Print Friendly HOUSE BILL NO. 26 – Income tax/real estate invest trust
HOUSE BILL NO. 26
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H0026...............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law relating to income taxes to require, in
the case of real estate investment trusts, that the taxpayer add back
dividends paid and deducted pursuant to sections 561 and 857 of the
Internal Revenue Code.
01/20 House intro - 1st rdg - to printing
01/21 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. 26
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCOME TAXES; AMENDING SECTION 63-3022, IDAHO CODE, TO REQUIRE,
3 IN THE CASE OF REAL ESTATE INVESTMENT TRUSTS, THAT THE TAXPAYER ADD BACK
4 DIVIDENDS PAID AND DEDUCTED PURSUANT TO SECTIONS 561 AND 857 OF THE INTER-
5 NAL REVENUE CODE; DECLARING AN EMERGENCY AND PROVIDING A RETROACTIVE
6 EFFECTIVE DATE.
7 Be It Enacted by the Legislature of the State of Idaho:
8 SECTION 1. That Section 63-3022, Idaho Code, be, and the same is hereby
9 amended to read as follows:
10 63-3022. ADJUSTMENTS TO TAXABLE INCOME. The additions and subtractions
11 set forth in this section, and in sections 63-3022A through 63-3022Q, Idaho
12 Code, are to be applied to the extent allowed in computing Idaho taxable
14 (a) Add any state and local taxes, as defined in section 164 of the
15 Internal Revenue Code and, measured by net income, paid or accrued during the
16 taxable year adjusted for state or local tax refunds used in arriving at tax-
17 able income.
18 (b) Add the net operating loss deduction used in arriving at taxable
20 (c) (1) A net operating loss for any taxable year commencing on and after
21 January 1, 2000, shall be a net operating loss carryback not to exceed a
22 total of one hundred thousand dollars ($100,000) to the two (2) immedi-
23 ately preceding taxable years. Any portion of the net operating loss not
24 subtracted in the two (2) preceding years may be subtracted in the next
25 twenty (20) years succeeding the taxable year in which the loss arises in
26 order until exhausted. The sum of the deductions may not exceed the amount
27 of the net operating loss deduction incurred. At the election of the tax-
28 payer, the two (2) year carryback may be foregone and the loss subtracted
29 from income received in taxable years arising in the next twenty (20)
30 years succeeding the taxable year in which the loss arises in order until
31 exhausted. The election shall be made as under section 172(b)(3) of the
32 Internal Revenue Code. An election under this subsection must be in the
33 manner prescribed in the rules of the state tax commission and once made
34 is irrevocable for the year in which it is made. The term "income" as used
35 in this subsection (c) means Idaho taxable income as defined in this chap-
36 ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
37 (2) Net operating losses incurred by a corporation during a year in which
38 such corporation did not transact business in Idaho or was not included in
39 a group of corporations combined under subsection (t) of section 63-3027,
40 Idaho Code, may not be subtracted. However, if at least one (1) corpora-
41 tion within a group of corporations combined under subsection (t) of sec-
42 tion 63-3027, Idaho Code, was transacting business in Idaho during the
43 taxable year in which the loss was incurred, then the net operating loss
1 may be subtracted. Net operating losses incurred by a person, other than a
2 corporation, in activities not taxable by Idaho may not be subtracted.
3 (d) (1) In the case of a corporation, add the amount deducted under the
4 provisions of sections 243(a) and (c), 244, 245 and 246A of the Internal
5 Revenue Code (relating to dividends received by corporations) as limited
6 by section 246(b)(1) of said code.
7 (2) In the case of a real estate investment trust, add the amount
8 described in section 857 of the Internal Revenue Code (relating to taxa-
9 tion of real estate investment trusts and their beneficiaries) and
10 deducted on the taxpayer's federal return pursuant to section 561 of the
11 Internal Revenue Code (relating to the definition of a deduction for divi-
12 dends paid).
13 (e) In the case of a corporation, subtract an amount determined under
14 section 78 of the Internal Revenue Code to be taxable as dividends.
15 (f) Subtract the amount of any income received or accrued during the tax-
16 able year which is exempt from taxation by this state, under the provisions of
17 any other law of this state or a law of the United States, if not previously
18 subtracted in arriving at taxable income.
19 (g) For the purpose of determining the Idaho taxable income of the bene-
20 ficiary of a trust or of an estate:
21 (1) Distributable net income as defined for federal tax purposes shall be
22 corrected for the other adjustments required by this section.
23 (2) Net operating losses attributable to a beneficiary of a trust or
24 estate under section 642 of the Internal Revenue Code shall be a deduction
25 for the beneficiary to the extent that income from the trust or estate
26 would be attributable to this state under the provisions of this chapter.
27 (h) In the case of an individual who is on active duty as a full-time
28 officer, enlistee or draftee, with the armed forces of the United States,
29 which full-time duty is or will be continuous and uninterrupted for one hun-
30 dred twenty (120) consecutive days or more, deduct compensation paid by the
31 armed forces of the United States for services performed outside this state.
32 The deduction is allowed only to the extent such income is included in taxable
33 income, and provided that appropriate adjustments shall be made in determining
34 the deductions and exemptions allowed pursuant to section 63-3026A(4), Idaho
36 (i) In the case of a corporation, including any corporation included in a
37 group of corporations combined under subsection (t) of section 63-3027, Idaho
38 Code, add any capital loss deducted which loss was incurred during any year in
39 which such corporation did not transact business in Idaho. However, do not add
40 any capital loss deducted if a corporation, including any corporation in a
41 group of corporations combined under subsection (t) of section 63-3027, Idaho
42 Code, was transacting business in Idaho during the taxable year in which the
43 loss was incurred. In the case of persons, other than corporations, add any
44 capital loss deducted which was incurred in activities not taxable by Idaho at
45 the time such loss was incurred. In computing the income taxable to an S cor-
46 poration or partnership under this section, deduction shall not be allowed for
47 a carryover or carryback of a net operating loss provided for in subsection
48 (c) of this section or a capital loss provided for in section 1212 of the
49 Internal Revenue Code.
50 (j) In the case of an individual, there shall be allowed as a deduction
51 from gross income either (1) or (2) at the option of the taxpayer:
52 (1) The standard deduction as defined in section 63, Internal Revenue
54 (2) Itemized deductions as defined in section 63 of the Internal Revenue
55 Code except state or local taxes measured by net income and as defined in
1 section 164 of the Internal Revenue Code.
2 (k) Add the taxable amount of any lump sum distribution excluded from
3 gross income for federal income tax purposes under the ten (10) year averaging
4 method. The taxable amount will include the ordinary income portion and the
5 amount eligible for the capital gain election.
6 (l) Deduct any amounts included in gross income under the provisions of
7 section 86 of the Internal Revenue Code relating to certain social security
8 and railroad benefits.
9 (m) In the case of a self-employed individual, deduct the actual cost of
10 premiums paid to secure worker's compensation insurance for coverage in Idaho,
11 if such cost has not been deducted in arriving at taxable income.
12 (n) In the case of an individual, deduct the amount contributed to a col-
13 lege savings program pursuant to chapter 54, title 33, Idaho Code, but not
14 more than four thousand dollars ($4,000) per tax year. If the contribution is
15 made on or before April 15, 2001, it may be deducted for tax year 2000 and an
16 individual can make another contribution and claim the deduction according to
17 the limits provided in this subsection during 2001 for tax year 2001, as long
18 as the contribution is made on or before December 31, 2001.
19 (o) In the case of an individual, add the amount of a nonqualified with-
20 drawal from an individual trust account or savings account established pursu-
21 ant to chapter 54, title 33, Idaho Code, less any amount of such nonqualified
22 withdrawal included in the individual's federal gross income pursuant to sec-
23 tion 529 of the Internal Revenue Code.
24 SECTION 2. An emergency existing therefor, which emergency is hereby
25 declared to exist, this act shall be in full force and effect on and after its
26 passage and approval, and retroactively to January 1, 2005.
STATEMENT OF PURPOSE
This bill taxes Real Estate Investment Trusts (REIT) on income
earned from investments in Idaho realty. It requires an REIT to
add its federal deduction for dividends paid to it federal
taxable income when calculating Idaho taxable income. As a
result, income earned on real property in Idaho will be subject
to the Idaho corporate income tax and not exported to the state
in which the investor resides.
The bill is effective January 1, 2005.
Increases general fund revenue $500,000.
Name: Dan John, State Tax Commission
STATEMENT OF PURPOSE/FISCAL NOTE H 26