Print Friendly HOUSE BILL NO. 460 – Real estate sale, nonresident, tax
HOUSE BILL NO. 460
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H0460...............................................by REVENUE AND TAXATION
REAL ESTATE SALE - NONRESIDENTS - Adds to existing law to provide an income
tax withholding on real estate sales by nonresidents and persons without a
permanent place of business in Idaho.
01/24 House intro - 1st rdg - to printing
01/25 Rpt prt - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature Second Regular Session - 2006
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 460
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO THE WITHHOLDING TAX FOR STATE INCOME TAX PURPOSES; AMENDING CHAP-
3 TER 30, TITLE 63, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 63-3035C,
4 IDAHO CODE, TO DEFINE TERMS, TO PROVIDE INCOME TAX WITHHOLDING ON REAL
5 ESTATE SALES BY NONRESIDENTS AND PERSONS WITHOUT A PERMANENT PLACE OF
6 BUSINESS IN IDAHO AND TO PROVIDE PROCEDURES.
7 Be It Enacted by the Legislature of the State of Idaho:
8 SECTION 1. That Chapter 30, Title 63, Idaho Code, be, and the same is
9 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
10 ignated as Section 63-3035C, Idaho Code, and to read as follows:
11 63-3035C. WITHHOLDING ON REAL ESTATE SOLD BY NONRESIDENTS AND PERSONS
12 WITHOUT A PERMANENT PLACE OF BUSINESS IN IDAHO. (1) As used in this section:
13 (a) "Real property" has the definition provided in section 63-201, Idaho
15 (b) "Sales price" means the sum of all of the following:
16 (i) The cash paid, or to be paid. The term "cash paid, or to be
17 paid" does not include stated or unstated interest or original issue
18 discount, as determined by sections 1271 through 1275 of the Internal
19 Revenue Code;
20 (ii) The fair market value of other property transferred, or to be
21 transferred; and
22 (iii) The outstanding amount of any liability assumed by the trans-
23 feree or to which the Idaho real property interest is subject immedi-
24 ately before and after the transfer.
25 (c) "Transferee" means any person, state and local government, subdivi-
26 sion, agency, authority or board acquiring real property located in Idaho.
27 (d) "Transferor" means any person disposing of real property which is
28 located in Idaho.
29 (2) Unless otherwise provided by this section, every transferee shall
30 deduct and withhold a tax equal to three percent (3%) of the sales price on
31 the disposition of Idaho real property. The transferee shall be liable for the
32 payment of the tax required to be deducted and withheld under this section.
33 The tax shall be held in trust for the state of Idaho and shall be paid to the
34 state tax commission on or before the twentieth day of the month following the
35 date the real property is transferred. Amounts withheld and payments made in
36 accordance with this section shall be reported and remitted to the state tax
37 commission on the form the state tax commission shall determine.
38 (3) No transferee shall be required to deduct and withhold the tax
39 imposed by this section if the transferor furnishes to the transferee an affi-
40 davit by the transferor stating the transferor's taxpayer identification num-
41 ber and:
42 (a) The transferor is an Idaho resident; or
43 (b) By reason of a nonrecognition provision of the Internal Revenue Code,
1 as operative under this chapter, the transferor is not required to recog-
2 nize any gain or loss for tax purposes with respect to the transfer of
3 Idaho real property. The statement of nonrecognition must include a brief
4 description of the transfer and a brief summary of the law and facts sup-
5 porting the claim that recognition of any gain or loss is not required
6 with respect to the transfer.
7 This subsection shall not apply if the transferee has knowledge that the affi-
8 davit provided by the transferor is false.
9 (4) For purposes of this section a transferor other than an individual as
10 defined in section 63-3008, Idaho Code, shall be considered a resident of
11 Idaho if the transferor, immediately after the transfer of the title to the
12 Idaho real property, has a permanent place of business in Idaho. A transferor
13 other than an individual as defined by section 63-3008, Idaho Code, has no
14 permanent place of business in Idaho if all of the following apply:
15 (a) It is not organized and existing under the laws of Idaho.
16 (b) It does not qualify with the office of the secretary of state to
17 transact business in Idaho.
18 (c) It does not maintain and staff a permanent office in Idaho.
19 (5) The transferor may submit to the state tax commission an application
20 for a partial or full waiver of the withholding required by this section. The
21 application must set forth:
22 (a) The name, address and taxpayer identification number, if any, of the
23 parties to the real property transaction;
24 (b) The location and general description of the real property to be
26 (c) A calculation and written justification showing that the transferor
27 will not realize any gain, as computed pursuant to the Internal Revenue
28 Code, with respect to the transfer; and
29 (d) A calculation showing whether the realized gain will be sufficient to
30 satisfy the withholding required by this section.
31 Upon receipt of the application, the state tax commission shall determine
32 whether the transferor has realized or will realize any gain with respect to
33 the transfer. If the state tax commission is satisfied with the calculation of
34 the gain or that no gain will be realized, it shall issue a withholding waiver
35 stating the amount that will be withheld and paid, if any. The application for
36 a withholding waiver does not relieve the transferee of its obligation to
37 withhold and pay the tax imposed by this section.
38 (6) No transferee shall be required to deduct and withhold any amount
39 under this section if one (1) or more individual transferors furnish to the
40 transferee an affidavit stating:
41 (a) The transferor's taxpayer identification number;
42 (b) The sales price of the property does not exceed three hundred thou-
43 sand dollars ($300,000); and
44 (c) That for the year preceding the date of the transfer the real prop-
45 erty has been used by the transferor as the transferor's principal resi-
46 dence within the meaning of section 121 of the Internal Revenue Code.
47 This subsection shall not apply if the transferee has knowledge that the affi-
48 davit provided by the transferor is false.
49 (7) Notwithstanding any other provision of this section, the following
50 shall apply:
51 (a) No transferee shall be required to withhold under this section when
52 the transferor is a financial institution acting as trustee other than a
53 trustee of a deed of trust.
54 (b) No transferee shall be required to withhold under this section when
55 the transferee is a corporate beneficiary under a mortgage or a benefi-
1 ciary under a deed of trust and the Idaho real property is acquired in
2 judicial or nonjudicial foreclosure or by a deed in lieu of foreclosure.
3 (8) Amounts withheld and payments made in accordance with this section
4 shall be reported and remitted to the state tax commission in the manner pre-
5 scribed in the rules of the state tax commission. The state tax commission may
6 prescribe a withholding method other than that set forth in this section for
7 persons who engage in more than one (1) real property transaction in a calen-
8 dar year or other persons to whom certain of the withholding requirements are
9 not practicable.
STATEMENT OF PURPOSE
This bill amends the Idaho Income Tax Act to require a
withholding tax when individual nonresidents, or business
entities without a permanent place of business in Idaho, sell
Idaho real property. Withholding would not be required when
individual residents, or business entities with a permanent place
of business in Idaho, sell Idaho real property.
An additional $3 million to the General Fund.
Name: Dan John
Agency: State Tax Commission
STATEMENT OF PURPOSE/FISCAL NOTE H 460