shall determine whether
26 the threshold amounts established by subsection (a)(4) of this section
27 must be adjusted to reflect fluctuations in the cost of living. The com-
28 mission shall base its determination on the cumulative effect of the
29 annual cost-of-living percentage modifications determined by the United
30 States secretary of health and human services pursuant to 42 USC 415(i).
31 When the cumulative percentage applied to the monthly threshold amount
32 equals or exceeds one thousand dollars ($1,000), the commission shall pro-
33 mulgate a rule adjusting the monthly threshold amount by one thousand dol-
34 lars ($1,000) and making the necessary proportional adjustment to the
35 annual threshold amount. The rule shall be effective for the next succeed-
36 ing calendar year and each year thereafter until again adjusted by the
37 commission. The tax commission shall determine subsequent adjustments in
38 the same manner, in each case using the year of the last adjustment as the
39 base year.
40 (b) (1) In addition to the payments required pursuant to subsections
41 (a)(2) and (a)(4) of this section, eEvery employer shall file a return
42 upon such form as shall be prescribed by the state tax commission, but not
43 more frequently than quarterly annually, or as required pursuant to any
44 agreement between the state tax commission and the department of labor
45 under section 63-3035B, Idaho Code, unless a shorter filing period and due
46 date are prescribed by the state tax commission. The return shall be due
47 on the last day of the month following the end of the period to which the
48 return relates. The return shall show, for the period to which it relates,
49 the total amount of wages, salary, bonus or other emolument paid to his
50 employees, the amount deducted therefrom in accordance with the provisions
51 of the Internal Revenue Code, the amount deducted therefrom in accordance
52 with the provisions of this section, the amount of any previous payments
53 made pursuant to this section, and such pertinent and necessary informa-
54 tion as the state tax commission may require.
55 (2) Every employer making a declaration of withholding as provided herein
3
1 shall furnish to the employees annually, but not later than thirty (30)
2 days after the end of the calendar year, a record of the amount of tax
3 withheld from such employee on forms to be prescribed, prepared and fur-
4 nished by the state tax commission and on or before the last day of Febru-
5 ary every employer shall file a copy thereof with the state tax commis-
6 sion. Every employer who is required, under Internal Revenue Code section
7 6011, to file returns on magnetic media or in other machine readable form
8 may be required by rules of the state tax commission to file corresponding
9 state returns on similar magnetic media or other machine readable form.
10 (c) All moneys deducted and withheld by every employer shall immediately
11 upon such deduction be state money and every employer who deducts and retains
12 any amount of money under the provisions of this chapter shall hold the same
13 in trust for the state of Idaho and for the payment thereof to the state tax
14 commission in the manner and at the times in this chapter provided. Any
15 employer who does not possess real property situated within the state of
16 Idaho, which, in the opinion of the state tax commission, is of sufficient
17 value to cover his probable tax liability, may be required to post a surety
18 bond in such sum as the state tax commission shall deem adequate to protect
19 the state.
20 (d) The provisions of this chapter relating to additions to tax in case
21 of delinquency, and penalties, shall apply to employers subject to the provi-
22 sions of this section and for these purposes any amount deducted, or required
23 to be deducted and remitted to the state tax commission under this section,
24 shall be considered to be the tax of the employer and with respect to such
25 amount he shall be considered the taxpayer.
26 (e) Amounts deducted from wages of an employee during any calendar year
27 in accordance with the provisions of this section shall be considered to be in
28 part payment of the tax imposed on such employee for his tax year which begins
29 within such calendar year and the return made by the employer under this sub-
30 section (e) shall be accepted by the state tax commission as evidence in favor
31 of the employee of the amount so deducted from his wages. Where the total
32 amount so deducted exceeds the amount of tax on the employee, based on his
33 Idaho taxable income, or where his income is not taxable under this chapter,
34 the state tax commission shall, after examining the annual return filed by the
35 employee in accordance with this chapter, but not later than sixty (60) days
36 after the filing of each return, refund the amount of the excess deducted.
37 (f) This section shall in no way relieve any taxpayer from his obligation
38 of filing a return at the time required under this chapter, and, should the
39 amount withheld under the provisions of this section be insufficient to pay
40 the total tax of such taxpayer, such unpaid tax shall be paid at the time pre-
41 scribed by section 63-3034, Idaho Code.
42 (g) An employee receiving wages shall on any day be entitled to not more
43 than, but may claim fewer than, the number of withholding exemptions to which
44 he is entitled under the Internal Revenue Code for federal income tax with-
45 holding purposes.
46 (h) An employer shall use the exemption certificate filed by the employee
47 with the employer under the withholding exemption provisions of the Internal
48 Revenue Code in determining the amount of tax to be withheld from the
49 employee's wages or salary under this chapter. The tax commission may redeter-
50 mine the number of withholding exemptions to which an employee is entitled
51 under subsection (g) of this section, and the state tax commission may require
52 such exemption certificate to be filed on a form prescribed by the commission
53 in any circumstance where the commission finds that the exemption certificate
54 filed for Internal Revenue Code purposes does not properly reflect the number
55 of withholding exemptions to which the employee is entitled under this chap-
4
1 ter. In no event shall any employee give an exemption certificate which claims
2 a higher number of withholding exemptions than the number to which the
3 employee is entitled by subsection (g) of this section.
4 SECTION 2. That Section 63-3035, Idaho Code, as amended in Section 1,
5 Chapter 296, Laws of 2003, be, and the same is hereby amended to read as fol-
6 lows:
7 63-3035. STATE WITHHOLDING TAX ON PERCENTAGE BASIS -- WITHHOLDING, COL-
8 LECTION AND PAYMENT OF TAX. (a) Every employer who is required under the pro-
9 visions of the Internal Revenue Code to withhold, collect and pay income tax
10 on wages or salaries paid by such employer to any employee (other than employ-
11 ees specified in Internal Revenue Code section 3401(a)(2)) shall, at the time
12 of such payment of wages, salary, bonus or other emolument to such employee,
13 deduct and retain therefrom an amount substantially equivalent to the tax rea-
14 sonably calculated by the state tax commission to be due from the employee
15 under this chapter. The state tax commission shall prepare tables showing
16 amounts to be withheld, and shall supply same to each employer subject to this
17 section. In the event that an employer can demonstrate administrative inconve-
18 nience in complying with the exact requirements set forth in these tables, he
19 may, with the consent of the state tax commission and upon application to it,
20 use a different method which will produce substantially the same amount of
21 taxes withheld. Every employer making payments of wages or salaries earned in
22 Idaho, regardless of the place where such payment is made:
23 (1) shall be liable to the state of Idaho for the payment of the tax
24 required to be deducted and withheld under this section and shall not be
25 liable to any individual for the amount deducted from his wages and paid
26 over in compliance or intended compliance with this section;
27 (2) must pay to the state tax commission monthly on or before the 20th
28 day of the succeeding month, or at such other times as the state tax com-
29 mission may allow, an amount of tax which, under the provisions of this
30 chapter, he is required to deduct and withhold;
31 (3) shall register with the state tax commission, in the manner pre-
32 scribed by it, to establish an employer's withholding account number. The
33 account number will be used to report all amounts withheld, for the annual
34 reconciliation required in this section, and for such other purposes
35 relating to withholding as the state tax commission may require; and
36 (4) must, notwithstanding the provisions of paragraphs (1) and (2) of
37 this subsection, if the amount of withholding of such employer for the
38 preceding twelve (12) month period equals or exceeds two hundred forty
39 thousand dollars ($240,000) per annum or an average of twenty thousand
40 dollars ($20,000) per month per annum, pay to the state tax commission on
41 the basis of withholding periods which begin on the 16th day of the month
42 and end on the 15th day of the following month, and payment shall be made
43 not later than five (5) days after the end of the withholding period.
44 (5) If the a payments made required pursuant to subsections (a)(2) and or
45 (a)(4) of this section are is not made or is made delinquently or if made
46 is not equal to the withholding required under this section shown or
47 required to be shown on the return required by subsection (b)(1) of this
48 section, no penalty shall apply to the underpayment for the period between
49 the due date of the payment and the due date of the return the state tax
50 commission may treat the failure as a failure to file a return and may
51 take administrative and judicial actions as authorized by this chapter in
52 the case of a failure to file a return. Interest, at the rate provided by
53 section 63-3045, Idaho Code, shall apply to any such underpayment.
5
1 (6) Commencing in 2006, the state tax commission shall determine whether
2 the threshold amounts established by subsection (a)(4) of this section
3 must be adjusted to reflect fluctuations in the cost of living. The com-
4 mission shall base its determination on the cumulative effect of the
5 annual cost-of-living percentage modifications determined by the United
6 States secretary of health and human services pursuant to 42 USC 415(i).
7 When the cumulative percentage applied to the monthly threshold amount
8 equals or exceeds five thousand dollars ($5,000), the commission shall
9 promulgate a rule adjusting the monthly threshold amount by five thousand
10 dollars ($5,000) and making the necessary proportional adjustment to the
11 annual threshold amount. The rule shall be effective for the next succeed-
12 ing calendar year and each year thereafter until again adjusted by the
13 commission. The tax commission shall determine subsequent adjustments in
14 the same manner, in each case using the year of the last adjustment as the
15 base year.
16 (b) (1) In addition to the payments required pursuant to subsections
17 (a)(2) and (a)(4) of this section, eEvery employer shall file a return
18 upon such form as shall be prescribed by the state tax commission, but not
19 more frequently than quarterly annually, or as required pursuant to any
20 agreement between the state tax commission and the department of labor
21 under section 63-3035B, Idaho Code, unless a shorter filing period and due
22 date is prescribed by the state tax commission. The return shall be due on
23 the last day of the month following the end of the period to which the
24 return relates. The return shall show, for the period to which it relates,
25 the total amount of wages, salary, bonus or other emolument paid to his
26 employees, the amount deducted therefrom in accordance with the provisions
27 of the Internal Revenue Code, the amount deducted therefrom in accordance
28 with the provisions of this section, the amount of any previous payments
29 made pursuant to this section, and such pertinent and necessary informa-
30 tion as the state tax commission may require.
31 (2) Every employer making a declaration of withholding as provided herein
32 shall furnish to the employees annually, but not later than thirty (30)
33 days after the end of the calendar year, a record of the amount of tax
34 withheld from such employee on forms to be prescribed, prepared and fur-
35 nished by the state tax commission and on or before the last day of Febru-
36 ary every employer shall file a copy thereof with the state tax commis-
37 sion. Every employer who is required, under Internal Revenue Code section
38 6011, to file returns on magnetic media or in other machine readable form
39 may be required by rules of the state tax commission to file corresponding
40 state returns on similar magnetic media or other machine readable form.
41 (c) All moneys deducted and withheld by every employer shall immediately
42 upon such deduction be state money and every employer who deducts and retains
43 any amount of money under the provisions of this chapter shall hold the same
44 in trust for the state of Idaho and for the payment thereof to the state tax
45 commission in the manner and at the times in this chapter provided. Any
46 employer who does not possess real property situated within the state of
47 Idaho, which, in the opinion of the state tax commission, is of sufficient
48 value to cover his probable tax liability, may be required to post a surety
49 bond in such sum as the state tax commission shall deem adequate to protect
50 the state.
51 (d) The provisions of this chapter relating to additions to tax in case
52 of delinquency, and penalties, shall apply to employers subject to the provi-
53 sions of this section and for these purposes any amount deducted, or required
54 to be deducted and remitted to the state tax commission under this section,
55 shall be considered to be the tax of the employer and with respect to such
6
1 amount he shall be considered the taxpayer.
2 (e) Amounts deducted from wages of an employee during any calendar year
3 in accordance with the provisions of this section shall be considered to be in
4 part payment of the tax imposed on such employee for his tax year which begins
5 within such calendar year and the return made by the employer under this sub-
6 section (e) shall be accepted by the state tax commission as evidence in favor
7 of the employee of the amount so deducted from his wages. Where the total
8 amount so deducted exceeds the amount of tax on the employee, based on his
9 Idaho taxable income, or where his income is not taxable under this chapter,
10 the state tax commission shall, after examining the annual return filed by the
11 employee in accordance with this chapter, but not later than sixty (60) days
12 after the filing of each return, refund the amount of the excess deducted.
13 (f) This section shall in no way relieve any taxpayer from his obligation
14 of filing a return at the time required under this chapter, and, should the
15 amount withheld under the provisions of this section be insufficient to pay
16 the total tax of such taxpayer, such unpaid tax shall be paid at the time pre-
17 scribed by section 63-3034, Idaho Code.
18 (g) An employee receiving wages shall on any day be entitled to not more
19 than, but may claim fewer than, the number of withholding exemptions to which
20 he is entitled under the Internal Revenue Code for federal income tax with-
21 holding purposes.
22 (h) An employer shall use the exemption certificate filed by the employee
23 with the employer under the withholding exemption provisions of the Internal
24 Revenue Code in determining the amount of tax to be withheld from the
25 employee's wages or salary under this chapter. The tax commission may redeter-
26 mine the number of withholding exemptions to which an employee is entitled
27 under subsection (g) of this section, and the state tax commission may require
28 such exemption certificate to be filed on a form prescribed by the commission
29 in any circumstance where the commission finds that the exemption certificate
30 filed for Internal Revenue Code purposes does not properly reflect the number
31 of withholding exemptions to which the employee is entitled under this chap-
32 ter. In no event shall any employee give an exemption certificate which claims
33 a higher number of withholding exemptions than the number to which the
34 employee is entitled by subsection (g) of this section.
35 SECTION 3. An emergency existing therefor, which emergency is hereby
36 declared to exist, Section 1 of this act shall be in full force and effect on
37 and after passage and approval, and retroactively to January 1, 2004. Section
38 2 of this act shall be in full force and effect on and after July 1, 2005.
STATEMENT OF PURPOSE
RS 13596
This bill changes the time when Idaho employers must file income
tax withholding returns from quarterly to annually. The
requirement to remit to the State Tax Commission the amount of
Idaho income tax withheld from employees' earnings each month (or
each quarter in the case of smaller businesses) will remain
unchanged.
FISCAL NOTE
No effect on General Fund revenue. Cost savings to taxpayers by
reduced reporting requirements and to the State Tax Commission in
processing requirements.
Contact
Name: Dan John / Ted Spangler
Agency: State Tax Commission
Phone: 334-7530
STATEMENT OF PURPOSE/FISCAL NOTE H 537