2005 Legislation
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HOUSE BILL NO. 10 – Internal Revenue Code, reference

HOUSE BILL NO. 10

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Bill Status



H0010...............................................by REVENUE AND TAXATION
INTERNAL REVENUE CODE - Amends existing law to update references to the
"Internal Revenue Code"; and to provide that the amount of general sales
tax included in federal itemized deductions be added back when calculating
state deductions.
                                                                        
01/19    House intro - 1st rdg - to printing
01/20    Rpt prt - to 2nd rdg
01/21    2nd rdg - to 3rd rdg
01/24    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 - Field(18)
    Title apvd - to Senate
01/25    Senate intro - 1st rdg - to Loc Gov
02/09    Rpt out - rec d/p - to 2nd rdg
02/10    2nd rdg - to 3rd rdg
02/11    3rd rdg - PASSED - 32-0-3
      AYES -- Brandt, Broadsword, Bunderson, Burkett, Burtenshaw, Coiner,
      Compton, Corder, Darrington, Davis, Gannon, Geddes, Goedde, Hill,
      Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Marley, McGee,
      McKenzie, Noble, Pearce, Richardson, Schroeder, Stegner, Stennett,
      Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Andreason, Cameron, Malepeai
    Floor Sponsor - Hill
    Title apvd - to House
02/14    To enrol
02/15    Rpt enrol - Sp signed
02/16    Pres signed
02/17    To Governor
02/18    Governor signed
         Session Law Chapter 14
         Effective: 01/07/05 Section 1;
         01/01/05 All others

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 10
                                                                        
                             BY REVENUE AND TAXATION COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO INCOME TAXES; AMENDING SECTION 63-3004, IDAHO CODE, TO UPDATE REF-
  3        ERENCES TO THE INTERNAL REVENUE  CODE;  AMENDING  SECTION  63-3022,  IDAHO
  4        CODE, TO PROVIDE THAT THE AMOUNT OF GENERAL SALES TAX INCLUDED IN  FEDERAL
  5        ITEMIZED  DEDUCTIONS  BE  ADDED  BACK  WHEN  CALCULATING STATE DEDUCTIONS;
  6        DECLARING AN EMERGENCY AND PROVIDING RETROACTIVE EFFECTIVE DATES.
                                                                        
  7    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  8        SECTION 1.  That Section 63-3004, Idaho Code, be, and the same  is  hereby
  9    amended to read as follows:
                                                                        
 10        63-3004.  INTERNAL  REVENUE  CODE.  (a)  The  term "Internal Revenue Code"
 11    means the Internal Revenue Code of 1986 of the United States, as amended,  and
 12    in effect on the first day of January, 20045.
 13        (b)  Provisions  of  the  Internal Revenue Code amended, deleted, or added
 14    prior to the effective date of the latest amendment to this section  shall  be
 15    applicable  for  Idaho  income tax purposes on the effective date provided for
 16    such amendments, deletions, or additions, including retroactive provisions.
                                                                        
 17        SECTION 2.  That Section 63-3022, Idaho Code, be, and the same  is  hereby
 18    amended to read as follows:
                                                                        
 19        63-3022.  ADJUSTMENTS  TO  TAXABLE  INCOME. The additions and subtractions
 20    set forth in this section, and in sections 63-3022A  through  63-3022Q,  Idaho
 21    Code,  are  to  be  applied  to  the extent allowed in computing Idaho taxable
 22    income:
 23        (a)  Add any state and local taxes, as  defined  in  section  164  of  the
 24    Internal  Revenue Code and, measured by net income, paid or accrued during the
 25    taxable year adjusted for state or local tax refunds used in arriving at  tax-
 26    able income.
 27        (b)  Add  the  net  operating  loss  deduction used in arriving at taxable
 28    income.
 29        (c)  (1) A net operating loss for any taxable year commencing on and after
 30        January 1, 2000, shall be a net operating loss carryback not to  exceed  a
 31        total  of  one  hundred thousand dollars ($100,000) to the two (2) immedi-
 32        ately preceding taxable years. Any portion of the net operating  loss  not
 33        subtracted  in  the  two (2) preceding years may be subtracted in the next
 34        twenty (20) years succeeding the taxable year in which the loss arises  in
 35        order until exhausted. The sum of the deductions may not exceed the amount
 36        of  the net operating loss deduction incurred. At the election of the tax-
 37        payer, the two (2) year carryback may be foregone and the loss  subtracted
 38        from  income  received  in  taxable  years arising in the next twenty (20)
 39        years succeeding the taxable year in which the loss arises in order  until
 40        exhausted.  The  election  shall be made as under section 172(b)(3) of the
 41        Internal Revenue Code. An election under this subsection must  be  in  the
                                                                        
                                           2
                                                                        
  1        manner  prescribed  in the rules of the state tax commission and once made
  2        is irrevocable for the year in which it is made. The term "income" as used
  3        in this subsection (c) means Idaho taxable income as defined in this chap-
  4        ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
  5        (2)  Net operating losses incurred by a corporation during a year in which
  6        such corporation did not transact business in Idaho or was not included in
  7        a group of corporations combined under subsection (t) of section  63-3027,
  8        Idaho  Code,  may not be subtracted. However, if at least one (1) corpora-
  9        tion within a group of corporations combined under subsection (t) of  sec-
 10        tion  63-3027,  Idaho  Code,  was transacting business in Idaho during the
 11        taxable year in which the loss was incurred, then the net  operating  loss
 12        may be subtracted. Net operating losses incurred by a person, other than a
 13        corporation, in activities not taxable by Idaho may not be subtracted.
 14        (d)  In  the case of a corporation, add the amount deducted under the pro-
 15    visions of sections 243(a) and (c), 244, 245 and 246A of the Internal  Revenue
 16    Code  (relating  to  dividends received by corporations) as limited by section
 17    246(b)(1) of said code.
 18        (e)  In the case of a corporation, subtract  an  amount  determined  under
 19    section 78 of the Internal Revenue Code to be taxable as dividends.
 20        (f)  Subtract the amount of any income received or accrued during the tax-
 21    able year which is exempt from taxation by this state, under the provisions of
 22    any  other  law of this state or a law of the United States, if not previously
 23    subtracted in arriving at taxable income.
 24        (g)  For the purpose of determining the Idaho taxable income of the  bene-
 25    ficiary of a trust or of an estate:
 26        (1)  Distributable net income as defined for federal tax purposes shall be
 27        corrected for the other adjustments required by this section.
 28        (2)  Net  operating  losses  attributable  to  a beneficiary of a trust or
 29        estate under section 642 of the Internal Revenue Code shall be a deduction
 30        for the beneficiary to the extent that income from  the  trust  or  estate
 31        would be attributable to this state under the provisions of this chapter.
 32        (h)  In  the  case  of  an individual who is on active duty as a full-time
 33    officer, enlistee or draftee, with the armed  forces  of  the  United  States,
 34    which  full-time  duty is or will be continuous and uninterrupted for one hun-
 35    dred twenty (120) consecutive days or more, deduct compensation  paid  by  the
 36    armed  forces  of the United States for services performed outside this state.
 37    The deduction is allowed only to the extent such income is included in taxable
 38    income, and provided that appropriate adjustments shall be made in determining
 39    the deductions and exemptions allowed pursuant to section  63-3026A(4),  Idaho
 40    Code.
 41        (i)  In the case of a corporation, including any corporation included in a
 42    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 43    Code, add any capital loss deducted which loss was incurred during any year in
 44    which such corporation did not transact business in Idaho. However, do not add
 45    any capital loss deducted if a corporation, including  any  corporation  in  a
 46    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 47    Code, was transacting business in Idaho during the taxable year in  which  the
 48    loss  was  incurred.  In the case of persons, other than corporations, add any
 49    capital loss deducted which was incurred in activities not taxable by Idaho at
 50    the time such loss was incurred. In computing the income taxable to an S  cor-
 51    poration or partnership under this section, deduction shall not be allowed for
 52    a  carryover  or  carryback of a net operating loss provided for in subsection
 53    (c) of this section or a capital loss provided for  in  section  1212  of  the
 54    Internal Revenue Code.
 55        (j)  In  the  case of an individual, there shall be allowed as a deduction
                                                                        
                                           3
                                                                        
  1    from gross income either (1) or (2) at the option of the taxpayer:
  2        (1)  The standard deduction as defined in  section  63,  Internal  Revenue
  3        Code.
  4        (2)  Itemized  deductions as defined in section 63 of the Internal Revenue
  5        Code except state or local taxes measured by net income and general  sales
  6        taxes as either is defined in section 164 of the Internal Revenue Code.
  7        (k)  Add  the  taxable  amount  of any lump sum distribution excluded from
  8    gross income for federal income tax purposes under the ten (10) year averaging
  9    method. The taxable amount will include the ordinary income  portion  and  the
 10    amount eligible for the capital gain election.
 11        (l)  Deduct  any  amounts included in gross income under the provisions of
 12    section 86 of the Internal Revenue Code relating to  certain  social  security
 13    and railroad benefits.
 14        (m)  In  the case of a self-employed individual, deduct the actual cost of
 15    premiums paid to secure worker's compensation insurance for coverage in Idaho,
 16    if such cost has not been deducted in arriving at taxable income.
 17        (n)  In the case of an individual, deduct the amount contributed to a col-
 18    lege savings program pursuant to chapter 54, title 33,  Idaho  Code,  but  not
 19    more  than four thousand dollars ($4,000) per tax year. If the contribution is
 20    made on or before April 15, 2001, it may be deducted for tax year 2000 and  an
 21    individual  can make another contribution and claim the deduction according to
 22    the limits provided in this subsection during 2001 for tax year 2001, as  long
 23    as the contribution is made on or before December 31, 2001.
 24        (o)  In  the case of an individual, add the amount of a nonqualified with-
 25    drawal from an individual trust account or savings account established  pursu-
 26    ant  to chapter 54, title 33, Idaho Code, less any amount of such nonqualified
 27    withdrawal included in the individual's federal gross income pursuant to  sec-
 28    tion 529 of the Internal Revenue Code.
                                                                        
 29        SECTION  3.  An  emergency  existing  therefor,  which emergency is hereby
 30    declared to exist, this act shall be in full force and effect on and after its
 31    passage and approval, and retroactively to January  1,  2005,  except  to  the
 32    extent  that  Section  1 may apply to Public Law 109-001 for which purpose the
 33    effective date of this act shall be January 7, 2005.

Statement of Purpose / Fiscal Impact


                     STATEMENT  OF  PURPOSE
                           RS 14429C2

This is the annual bill to update references to the Internal
Revenue Code (IRC).  

It also conforms the Idaho income tax to changes made to the
IRC by:

1.   The federal "American Jobs Creation Act of 2004" (AJCA) and
requires that any deduction for general state sales taxes allowed
by the AJCA, like state income taxes, be added back when
computing state taxable income.  

2.   Public Law 109-001 which allows taxpayers to deduct in 2004
charitable contributions made in January 2005 for the relief of
victims in areas affected by the December 26, 2004, Indian Ocean
tsunami.

The bill will be effective on and after January 1, 2005.    



                           FISCAL NOTE

     FY 2005   Increases income tax revenue $1.1 million.  

     FY 2006   Decreases income tax revenue $0.8 million.  



CONTACT          
Name:     Dan John/Ted Spangler
Agency:   State Tax Commission
Phone:    334-7530

STATEMENT OF PURPOSE/FISCAL NOTE                      H 10