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H0314...............................................by REVENUE AND TAXATION SMALL EMPLOYER INCENTIVE ACT - Adds to existing law to provide the "Idaho Small Employer Incentive Act of 2005"; to provide an additional income tax credit for capital investment; to provide an additional income tax credit for new jobs; to provide limitations and other provisions on credits against income taxes; to provide for sales and use tax incentives; to provide rebates; to provide for recapture; to provide for administration; and to allow the county board of equalization to exempt all or a portion of certain property from property taxation. 03/09 House intro - 1st rdg - to printing 03/10 Rpt prt - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature First Regular Session - 2005 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 314 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO TAXATION; AMENDING TITLE 63, IDAHO CODE, BY THE ADDITION OF A NEW 3 CHAPTER 44, TITLE 63, IDAHO CODE, TO PROVIDE A SHORT TITLE AND APPLICA- 4 TION, TO DEFINE TERMS, TO PROVIDE AN ADDITIONAL INCOME TAX CREDIT FOR CAP- 5 ITAL INVESTMENT, TO PROVIDE AN ADDITIONAL INCOME TAX CREDIT FOR NEW JOBS, 6 TO PROVIDE LIMITATIONS AND OTHER PROVISIONS ON CREDITS AGAINST INCOME 7 TAXES, TO PROVIDE RECAPTURE, TO PROVIDE SALES AND USE TAX INCENTIVES, TO 8 PROVIDE REBATES, TO PROVIDE FOR RECAPTURE AND TO PROVIDE FOR ADMINISTRA- 9 TION; AMENDING CHAPTER 6, TITLE 63, IDAHO CODE, BY THE ADDITION OF A NEW 10 SECTION 63-606A, IDAHO CODE, TO ALLOW THE COUNTY BOARD OF EQUALIZATION TO 11 EXEMPT ALL OR A PORTION OF CERTAIN PROPERTY FROM PROPERTY TAXATION AND TO 12 PROVIDE PROCEDURES; PROVIDING SEVERABILITY; DECLARING AN EMERGENCY AND 13 PROVIDING RETROACTIVE APPLICATION. 14 Be It Enacted by the Legislature of the State of Idaho: 15 SECTION 1. That Title 63, Idaho Code, be, and the same is hereby amended 16 by the addition thereto of a NEW CHAPTER, to be known and designated as Chap- 17 ter 44, Title 63, Idaho Code, and to read as follows: 18 CHAPTER 44 19 THE IDAHO SMALL EMPLOYER INCENTIVE ACT OF 2005 20 63-4401. SHORT TITLE -- APPLICATION. This chapter shall be known and may 21 be cited as "The Idaho Small Employer Incentive Act of 2005." No provision of 22 this chapter applies to a person, taxpayer, or other entity entitled to, 23 applying for, or receiving any credit, rebate or other benefit under chapter 24 29, 39 or 43, title 63, Idaho Code. 25 63-4402. DEFINITIONS. (1) The definitions contained in the Idaho income 26 tax act, shall apply to this chapter unless modified in this chapter or unless 27 the context clearly requires another definition. 28 (2) As used in this chapter: 29 (a) "Commission" means the Idaho state tax commission. 30 (b) "Headquarters or administrative facilities" means facility or facili- 31 ties, including related parking facilities, where corporate staff employ- 32 ees are physically employed, and where the majority of the company's ser- 33 vices are handled. Company services may include: accounts receivable and 34 payable, accounting, data processing, distribution management, employee 35 benefit plan, financial and securities accounting, information technology, 36 insurance, legal, merchandising, payroll, personnel, 37 purchasing/procurement, planning, reporting and compliance, tax, treasury, 38 or other headquarters-related services. 39 (c) "Idaho income tax act" means chapter 30, title 63, Idaho Code. 40 (d) "Investment in new plant" means investment in headquarters or admin- 41 istrative facilities that are: 2 1 (i) Qualified investments; or 2 (ii) Buildings or structural components of buildings. 3 (e) "New employee": 4 (i) Means an individual, employed primarily within the project site 5 by the taxpayer, subject to Idaho income tax withholding whether or 6 not any amounts are required to be withheld, covered for unemployment 7 insurance purposes under chapter 13, title 72, Idaho Code, and who 8 was eligible to receive employer provided coverage under an accident 9 or health plan described in section 105 of the Internal Revenue Code 10 during the taxable year. A person shall be deemed to be so employed 11 if such person performs duties on a regular full-time basis. 12 (ii) The number of employees employed primarily within the project 13 site by the taxpayer, during any taxable year for a taxpayer shall be 14 the mathematical average of the number of such employees reported to 15 the Idaho department of commerce and labor for employment security 16 purposes during the twelve (12) months of the taxable year which 17 qualified under paragraph (e)(i) of this subsection (2). In the event 18 the business is in operation for less than the entire taxable year, 19 the number of employees of the taxpayer for the year shall be the 20 average number actually employed during the months of operation, pro- 21 vided that the qualifications of paragraph (e)(i) of this subsection 22 (2) are met. 23 (iii) Employees transferred from a related taxpayer or acquired as 24 part of the acquisition of a trade or business from another taxpayer 25 within the prior twelve (12) months are not included in this defini- 26 tion unless the transfer creates a net new job in Idaho. 27 (f) "Project period" means the period of time beginning at the earlier of 28 a physical change to the project site or the first employment of new 29 employees located in Idaho who are related to the activities at the proj- 30 ect site, but no earlier than January 1, 2005, and ending when the facili- 31 ties constituting the project are placed in service, but no later than 32 December 31, 2009. 33 (g) "Project site" means an area or areas at which headquarters and head- 34 quarters facilities are located and at which the tax incentive criteria 35 have been or will be met and which are either: 36 (i) A single geographic area located in this state at which the 37 headquarters or administrative facilities owned or leased by the tax- 38 payer are located; or 39 (ii) One (1) or more geographic areas located in this state if 40 eighty percent (80%) or more of the investment required by subsection 41 (2)(j)(i) of this section is made at one (1) of the areas. 42 (iii) The project site must be identified and described to the com- 43 mission by a taxpayer subject to tax under the Idaho income tax act, 44 in the form and manner prescribed by the commission. 45 (h) "Qualified investment" shall be defined as in section 63-3029B, Idaho 46 Code. 47 (i) "Recapture period" means: 48 (i) In the case of credits described in sections 63-4403 and 49 63-4404, Idaho Code, the same period for which a recapture of invest- 50 ment tax credit under section 63-3029B, Idaho Code, is required; or 51 (ii) In the case of credits described in section 63-4405, Idaho 52 Code, five (5) years from the date the project period ends. 53 (j) "Tax incentive criteria" means a taxpayer meeting at a project site 54 the requirements of subparagraphs (i), (ii) and (iii) of this paragraph 55 (j). 3 1 (i) During the project period, making capital investments in new 2 plant of at least five hundred thousand dollars ($500,000) at the 3 project site. 4 (ii) During a period of time beginning on January 1, 2005, and end- 5 ing at the conclusion of the project period: 6 1. Increasing employment at the project site by at least ten 7 (10) new employees each of whom must earn at least nineteen dol- 8 lars and twenty-three cents ($19.23) per hour worked during the 9 taxpayer's taxable year. 10 (A) Earnings calculated pursuant to subparagraph (ii) of 11 this paragraph (j) shall include income upon which Idaho 12 income tax withholding is required under section 63-3035, 13 Idaho Code, but shall not include income such as stock 14 options or restricted stock grants. 15 (B) For purposes of determining whether the increased 16 employment threshold has been met, employment at the proj- 17 ect site shall be determined by calculating the increase of 18 such new employees reported to the Idaho department of com- 19 merce and labor for employment security purposes over the 20 employees so reported as of the beginning of the project 21 period or no earlier than January 1, 2005, whichever is 22 larger; and 23 2. Maintaining net increased employment in Idaho required by 24 subparagraph (ii)1. of this paragraph (j) during the remainder 25 of the project period. 26 (iii) No person meets the tax incentive criteria unless the ratio of 27 new employees qualified under subparagraph (ii) of this section to 28 investment in new plant under subparagraph (i) of this section 29 exceeds one (1) employee for each one hundred thousand dollars 30 ($100,000) of investment in new plant. 31 (k) "Taxpayer," for purposes of paragraphs (j) and (e) of this subsection 32 (2), means either: 33 (i) A single taxpayer; or 34 (ii) In the context of a unitary group filing a combined report 35 under section 63-3027(t), Idaho Code, all members of a unitary group 36 includable in a combined report for the tax years in which the credit 37 provided for by this chapter may be claimed. For all other purposes, 38 the terms of section 63-3009, Idaho Code, and section 63-3027(t)(1), 39 Idaho Code, apply to the meaning of "taxpayer." 40 63-4403. ADDITIONAL INCOME TAX CREDIT FOR CAPITAL INVESTMENT. (1) For 41 taxable years beginning on or after January 1, 2005, and before December 31, 42 2009, and subject to the limitations of this chapter, a taxpayer who has cer- 43 tified that the tax incentive criteria will be met within a project site dur- 44 ing a project period shall, in regard to qualified investments made after the 45 beginning of the project period and before December 31, 2009, in lieu of the 46 investment tax credit provided in section 63-3029B, Idaho Code, be allowed a 47 nonrefundable credit against taxes imposed by sections 63-3024, 63-3025 and 48 63-3025A, Idaho Code, in the amount of three and seventy-five one hundredths 49 percent (3.75%) of the amount of qualified investment made during a taxable 50 year, wherever located within this state. 51 (2) The credit allowed by this section shall not exceed sixty-two and 52 five-tenths percent (62.5%) of the tax liability of the taxpayer. 53 (3) The credit allowed by this section shall not exceed one million two 54 hundred fifty thousand dollars ($1,250,000) in any one (1) taxable year. 4 1 63-4404. REAL PROPERTY IMPROVEMENT TAX CREDIT. (1) For taxable years 2 beginning on or after January 1, 2005, and before December 31, 2009, subject 3 to the limitations of this chapter, a taxpayer who has certified that the tax 4 incentive criteria will be met within a project site during a project period 5 shall be allowed a nonrefundable credit against taxes imposed by sections 6 63-3024, 63-3025 and 63-3025A, Idaho Code, in the amount of two and five- 7 tenths percent (2.5%) of the investment in new plant which is incurred during 8 the project period applicable to the project site in which the investment is 9 made. 10 (2) The credit allowed by this section shall not exceed one hundred and 11 twenty-five thousand dollars ($125,000) in any one (1) taxable year. 12 (3) No credit is allowable under this section for a qualified investment 13 in regard to which a credit under section 63-4403, Idaho Code, is available. 14 (4) The credit allowed by this section is limited to buildings and struc- 15 tural components of buildings related to headquarters or administrative facil- 16 ities. 17 63-4405. ADDITIONAL INCOME TAX CREDIT FOR NEW JOBS. (1) Subject to the 18 limitations of this chapter, for taxable years beginning on or after January 19 1, 2005, and before December 31, 2009, a taxpayer who has certified that the 20 tax incentive criteria will be met within a project site during a project 21 period shall, for the number of new employees earning more than a rate of 22 twenty-four dollars and four cents ($24.04) per hour worked, in lieu of the 23 credit amount in subsection (2)(a) of section 63-3029F, Idaho Code, be allowed 24 the credit provided by this section. The number of new employees is the 25 increase in the number of employees for the current taxable year over the 26 greater of the following: 27 (a) The number of employees for the prior taxable year; or 28 (b) The average of the number of employees for the three (3) prior tax- 29 able years. 30 (2) The credit provided by this section shall be: 31 (a) One thousand five hundred dollars ($1,500) for each new employee 32 whose annual salary during the taxable year for which the credit is earned 33 is greater than twenty-four dollars and four cents ($24.04) per hour 34 worked but equal to or less than an average rate of twenty-eight dollars 35 and eighty-five cents ($28.85) per hour worked; 36 (b) Two thousand dollars ($2,000) for each new employee whose annual sal- 37 ary during the taxable year for which the credit is earned is greater than 38 an average rate of twenty-eight dollars and eighty-five cents ($28.85) per 39 hour worked but equal to or less than an average rate of thirty-six dol- 40 lars and six cents ($36.06) per hour worked; 41 (c) Two thousand five hundred dollars ($2,500) for each new employee 42 whose annual salary during the taxable year for which the credit is earned 43 is greater than an average rate of thirty-six dollars and six cents 44 ($36.06) per hour worked but equal to or less than an average rate of for- 45 ty-three dollars and twenty-seven cents ($43.27) per hour worked; 46 (d) Three thousand dollars ($3,000) for each new employee whose annual 47 salary during the taxable year for which the credit is earned is greater 48 than an average rate of forty-three dollars and twenty-seven cents 49 ($43.27) per hour worked. 50 (3) The credit allowed by subsection (1) of this section shall apply only 51 to employment primarily within the project site. No credit shall be earned 52 unless such employee shall have performed such duties for the taxpayer for a 53 minimum of nine (9) months during the taxable year for which the credit is 54 claimed. 5 1 (4) The credit allowed by this section shall not exceed sixty-two and 2 five-tenths percent (62.5%) of the tax liability of the taxpayer. 3 (5) Employees transferred from a related taxpayer or acquired from 4 another taxpayer within the prior twelve (12) months shall not be included in 5 the computation of the credit unless the transfer creates a net new job in 6 Idaho. 7 63-4406. LIMITATIONS, AND OTHER PROVISIONS ON CREDITS AGAINST INCOME 8 TAXES. (1) In addition to other needed rules, the state tax commission may 9 promulgate rules prescribing: 10 (a) In the case of S corporations, partnerships, trusts or estates, a 11 method of attributing a credit under this chapter to the shareholders, 12 partners or beneficiaries in proportion to their share of the income from 13 the S corporation, partnership, trust or estate; and 14 (b) The method by which the carryover of credits and the duty to recap- 15 ture credits shall survive and be transferred in the event of reorganiza- 16 tions, mergers or liquidations. 17 (2) In the case of a unitary group of corporations filing a combined 18 report under subsection (t) of section 63-3027, Idaho Code, credits against 19 income tax provided by sections 63-4403, 63-4404 and 63-4405, Idaho Code, 20 earned by one (1) member of the group but not used by that member may be used 21 by another member of the group, subject to the limitation in subsection (3) of 22 this section, instead of carried over. For a combined group of corporations, 23 credit carried forward may be claimed by any member of the group unless the 24 member or members who earned the credit are no longer included in the combined 25 group. 26 (3) The total of all credits allowed by sections 63-4403, 63-4404 and 27 63-4405, Idaho Code, together with any credits carried forward under subsec- 28 tion (4) of this section shall not exceed the amount of tax due under sections 29 63-3024, 63-3025 and 63-3025A, Idaho Code, after allowance for all other cre- 30 dits permitted by this chapter and the Idaho income tax act. 31 (4) If the credits exceed the limitation under subsection (3) of this 32 section, the excess amount may be carried forward for a period that does not 33 exceed: 34 (a) The next fourteen (14) taxable years in the case of credits allowed 35 by sections 63-4403 and 63-4404, Idaho Code; or 36 (b) The next ten (10) taxable years in the case of credits allowed by 37 section 63-4405, Idaho Code. 38 63-4407. RECAPTURE. (1) In the event that any person to whom a tax credit 39 allowed by section 63-4403, 63-4404 or 63-4405, Idaho Code, fails to meet the 40 tax incentive criteria, the full amount of the credit shall be subject to 41 recapture by the commission. 42 (2) If, during any taxable year, an investment in new plant is disposed 43 of, or otherwise ceases to qualify with respect to the taxpayer, prior to the 44 close of the recapture period, recapture of the credit allowed by sections 45 63-4403 and 63-4404, Idaho Code, shall be determined for such taxable year in 46 the same proportion and subject to the same provisions as an amount of credit 47 required to be recaptured under section 63-3029B, Idaho Code. 48 (3) In the event that the employment required in section 63-4402(2)(j), 49 Idaho Code, is not maintained for the entire recapture period, recapture of 50 the credit allowed in section 63-4405, Idaho Code, shall be determined for 51 such taxable year in the same proportion as an amount of credit required to be 52 recaptured under section 63-3029B, Idaho Code. This subsection shall not be 53 construed to require that the required level of employment must be met by the 6 1 same individual employees. 2 (4) Any amount subject to recapture is a deficiency in tax for the amount 3 of the credit in the taxable year in which the disqualification first occurs 4 and may be enforced and collected in the manner provided by the Idaho income 5 tax act, provided however, that in lieu of the provisions of section 6 63-3068(a), Idaho Code, the period of time within which the commission may 7 issue a notice under section 63-3045, Idaho Code, in regard to an amount sub- 8 ject to recapture shall be the later of five (5) years after the end of the 9 taxable year in which the project period ends or three (3) years after the end 10 of the taxable year in which any amounts carried forward under section 11 63-4406, Idaho Code, expire. 12 63-4408. SALES AND USE TAX INCENTIVES -- REBATES -- RECAPTURE. (1) For 13 calendar years beginning on January 1, 2005, and ending on December 31, 2009, 14 subject to the limitations of this chapter, a taxpayer who has certified that 15 the tax incentive criteria will be met within the project site shall be enti- 16 tled to receive a rebate of twenty-five percent (25%) of all sales and use 17 taxes imposed by chapter 36, title 63, Idaho Code, and that the taxpayer or 18 its contractors actually paid in regard to any property constructed, located 19 or installed within the project site during the project period for that site. 20 (2) Upon filing of a written refund claim by the taxpayer entitled to the 21 rebate, and subject to such reasonable documentation and verification as the 22 commission may require, the rebate shall be paid by the commission as a refund 23 allowable under section 63-3626, Idaho Code. A claim for rebate under this 24 section must be filed on or before the last day of the third calendar year 25 following the year in which the taxes sought to be rebated were paid or the 26 right to the rebate is lost. 27 (3) Any rebate paid shall be subject to recapture by the commission: 28 (a) At one hundred percent (100%) in the event that the tax incentive 29 criteria are not met at the project site during the project period, or 30 (b) In the event that the property is not used, stored or otherwise con- 31 sumed within the project site for a period of sixty (60) consecutive full 32 months after the property was placed in service, or 33 (c) In the event that the employment required in section 63-4402(2)(j), 34 Idaho Code, is not maintained for sixty (60) consecutive full months from 35 the date the project period ends. 36 (d) Any recapture required by subsection (3)(b) or (3)(c) of this section 37 shall be in the same proportion as an amount of credit required to be 38 recaptured under section 63-3029B, Idaho Code. 39 (4) Any recapture amount due under this section shall be a deficiency in 40 tax for the period in which the disqualification first occurs for purposes of 41 section 63-3629, Idaho Code, and may be enforced and collected in the manner 42 provided by the Idaho sales tax act, provided however, that in lieu of the 43 provisions of section 63-3633, Idaho Code, the period of time within which the 44 commission may issue a notice under section 63-3629, Idaho Code, in regard to 45 an amount subject to recapture, shall be the later of five (5) years after the 46 end of the taxable year, for income tax purposes, in which the project period 47 ends. 48 (5) The rebate allowed by this section is limited to sales and use taxes 49 actually paid by the taxpayer or its contractors for taxable property related 50 to headquarters or administrative facilities. 51 63-4409. ADMINISTRATION. The commission shall enforce the provisions of 52 this chapter and may prescribe, adopt, and enforce reasonable rules relating 53 to the administration and enforcement of those provisions, including the pro- 7 1 mulgation of rules relating to information necessary to certify that the 2 incentive criteria have been or will be met. For the purpose of carrying out 3 its duties to enforce or administer the provisions of this chapter, the com- 4 mission shall have the powers and duties provided by sections 63-3038, 5 63-3039, 63-3042 through 63-3067, 63-3068, 63-3071, 63-3074 through 63-3078 6 and 63-217, Idaho Code. 7 SECTION 2. That Chapter 6, Title 63, Idaho Code, be, and the same is 8 hereby amended by the addition thereto of a NEW SECTION, to be known and des- 9 ignated as Section 63-606A, Idaho Code, and to read as follows: 10 63-606A. SMALL EMPLOYER GROWTH INCENTIVE EXEMPTION. (1) The county board 11 of equalization of any county in which any property, the investment in which 12 qualifies for the income tax credits described in sections 63-4403 and 13 63-4404, Idaho Code, is located may exempt all or a portion of the value of 14 such property from property taxation. The board may grant the exemption when 15 it finds that the investments in such property benefit the citizens within the 16 county and taxing districts within the county in a manner and to such a degree 17 that to grant the exemption is necessary and just. 18 (2) Property exempted under this section shall not be included on any new 19 construction roll prepared by the county assessor in accordance with section 20 63-301A, Idaho Code. 21 (3) Applications for the exemption under this section shall be considered 22 by the board as other applications for exemption under section 63-501, Idaho 23 Code. Upon request of the board, the state tax commission may disclose to the 24 board or county official designated by the board information necessary to 25 identify and determine the property upon which the exemption may be granted. 26 27 SECTION 3. SEVERABILITY. The provisions of this act are hereby declared 28 to be severable and if any provision of this act or the application of such 29 provision to any person or circumstance is declared invalid for any reason, 30 such declaration shall not affect the validity of the remaining portions of 31 this act. 32 SECTION 4. An emergency existing therefor, which emergency is hereby 33 declared to exist, this act shall be in full force and effect on and after its 34 passage and approval, and retroactively to January 1, 2005.
STATEMENT OF PURPOSE RS 15135 This bill is "The Idaho Small Employer Incentive Act of 2005." It provides qualifying businesses with: Income tax credits: o A 3.75% investment tax credit with a credit limitation of 62.5%. o An additional new jobs tax credit with a graduated scale starting at $1,000 per job and climbing to $3,000 per job. o A 2.5% real property improvement tax credit for investment in headquarters or administrative buildings of up to $125,000 in any one year. A temporary sales tax abatement of 25% for materials used in new headquarters and administrative buildings. To qualify a company must: o Create at least 10 new jobs in Idaho; o Jobs must have a starting annual salary of at least $40,000 per year, plus benefits; o Invest at least $50,000 in new facilities and equipment for each new project employee added in Idaho; and o Accomplish this within a five-year period. Existing recapture provisions apply. Conveys authority to county boards of equalization to exempt new plant investment at project site from property taxation. FISCAL NOTE Impact on General Fund 10 new employees New New New Net assumed Rev Local State Costs Impact For Fiscal Year 2006 $ 99,750 $ 16,688 $ 83,062 $17,188 $ 65,874 For Life of Tax Credits $971,220 $335,134 $636,086 $81,250 $554,836 Contact: Name: Rep. Mike Moyle Phone: (208) 332-1000 Name: Rep. Dolores Crow Phone: (208) 332-1000 STATEMENT OF PURPOSE/FISCAL NOTE H 314