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H0025...............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to include in income for income tax
purposes, that income, derived from or relating to sources within Idaho,
from gains or losses realized from the sale or other disposition of a
partnership interest or stock in an S corporation to the extent of the
partnership's or S corporation's Idaho apportionment factor in the year
preceding the year of sale.
01/20 House intro - 1st rdg - to printing
01/21 Rpt prt - to Rev/Tax
02/01 Rpt out - rec d/p - to 2nd rdg
02/02 2nd rdg - to 3rd rdg
02/03 3rd rdg - PASSED - 70-0-0
AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Cannon,
Chadderdon, Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth,
Eskridge, Field(18), Field(23), Garrett, Hart, Harwood, Henbest,
Henderson, Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez,
Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen,
Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche,
Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley,
Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail,
Wills, Wood, Mr. Speaker
NAYS -- None
Absent and excused -- None
Floor Sponsor - Wood
Title apvd - to Senate
02/04 Senate intro - 1st rdg - to Loc Gov
02/09 Rpt out - rec d/p - to 2nd rdg
02/10 2nd rdg - to 3rd rdg
02/14 3rd rdg - PASSED - 34-0-1
AYES -- Brandt, Broadsword, Bunderson, Burkett, Burtenshaw, Cameron,
Coiner, Compton, Corder, Darrington, Davis, Gannon, Geddes, Goedde,
Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai,
Marley, McGee, McKenzie, Noble, Pearce, Richardson, Schroeder,
Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Andreason
Floor Sponsor - Malepeai
Title apvd - to House
02/15 To enrol
02/16 Rpt enrol - Sp signed
02/17 Pres signed
02/18 To Governor
02/22 Governor signed
Session Law Chapter 21
Effective: 01/01/05
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature First Regular Session - 2005
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 25
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO STATE INCOME TAX; AMENDING SECTION 63-3026A, IDAHO CODE, TO
3 INCLUDE IN INCOME DERIVED FROM OR RELATING TO SOURCES WITHIN IDAHO, GAINS
4 OR LOSSES REALIZED FROM THE SALE OR OTHER DISPOSITION OF A PARTNERSHIP
5 INTEREST OR STOCK IN AN S CORPORATION TO THE EXTENT OF THE PARTNERSHIP'S
6 OR S CORPORATION'S IDAHO APPORTIONMENT FACTOR IN THE YEAR PRECEDING THE
7 YEAR OF SALE; DECLARING AN EMERGENCY AND PROVIDING A RETROACTIVE EFFECTIVE
8 DATE.
9 Be It Enacted by the Legislature of the State of Idaho:
10 SECTION 1. That Section 63-3026A, Idaho Code, be, and the same is hereby
11 amended to read as follows:
12 63-3026A. COMPUTING IDAHO TAXABLE INCOME OF PART-YEAR OR NONRESIDENT
13 INDIVIDUALS, TRUSTS AND ESTATES. (1) For nonresident individuals, trusts, or
14 estates the term "Idaho taxable income" includes only those components of
15 Idaho taxable income as computed for a resident which are derived from or
16 related to sources within Idaho. This is to be computed without the deductions
17 for either the standard deduction or itemized deductions or personal exemp-
18 tions except as provided in subsection (4) of this section.
19 (2) For part-year resident individuals, trusts or estates the term "Idaho
20 taxable income" includes the total of: (a) Idaho taxable income as computed
21 for a resident for the portion of the tax period during which a taxpayer is
22 domiciled in or is residing in Idaho, plus (b) those components of Idaho tax-
23 able income which are derived from or related to sources within Idaho for that
24 portion of the tax period during which a taxpayer is not domiciled in and is
25 not residing in Idaho. This is to be computed without the deductions for
26 either the standard deduction or itemized deductions or personal exemptions
27 except as provided in subsection (4) of this section.
28 (3) For the purposes of subsections (1) and (2) of this section:
29 (a) Income shall be considered derived from or relating to sources within
30 Idaho when such income is attributable to or resulting from:
31 (i) Any business, trade, profession or occupation conducted or car-
32 ried on in this state, including the distributive share of partner-
33 ship income and deductions, and the pro rata share of S corporation
34 income and deductions;
35 (ii) The ownership or disposition of any interest in real or tangi-
36 ble personal property located in this state;
37 (iii) The ownership or disposition of any interest in intangible per-
38 sonal property only to the extent that such property is employed in a
39 business, trade, profession or occupation conducted or carried on in
40 this state. Provided however, that interest income from an install-
41 ment sale of real or tangible personal property shall constitute
42 income from sources within this state to the extent that the property
43 sold was located within this state. Provided further, that interest
2
1 income received by a partner or shareholder of a partnership or S
2 corporation from such partnership or S corporation shall constitute
3 income from sources within this state to the extent that the partner-
4 ship or S corporation is transacting business within this state;
5 (iv) A resident estate or trust;
6 (v) A nonresident estate or trust to the extent the income and
7 deductions of the nonresident estate or trust were derived from or
8 related to sources within this state;
9 (vi) The conduct of pari-mutuel wagering, charitable gaming or any
10 other form of gambling taking place within this state, except as
11 expressly limited in section 67-7439, Idaho Code;
12 (vii) Gains or losses realized from the sale or other disposition of
13 a partnership interest or stock in an S corporation to the extent of
14 the partnership's or S corporation's Idaho apportionment factor in
15 the taxable year immediately preceding the year of sale.
16 (b) Notwithstanding the provisions of subsection (3)(a) of this section,
17 transactions and investments made, placed or directed by Idaho resident
18 registered broker-dealers and investment advisers or institutions exempt
19 from registration under the Idaho securities act in securities listed with
20 or through the New York Stock Exchange, the American Stock Exchange or any
21 other stock exchange registered with the United States securities and
22 exchange commission and approved by the director of the department of
23 finance which generate dividends, interest, capital gains or similar prof-
24 its or returns for nonresidents not otherwise subject to Idaho income tax-
25 ation shall not result in the intangible property being deemed to have a
26 situs outside the domicile of the owner.
27 (c) Compensation paid by the United States for active service in the
28 armed forces of the United States, performed by an individual not domi-
29 ciled in this state, shall not constitute income derived from or related
30 to sources within this state.
31 (d) The income of nonresident or part-year resident individuals, trusts
32 or estates which is derived from or related to sources both within and
33 without this state shall be attributable to this state in the manner pre-
34 scribed in the rules of the state tax commission.
35 (4) In computing the Idaho taxable income of a part-year or nonresident
36 individual, trust or estate, the standard deduction or itemized deductions, as
37 defined in section 63-3022(j), Idaho Code, if applicable, and the exemptions,
38 as defined in section 151 of the Internal Revenue Code or any allowance in
39 lieu of such deduction, shall be allowed in the proportion that paragraph (a)
40 of this subsection bears to paragraph (b) of this subsection:
41 (a) The Idaho taxable income of the taxpayer modified as follows:
42 (i) No allowance shall be made for either the standard deduction or
43 itemized deductions;
44 (ii) No deduction shall be made for personal exemptions or any
45 allowance in lieu of such deduction.
46 (b) The Idaho taxable income as would be calculated for a resident of
47 Idaho modified as follows:
48 (i) No allowance shall be made for either a standard deduction or
49 itemized deductions;
50 (ii) No deduction shall be made for personal exemptions or any
51 allowance in lieu of such deduction;
52 (iii) Compensation for active military service in the armed forces
53 shall not be deducted;
54 (iv) Income earned within the original exterior boundaries of any
55 federally created Indian reservation by an enrolled Indian in a fed-
3
1 erally recognized Indian tribe on a federally recognized Indian res-
2 ervation shall be added if not otherwise included.
3 (5) An adjustment may be made to eliminate distortions in the amount of
4 net income attributable to a taxpayer's activities within the state of Idaho.
5 Such deductions shall be limited to circumstances involving itemized deduc-
6 tions as referred to in subsection (4) of this section and which reflect:
7 (a) A failure to reflect the net income or deduction after reimbursements
8 have been received; or
9 (b) A failure to reflect the net amount of mortgage interest income or
10 expense from activities within Idaho.
11 (6) For the purposes of subsections (1) and (2) of this section, deduc-
12 tions and adjustments allowed in computing the Idaho taxable income of nonres-
13 ident and part-year resident individuals, trusts and estates shall be pre-
14 scribed in the rules of the state tax commission. Such rules shall be based
15 upon:
16 (a) Whether or not the deduction or adjustment is related to the produc-
17 tion of income reportable to Idaho;
18 (b) Whether or not the deduction or adjustment is related to income
19 received, expenses paid, or events of tax consequence which occurred dur-
20 ing a portion of a taxable year that the taxpayer was domiciled in or
21 residing in Idaho; or
22 (c) Any other appropriate basis for making the adjustment. An
23 "appropriate basis" is one which the state tax commission finds is needed
24 to insure that the amount of Idaho taxable income is fairly and reasonably
25 related to a taxpayer's activities in this state.
26 SECTION 2. An emergency existing therefor, which emergency is hereby
27 declared to exist, this act shall be in full force and effect on and after its
28 passage and approval, and retroactively to January 1, 2005.
STATEMENT OF PURPOSE
RS 14432
The bill changes the Idaho income tax to include income earned in
Idaho by a nonresident any gains or losses from the sale of a
partnership interest or stock in an S corporation to the extent of
the partnership's or corporation's business activities in Idaho in
the year preceding the year of the sale.
The change is effective January 1, 2005.
FISCAL IMPACT
Additional $1 million to the General Fund.
CONTACT
Name: Dan John
Agency: State Tax Commission
Phone: 334-7530
STATEMENT OF PURPOSE/FISCAL NOTE H 25