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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