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H0015...............................................by REVENUE AND TAXATION
INVESTMENT INCOME - NONRESIDENTS - STATE INCOME TAX - Amends existing law
to provide that nonresident individuals shall not be taxable for state
income tax purposes on investment income distributed by a qualified
investment partnership; and to define "qualified investment partnership."
01/16 House intro - 1st rdg - to printing
01/17 Rpt prt - to Rev/Tax
01/18 Rpt out - rec d/p - to 2nd rdg
01/19 2nd rdg - to 3rd rdg
01/23 3rd rdg - PASSED - 68-0-2
AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black,
Block, Bock, Boe, Bolz, Brackett, Bradford, Chadderdon, Chavez, Chew,
Collins, Crane, Durst, Edmunson, Eskridge, Hagedorn, Hart, Harwood,
Henbest(Wallace), Henderson, Jaquet, Killen, King, Kren, Labrador,
Lake, LeFavour, Loertscher, Luker, Marriott, Mathews, McGeachin,
Mortimer, Moyle, Nielsen, Nonini, Pasley-Stuart, Patrick, Pence,
Raybould, Ring, Ringo, Roberts, Ruchti, Rusche, Sayler, Schaefer,
Shepherd(2), Shepherd(8), Shirley, Shively, Smith(30), Smith(24),
Snodgrass, Stevenson, Thayn, Trail, Vander Woude, Wills, Wood(27),
Wood(35)
NAYS -- None
Absent and excused -- Clark, Mr. Speaker
Floor Sponsor - Roberts
Title apvd - to Senate
01/24 Senate intro - 1st rdg - to Loc Gov
02/02 Rpt out - rec d/p - to 2nd rdg
02/05 2nd rdg - to 3rd rdg
02/06 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
Goedde, Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst,
Little, Lodge, Malepeai, McGee, McKague, McKenzie, Pearce,
Richardson, Schroeder, Siddoway, Stegner, Stennett, Werk
NAYS -- None
Absent and excused -- None
Floor Sponsor - Stegner
Title apvd - to House
02/07 To enrol
02/08 Rpt enrol - Sp signed
02/09 Pres signed
02/12 To Governor
02/14 Governor signed
Session Law Chapter 12
Effective: 01/01/07
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature First Regular Session - 2007
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 15
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCOME TAXES; AMENDING SECTION 63-3026A, IDAHO CODE, TO PROVIDE
3 THAT NONRESIDENT INDIVIDUALS SHALL NOT BE TAXABLE ON INVESTMENT INCOME
4 DISTRIBUTED BY A QUALIFIED INVESTMENT PARTNERSHIP AND TO DEFINE "QUALIFIED
5 INVESTMENT PARTNERSHIP"; DECLARING AN EMERGENCY AND PROVIDING A RETROAC-
6 TIVE EFFECTIVE DATE.
7 Be It Enacted by the Legislature of the State of Idaho:
8 SECTION 1. That Section 63-3026A, Idaho Code, be, and the same is hereby
9 amended to read as follows:
10 63-3026A. COMPUTING IDAHO TAXABLE INCOME OF PART-YEAR OR NONRESIDENT
11 INDIVIDUALS, TRUSTS AND ESTATES. (1) For nonresident individuals, trusts, or
12 estates the term "Idaho taxable income" includes only those components of
13 Idaho taxable income as computed for a resident which are derived from or
14 related to sources within Idaho. This is to be computed without the deductions
15 for either the standard deduction or itemized deductions or personal exemp-
16 tions except as provided in subsection (4) of this section.
17 (2) For part-year resident individuals, trusts or estates the term "Idaho
18 taxable income" includes the total of: (a) Idaho taxable income as computed
19 for a resident for the portion of the tax period during which a taxpayer is
20 domiciled in or is residing in Idaho, plus (b) those components of Idaho tax-
21 able income which are derived from or related to sources within Idaho for that
22 portion of the tax period during which a taxpayer is not domiciled in and is
23 not residing in Idaho. This is to be computed without the deductions for
24 either the standard deduction or itemized deductions or personal exemptions
25 except as provided in subsection (4) of this section.
26 (3) For the purposes of subsections (1) and (2) of this section:
27 (a) Income shall be considered derived from or relating to sources within
28 Idaho when such income is attributable to or resulting from:
29 (i) Any business, trade, profession or occupation conducted or car-
30 ried on in this state, including the distributive share of partner-
31 ship income and deductions, and the pro rata share of S corporation
32 income and deductions;
33 (ii) The ownership or disposition of any interest in real or tangi-
34 ble personal property located in this state;
35 (iii) The ownership or disposition of any interest in intangible per-
36 sonal property only to the extent that such property is employed in a
37 business, trade, profession or occupation conducted or carried on in
38 this state. Provided however, that interest income from an install-
39 ment sale of real or tangible personal property shall constitute
40 income from sources within this state to the extent that the property
41 sold was located within this state. Provided further, that interest
42 income received by a partner or shareholder of a partnership or S
43 corporation from such partnership or S corporation shall constitute
2
1 income from sources within this state to the extent that the partner-
2 ship or S corporation is transacting business within this state;
3 (iv) A resident estate or trust;
4 (v) A nonresident estate or trust to the extent the income and
5 deductions of the nonresident estate or trust were derived from or
6 related to sources within this state;
7 (vi) The conduct of pari-mutuel wagering, charitable gaming or any
8 other form of gambling taking place within this state, except as
9 expressly limited in section 67-7439, Idaho Code;
10 (vii) Gains or losses realized from the sale or other disposition of
11 a partnership interest or stock in an S corporation to the extent of
12 the partnership's or S corporation's Idaho apportionment factor in
13 the taxable year immediately preceding the year of sale.
14 (b) Notwithstanding the provisions of subsection (3)(a) of this section,
15 transactions and investments made, placed or directed by Idaho resident
16 registered broker-dealers and investment advisers or institutions exempt
17 from registration under the Idaho securities act in securities listed with
18 or through the New York Stock Exchange, the American Stock Exchange or any
19 other stock exchange registered with the United States securities and
20 exchange commission and approved by the director of the department of
21 finance which generate dividends, interest, capital gains or similar prof-
22 its or returns for nonresidents not otherwise subject to Idaho income tax-
23 ation shall not result in the intangible property being deemed to have a
24 situs outside the domicile of the owner.
25 (c) Notwithstanding the provisions of subsection (3)(a) of this section,
26 when intangible property owned by a limited liability company, partner-
27 ship or other entity taxed as a partnership for federal income tax pur-
28 poses generates dividends, interest, capital gains or similar profits or
29 returns, such income shall not constitute income derived from or related
30 to sources within Idaho, provided that the business activity of such
31 entity is limited to the investment in securities and activities incident
32 thereto Nonresident individuals shall not be taxable on investment income
33 from a qualified investment partnership. For purposes of this paragraph, a
34 "qualified investment partnership" means a partnership, as defined in sec-
35 tion 63-3006B, Idaho Code, that derives at least ninety percent (90%) of
36 its gross income from investments that produce income that would not be
37 taxable to a nonresident individual if the investment were held by that
38 individual.
39 (d) Compensation paid by the United States for active service in the
40 armed forces of the United States, performed by an individual not domi-
41 ciled in this state, shall not constitute income derived from or related
42 to sources within this state.
43 (e) The income of nonresident or part-year resident individuals, trusts
44 or estates which is derived from or related to sources both within and
45 without this state shall be attributable to this state in the manner pre-
46 scribed in the rules of the state tax commission.
47 (4) In computing the Idaho taxable income of a part-year or nonresident
48 individual, trust or estate, the standard deduction or itemized deductions, as
49 defined in section 63-3022(j), Idaho Code, if applicable, and the exemptions,
50 as defined in section 151 of the Internal Revenue Code or any allowance in
51 lieu of such deduction, shall be allowed in the proportion that paragraph (a)
52 of this subsection bears to paragraph (b) of this subsection:
53 (a) The Idaho taxable income of the taxpayer modified as follows:
54 (i) No allowance shall be made for either the standard deduction or
55 itemized deductions;
3
1 (ii) No deduction shall be made for personal exemptions or any
2 allowance in lieu of such deduction.
3 (b) The Idaho taxable income as would be calculated for a resident of
4 Idaho modified as follows:
5 (i) No allowance shall be made for either a standard deduction or
6 itemized deductions;
7 (ii) No deduction shall be made for personal exemptions or any
8 allowance in lieu of such deduction;
9 (iii) Compensation for active military service in the armed forces
10 shall not be deducted;
11 (iv) Income earned within the original exterior boundaries of any
12 federally created Indian reservation by an enrolled Indian in a fed-
13 erally recognized Indian tribe on a federally recognized Indian res-
14 ervation shall be added if not otherwise included.
15 (5) An adjustment may be made to eliminate distortions in the amount of
16 net income attributable to a taxpayer's activities within the state of Idaho.
17 Such deductions shall be limited to circumstances involving itemized deduc-
18 tions as referred to in subsection (4) of this section and which reflect:
19 (a) A failure to reflect the net income or deduction after reimbursements
20 have been received; or
21 (b) A failure to reflect the net amount of mortgage interest income or
22 expense from activities within Idaho.
23 (6) For the purposes of subsections (1) and (2) of this section, deduc-
24 tions and adjustments allowed in computing the Idaho taxable income of nonres-
25 ident and part-year resident individuals, trusts and estates shall be pre-
26 scribed in the rules of the state tax commission. Such rules shall be based
27 upon:
28 (a) Whether or not the deduction or adjustment is related to the produc-
29 tion of income reportable to Idaho;
30 (b) Whether or not the deduction or adjustment is related to income
31 received, expenses paid, or events of tax consequence which occurred dur-
32 ing a portion of a taxable year that the taxpayer was domiciled in or
33 residing in Idaho; or
34 (c) Any other appropriate basis for making the adjustment. An
35 "appropriate basis" is one which the state tax commission finds is needed
36 to insure that the amount of Idaho taxable income is fairly and reasonably
37 related to a taxpayer's activities in this state.
38 SECTION 2. An emergency existing therefor, which emergency is hereby
39 declared to exist, this act shall be in full force and effect on and after its
40 passage and approval, and retroactively to January 1, 2007.
STATEMENT OF PURPOSE
RS 16529
This bill clarifies when nonresident individuals are not
required to pay Idaho income tax on investment income
distributed by Idaho investment partnerships. Under the Idaho
Income Tax Act, “partnerships” include general and limited
partnerships, limited liability companies and other entities
classified as partnerships pursuant to the federal income tax
regulations.
FISCAL NOTE
None.
CONTACT
Name: Dan John/Ted Spangler
Agency: State Tax Commission
Phone: (208) 334-7500
STATEMENT OF PURPOSE/FISCAL NOTE H 15