2006 Legislation
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HOUSE BILL NO. 444 – Income tax, military members

HOUSE BILL NO. 444

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Bill Status



H0444aa.............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to delete the requirement that resident
military members reduce deductions and exemptions in proportion to
nontaxable military pay for state income tax purposes.
                                                                        
01/23    House intro - 1st rdg - to printing
01/24    Rpt prt - to Rev/Tax
02/15    Rpt out - to Gen Ord
02/16    Rpt out amen - to engros
02/17    Rpt engros - 1st rdg - to 2nd rdg as amen
02/20    2nd rdg - to 3rd rdg as amen
02/23    3rd rdg as amen - PASSED - 63-0-7
      AYES -- Anderson, Andrus, Barrett, Bastian, Bayer, Bedke, Bell,
      Bilbao, Black, Block, Boe, Bolz, Bradford, Cannon, Chadderdon, Clark,
      Collins, Crow, Denney, Edmunson, Ellsworth, Eskridge, Field(18),
      Garrett, Hart, Harwood, Henbest, Henderson, Jaquet, Kemp, Lake,
      LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller,
      Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Raybould,
      Ring, Ringo, Roberts, Rusche, Rydalch, Sayler, Schaefer, Shepherd(2),
      Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie(Luker),
      Snodgrass, Stevenson, Trail, Wills
      NAYS -- None
      Absent and excused -- Barraclough, Brackett, Deal, Field(23), Sali,
      Wood, Mr. Speaker
    Floor Sponsor - McKague
    Title apvd - to Senate
02/24    Senate intro - 1st rdg - to Loc Gov
03/02    Rpt out - rec d/p - to 2nd rdg
03/03    2nd rdg - to 3rd rdg
03/07    3rd rdg - PASSED - 33-0-2
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett, Cameron,
      Coiner, Compton, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
      Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge,
      Malepeai, Marley, McGee, McKenzie, Richardson, Schroeder, Stegner,
      Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Burtenshaw, Pearce
    Floor Sponsor - Williams
    Title apvd - to House
03/08    To enrol
03/09    Rpt enrol - Sp signed
03/10    Pres signed
03/13    To Governor
03/14    Governor signed
         Session Law Chapter 63
         Effective: 01/01/05

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 444
                                                                        
                             BY REVENUE AND TAXATION COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO INCOME TAXES; AMENDING SECTION 63-3022, IDAHO CODE, TO DELETE  THE
  3        REQUIREMENT  THAT  RESIDENT  MILITARY MEMBERS REDUCE DEDUCTIONS AND EXEMP-
  4        TIONS IN PROPORTION TO NONTAXABLE MILITARY PAY; DECLARING AN EMERGENCY AND
  5        PROVIDING RETROACTIVE APPLICATION.
                                                                        
  6    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  7        SECTION 1.  That Section 63-3022, Idaho Code, be, and the same  is  hereby
  8    amended to read as follows:
                                                                        
  9        63-3022.  ADJUSTMENTS  TO  TAXABLE  INCOME. The additions and subtractions
 10    set forth in this section, and in sections 63-3022A  through  63-3022Q,  Idaho
 11    Code,  are  to  be  applied  to  the extent allowed in computing Idaho taxable
 12    income:
 13        (a)  Add any state and local taxes, as  defined  in  section  164  of  the
 14    Internal  Revenue Code and, measured by net income, paid or accrued during the
 15    taxable year adjusted for state or local tax refunds used in arriving at  tax-
 16    able income.
 17        (b)  Add  the  net  operating  loss  deduction used in arriving at taxable
 18    income.
 19        (c)  (1) A net operating loss for any taxable year commencing on and after
 20        January 1, 2000, shall be a net operating loss carryback not to  exceed  a
 21        total  of  one  hundred thousand dollars ($100,000) to the two (2) immedi-
 22        ately preceding taxable years. Any portion of the net operating  loss  not
 23        subtracted  in  the  two (2) preceding years may be subtracted in the next
 24        twenty (20) years succeeding the taxable year in which the loss arises  in
 25        order until exhausted. The sum of the deductions may not exceed the amount
 26        of  the net operating loss deduction incurred. At the election of the tax-
 27        payer, the two (2) year carryback may be foregone and the loss  subtracted
 28        from  income  received  in  taxable  years arising in the next twenty (20)
 29        years succeeding the taxable year in which the loss arises in order  until
 30        exhausted.  The  election  shall be made as under section 172(b)(3) of the
 31        Internal Revenue Code. An election under this subsection must  be  in  the
 32        manner  prescribed  in the rules of the state tax commission and once made
 33        is irrevocable for the year in which it is made. The term "income" as used
 34        in this subsection (c) means Idaho taxable income as defined in this chap-
 35        ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
 36        (2)  Net operating losses incurred by a corporation during a year in which
 37        such corporation did not transact business in Idaho or was not included in
 38        a group of corporations combined under subsection (t) of section  63-3027,
 39        Idaho  Code,  may not be subtracted. However, if at least one (1) corpora-
 40        tion within a group of corporations combined under subsection (t) of  sec-
 41        tion  63-3027,  Idaho  Code,  was transacting business in Idaho during the
 42        taxable year in which the loss was incurred, then the net  operating  loss
 43        may be subtracted. Net operating losses incurred by a person, other than a
                                                                        
                                           2
                                                                        
  1        corporation, in activities not taxable by Idaho may not be subtracted.
  2        (d)  In  the case of a corporation, add the amount deducted under the pro-
  3    visions of sections 243(a) and (c), 244, 245 and 246A of the Internal  Revenue
  4    Code  (relating  to  dividends received by corporations) as limited by section
  5    246(b)(1) of said code.
  6        (e)  In the case of a corporation, subtract  an  amount  determined  under
  7    section 78 of the Internal Revenue Code to be taxable as dividends.
  8        (f)  Subtract the amount of any income received or accrued during the tax-
  9    able year which is exempt from taxation by this state, under the provisions of
 10    any  other  law of this state or a law of the United States, if not previously
 11    subtracted in arriving at taxable income.
 12        (g)  For the purpose of determining the Idaho taxable income of the  bene-
 13    ficiary of a trust or of an estate:
 14        (1)  Distributable net income as defined for federal tax purposes shall be
 15        corrected for the other adjustments required by this section.
 16        (2)  Net  operating  losses  attributable  to  a beneficiary of a trust or
 17        estate under section 642 of the Internal Revenue Code shall be a deduction
 18        for the beneficiary to the extent that income from  the  trust  or  estate
 19        would be attributable to this state under the provisions of this chapter.
 20        (h)  In  the  case  of  an individual who is on active duty as a full-time
 21    officer, enlistee or draftee, with the armed  forces  of  the  United  States,
 22    which  full-time  duty is or will be continuous and uninterrupted for one hun-
 23    dred twenty (120) consecutive days or more, deduct compensation  paid  by  the
 24    armed  forces  of the United States for services performed outside this state.
 25    The deduction is allowed only to the extent such income is included in taxable
 26    income, and provided that appropriate adjustments shall be made in determining
 27    the deductions and exemptions allowed pursuant to section  63-3026A(4),  Idaho
 28    Code.
 29        (i)  In the case of a corporation, including any corporation included in a
 30    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 31    Code, add any capital loss deducted which loss was incurred during any year in
 32    which such corporation did not transact business in Idaho. However, do not add
 33    any capital loss deducted if a corporation, including  any  corporation  in  a
 34    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 35    Code, was transacting business in Idaho during the taxable year in  which  the
 36    loss  was  incurred.  In the case of persons, other than corporations, add any
 37    capital loss deducted which was incurred in activities not taxable by Idaho at
 38    the time such loss was incurred. In computing the income taxable to an S  cor-
 39    poration or partnership under this section, deduction shall not be allowed for
 40    a  carryover  or  carryback of a net operating loss provided for in subsection
 41    (c) of this section or a capital loss provided for  in  section  1212  of  the
 42    Internal Revenue Code.
 43        (j)  In  the  case of an individual, there shall be allowed as a deduction
 44    from gross income either (1) or (2) at the option of the taxpayer:
 45        (1)  The standard deduction as defined in  section  63,  Internal  Revenue
 46        Code.
 47        (2)  Itemized  deductions as defined in section 63 of the Internal Revenue
 48        Code except state or local taxes measured by net income and general  sales
 49        taxes as either is defined in section 164 of the Internal Revenue Code.
 50        (k)  Add  the  taxable  amount  of any lump sum distribution excluded from
 51    gross income for federal income tax purposes under the ten (10) year averaging
 52    method. The taxable amount will include the ordinary income  portion  and  the
 53    amount eligible for the capital gain election.
 54        (l)  Deduct  any  amounts included in gross income under the provisions of
 55    section 86 of the Internal Revenue Code relating to  certain  social  security
                                                                        
                                           3
                                                                        
  1    and railroad benefits.
  2        (m)  In  the case of a self-employed individual, deduct the actual cost of
  3    premiums paid to secure worker's compensation insurance for coverage in Idaho,
  4    if such cost has not been deducted in arriving at taxable income.
  5        (n)  In the case of an individual, deduct the amount contributed to a col-
  6    lege savings program pursuant to chapter 54, title 33,  Idaho  Code,  but  not
  7    more than four  thousand dollars ($4,000) per tax year. If the contribution is
  8    made  on or before April 15, 2001, it may be deducted for tax year 2000 and an
  9    individual can make another contribution and claim the deduction according  to
 10    the  limits provided in this subsection during 2001 for tax year 2001, as long
 11    as the contribution is made on or before December 31, 2001.
 12        (o)  In the case of an individual, add the amount of a nonqualified  with-
 13    drawal  from an individual trust account or savings account established pursu-
 14    ant to chapter 54, title 33, Idaho Code, less any amount of such  nonqualified
 15    withdrawal  included in the individual's federal gross income pursuant to sec-
 16    tion 529 of the Internal Revenue Code.
                                                                        
 17        SECTION 2.  An emergency existing  therefor,  which  emergency  is  hereby
 18    declared to exist, this act shall be in full force and effect on and after its
 19    passage and approval, and retroactively to January 1, 2006.

Amendment


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                                                     Moved by    Smith (24)          
                                                                        
                                                     Seconded by Crow                
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                              HOUSE AMENDMENT TO H.B. NO. 444
                                                                        
  1                                AMENDMENT TO SECTION 2
  2        On page 3 of the printed bill, in  line  19,  delete  "2006"  and  insert:
  3    "2005".

Engrossed Bill (Original Bill with Amendment(s) Incorporated)


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                              HOUSE BILL NO. 444, As Amended
                                                                        
                             BY REVENUE AND TAXATION COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO INCOME TAXES; AMENDING SECTION 63-3022, IDAHO CODE, TO DELETE  THE
  3        REQUIREMENT  THAT  RESIDENT  MILITARY MEMBERS REDUCE DEDUCTIONS AND EXEMP-
  4        TIONS IN PROPORTION TO NONTAXABLE MILITARY PAY; DECLARING AN EMERGENCY AND
  5        PROVIDING RETROACTIVE APPLICATION.
                                                                        
  6    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  7        SECTION 1.  That Section 63-3022, Idaho Code, be, and the same  is  hereby
  8    amended to read as follows:
                                                                        
  9        63-3022.  ADJUSTMENTS  TO  TAXABLE  INCOME. The additions and subtractions
 10    set forth in this section, and in sections 63-3022A  through  63-3022Q,  Idaho
 11    Code,  are  to  be  applied  to  the extent allowed in computing Idaho taxable
 12    income:
 13        (a)  Add any state and local taxes, as  defined  in  section  164  of  the
 14    Internal  Revenue Code and, measured by net income, paid or accrued during the
 15    taxable year adjusted for state or local tax refunds used in arriving at  tax-
 16    able income.
 17        (b)  Add  the  net  operating  loss  deduction used in arriving at taxable
 18    income.
 19        (c)  (1) A net operating loss for any taxable year commencing on and after
 20        January 1, 2000, shall be a net operating loss carryback not to  exceed  a
 21        total  of  one  hundred thousand dollars ($100,000) to the two (2) immedi-
 22        ately preceding taxable years. Any portion of the net operating  loss  not
 23        subtracted  in  the  two (2) preceding years may be subtracted in the next
 24        twenty (20) years succeeding the taxable year in which the loss arises  in
 25        order until exhausted. The sum of the deductions may not exceed the amount
 26        of  the net operating loss deduction incurred. At the election of the tax-
 27        payer, the two (2) year carryback may be foregone and the loss  subtracted
 28        from  income  received  in  taxable  years arising in the next twenty (20)
 29        years succeeding the taxable year in which the loss arises in order  until
 30        exhausted.  The  election  shall be made as under section 172(b)(3) of the
 31        Internal Revenue Code. An election under this subsection must  be  in  the
 32        manner  prescribed  in the rules of the state tax commission and once made
 33        is irrevocable for the year in which it is made. The term "income" as used
 34        in this subsection (c) means Idaho taxable income as defined in this chap-
 35        ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
 36        (2)  Net operating losses incurred by a corporation during a year in which
 37        such corporation did not transact business in Idaho or was not included in
 38        a group of corporations combined under subsection (t) of section  63-3027,
 39        Idaho  Code,  may not be subtracted. However, if at least one (1) corpora-
 40        tion within a group of corporations combined under subsection (t) of  sec-
 41        tion  63-3027,  Idaho  Code,  was transacting business in Idaho during the
 42        taxable year in which the loss was incurred, then the net  operating  loss
 43        may be subtracted. Net operating losses incurred by a person, other than a
                                                                        
                                           2
                                                                        
  1        corporation, in activities not taxable by Idaho may not be subtracted.
  2        (d)  In  the case of a corporation, add the amount deducted under the pro-
  3    visions of sections 243(a) and (c), 244, 245 and 246A of the Internal  Revenue
  4    Code  (relating  to  dividends received by corporations) as limited by section
  5    246(b)(1) of said code.
  6        (e)  In the case of a corporation, subtract  an  amount  determined  under
  7    section 78 of the Internal Revenue Code to be taxable as dividends.
  8        (f)  Subtract the amount of any income received or accrued during the tax-
  9    able year which is exempt from taxation by this state, under the provisions of
 10    any  other  law of this state or a law of the United States, if not previously
 11    subtracted in arriving at taxable income.
 12        (g)  For the purpose of determining the Idaho taxable income of the  bene-
 13    ficiary of a trust or of an estate:
 14        (1)  Distributable net income as defined for federal tax purposes shall be
 15        corrected for the other adjustments required by this section.
 16        (2)  Net  operating  losses  attributable  to  a beneficiary of a trust or
 17        estate under section 642 of the Internal Revenue Code shall be a deduction
 18        for the beneficiary to the extent that income from  the  trust  or  estate
 19        would be attributable to this state under the provisions of this chapter.
 20        (h)  In  the  case  of  an individual who is on active duty as a full-time
 21    officer, enlistee or draftee, with the armed  forces  of  the  United  States,
 22    which  full-time  duty is or will be continuous and uninterrupted for one hun-
 23    dred twenty (120) consecutive days or more, deduct compensation  paid  by  the
 24    armed  forces  of the United States for services performed outside this state.
 25    The deduction is allowed only to the extent such income is included in taxable
 26    income, and provided that appropriate adjustments shall be made in determining
 27    the deductions and exemptions allowed pursuant to section  63-3026A(4),  Idaho
 28    Code.
 29        (i)  In the case of a corporation, including any corporation included in a
 30    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 31    Code, add any capital loss deducted which loss was incurred during any year in
 32    which such corporation did not transact business in Idaho. However, do not add
 33    any capital loss deducted if a corporation, including  any  corporation  in  a
 34    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 35    Code, was transacting business in Idaho during the taxable year in  which  the
 36    loss  was  incurred.  In the case of persons, other than corporations, add any
 37    capital loss deducted which was incurred in activities not taxable by Idaho at
 38    the time such loss was incurred. In computing the income taxable to an S  cor-
 39    poration or partnership under this section, deduction shall not be allowed for
 40    a  carryover  or  carryback of a net operating loss provided for in subsection
 41    (c) of this section or a capital loss provided for  in  section  1212  of  the
 42    Internal Revenue Code.
 43        (j)  In  the  case of an individual, there shall be allowed as a deduction
 44    from gross income either (1) or (2) at the option of the taxpayer:
 45        (1)  The standard deduction as defined in  section  63,  Internal  Revenue
 46        Code.
 47        (2)  Itemized  deductions as defined in section 63 of the Internal Revenue
 48        Code except state or local taxes measured by net income and general  sales
 49        taxes as either is defined in section 164 of the Internal Revenue Code.
 50        (k)  Add  the  taxable  amount  of any lump sum distribution excluded from
 51    gross income for federal income tax purposes under the ten (10) year averaging
 52    method. The taxable amount will include the ordinary income  portion  and  the
 53    amount eligible for the capital gain election.
 54        (l)  Deduct  any  amounts included in gross income under the provisions of
 55    section 86 of the Internal Revenue Code relating to  certain  social  security
                                                                        
                                           3
                                                                        
  1    and railroad benefits.
  2        (m)  In  the case of a self-employed individual, deduct the actual cost of
  3    premiums paid to secure worker's compensation insurance for coverage in Idaho,
  4    if such cost has not been deducted in arriving at taxable income.
  5        (n)  In the case of an individual, deduct the amount contributed to a col-
  6    lege savings program pursuant to chapter 54, title 33,  Idaho  Code,  but  not
  7    more than four  thousand dollars ($4,000) per tax year. If the contribution is
  8    made  on or before April 15, 2001, it may be deducted for tax year 2000 and an
  9    individual can make another contribution and claim the deduction according  to
 10    the  limits provided in this subsection during 2001 for tax year 2001, as long
 11    as the contribution is made on or before December 31, 2001.
 12        (o)  In the case of an individual, add the amount of a nonqualified  with-
 13    drawal  from an individual trust account or savings account established pursu-
 14    ant to chapter 54, title 33, Idaho Code, less any amount of such  nonqualified
 15    withdrawal  included in the individual's federal gross income pursuant to sec-
 16    tion 529 of the Internal Revenue Code.
                                                                        
 17        SECTION 2.  An emergency existing  therefor,  which  emergency  is  hereby
 18    declared to exist, this act shall be in full force and effect on and after its
 19    passage and approval, and retroactively to January 1, 2005.

Statement of Purpose / Fiscal Impact


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                      STATEMENT OF PURPOSE
                                
                            RS 15373

     Current Idaho income tax law permits Idaho residents on
active military duty outside Idaho for at least 120 consecutive
days to deduct their military pay when computing Idaho taxable
income.  They are also required to reduce their exemptions and
deductions in proportion to their exempt military income.  This
bill repeals the requirement to reduce their exemptions and
deductions.



                          FISCAL NOTE

     Loss to the general fund of $1.5 million.  

(Note:  Expect the fiscal effect to diminish as mobilizations of
Idaho National Guard and Reserve members declines.)




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

STATEMENT OF PURPOSE/FISCAL NOTE                           H 444 AA