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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