2006 Legislation
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HOUSE BILL NO. 460 – Real estate sale, nonresident, tax

HOUSE BILL NO. 460

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Bill Status



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

Bill Text


                                                                        
                                                                        
  ]]]]              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
 14        Code.
 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,
                                                                        
                                           2
                                                                        
  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
 25        transferred;
 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-
                                                                        
                                           3
                                                                        
  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 / Fiscal Impact


                      STATEMENT OF PURPOSE
                                
                           RS 15425c1

     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.


                          FISCAL NOTE

     An additional $3 million to the General Fund.






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

STATEMENT OF PURPOSE/FISCAL NOTE                              H 460